Luxury set for comeback
The total market share of the global luxury market is set to reach $397 billion in 2025.
Dubai - Dubai remains one of the top luxury destinations for Middle Eastern consumers
The UAE's luxury sector will witness improving sales across 2019, buoyed by the spending power of an increasing number of international tourists.
The prediction is in line with global trends highlighted in the Luxury Institute's 2019 State of the Luxury Industry report, which revealed that 29 per cent of consumers who bought luxury goods in 2018 plan to spend more on such purchases in 2019. The highest anticipated spend on luxury purchases was recorded among consumers in the UK, who planned to spend $21,193; followed by shoppers in Italy with an anticipated spend on $18,832. Chinese consumers plan to spend $17,262; while affluent consumers both in France and the US expect to spend just over $16,000 on luxury items.
The report also showed that at 52 per cent, more than half of Chinese luxury buyers plan to increase their spending in 2019. This is followed by shoppers in Italy at 37 per cent, and shoppers in the UK at 34 per cent. Popular categories for luxury spending include leisure travel, dining, apparel, shoes, entertainment, and technology.
According to McKinsey & Company, the total market share of the global luxury market is set to reach $397 billion in 2025. Affluent Chinese consumers are projected to account for up to 44 per cent of the global luxury consumption across the globe by 2025; this would double their current level of spending to $147 billion.
According to the Global Powers of Luxury Goods 2018 report by Deloitte, Dubai remains one of the top luxury destinations for Middle Eastern consumers, as well as for Chinese and European visitors. Dubai is among the best cities in the world for luxury shopping and a crucial spending hub for the region, with high-end shoppers coming from around the world. The report also noted that the UAE is one of the most attractive countries in the Middle East for luxury brands, and is a strategic centre for companies deciding to enter the regional market.
"Whether total global market growth is in single or double digits will depend on many factors, including larger geopolitical factors and their impact on tourism. Growth in the luxury goods industry will continue, unlike in several other industries," said Herve Ballantyne, Deloitte Dubai managing partner and Consumer Business Leader at Deloitte Middle East.
Deloitte's data noted that the Middle East has one of the largest young populations in the world, and that millennials in the Middle East are richer than the average and their willingness to buy is stronger. Collectively millennials and Generation Z will represent more than 40 per cent of the overall luxury goods market by 2025, compared with around 30 per cent in 2016.
Anand Kumar, executive director of ABRA VM & SD International, noted that retailers in 2019 will play a wait-and-watch game. "There is optimism that towards the fourth quarter of the year demand will pickup as the countdown begins towards the Dubai Expo 2020 event, and a large volume of people start moving into the country. Luxury brands have scaled back on spending as they are waiting to see the how the market moves, however, some brands are also using this time to upgrade their offering and renovate older stores, which was tougher earlier due to the continued footfall wherein they were hesitant to close the store for the 1-2 months that would be required for renovation."
"That said, brands are improving their presence mainly in key locations that continue to perform and avoiding locations where the makeover is not expected to return sufficiently on investment in the next 2-3 years," he added. "A group like PUIG, who are the parent company for luxury brands like Carolina Herrera and Paco Rabanne in fragrances have made significant strides in replacing static visuals with dynamic displays including on their shelf talkers, which creates a wow factor for the customers."