Luxury Goods are Selling and Smart Retailers are Already Cashing In
Amid the mucky news of the mortgage crisis, the panic of privacy lost to social media, and the dyspeptic stress caused by factory farmed food, there is as they say in fashion-speak, a bright pop of color: the growing luxury market. Bain & Company reports that the global crisis in worldwide luxury goods sales is officially over. And it took about 18 months. File that under "fast fashion."
The consulting firm found that the slump officially ended at the close of 2009, with the first-ever full year decline in sales of 8 percent. But the news gets better: sales are now projected to rise 10 percent by the end of 2010, reaching 168 billion euros (nearly eclipsing its historical market peak of 170 billion euros in 2007). For those watching the European market closely -â€" 40 percent of the sales revenue increase stems from the depreciation of the euro. Looking at constant exchange rates it still represents a 6 percent year-over-year increase.
So which retail management teams are in prime position to take advantage of the coming surge? Read on.
Bain reports the luxury rebound in 2010 hinges largely on the performance of retail stores owned and managed directly by luxury brands. Sales in this channel increased by 20 percent.
Kudos to Ralph Lauren (RL) who made a smart bet back in 2007 -- well before the economy tanked -- when Polo acquired Impact 21, its Japanese sub-licensee for men's, women's, jeans, and accessories. While other retailers struggled to post flat or tiny increases in revenue in 2009, Lauren used higher profits to preside over the acquisition of Polo's Southeast Asia license from Dickson Concepts International Ltd., (think China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, Taiwan and Thailand). Lauren plunked down a cool $47 million to purchase wholesale and retail distribution in South Korea from Doosan Corp. a strategy that initially scared investors when it was announced (somewhat vaguely) back in February.
Luxury sales online are over-performing overall web sales, and will grow at 20 percent to 4.2 billion Euro. Discount luxury outlet stores will grow to 8.2 billion Euro in 2010, having grown an average of 12 percent each year since 2007.
Well done Richemont, the Swiss luxury conglomerate that purchased Natalie Massenet's high-style e-commerce business Net-a-Porter for $341 million in April. The online purveyor of posh threads and accessories posted sales that jumped from $84 to $183 million during these last two very lean recessionary years. What's more, Massenet had just launched TheOutnet.com, a site catering to that fashion-hungry yet bargain-conscious woman who wants to look like a million (and sport the labels to prove it) without breaking the bank. You might say Richemont got its discount outlet all wrapped up in Net's signature silk ribbons.
Leather accessories are the "champion category," the only one posting growth in 2009 (up 2 percent). In 2010, leather goods are expected to surge 20 percent to 23 billion euros.
Bravo Tiffany & Co. (TIF) for the recent launch of an exclusive leather goods line by Richard Lambertson and John Truex (the dynamic design duo fashionistas know simply as Lambertson Truex). Tiffany snatched up the upscale handbag brand for a likely song given that Lambertson Truex was in Chapter 11 bankruptcy in the first quarter of 2009.
Bain forecasts that sales in China will achieve 30% year-over-year growth for 2010, reaching 9.2 billion euros.
Great job team Coach (COH) for anticipating the strength of this market with a plan to add nearly 50 more stores on mainland China. The company is also investing in intensive market research to determine the right product mix for the Chinese market including which materials, sizes, styles and functions buyers prefer.
Related:
- Ralph Lauren's Push into Asia
- Tiffany & Company's Expansion
- Coach's Expansion Plans are in the Bag
- Net-a-Porter's Acquisition by Richemont