Indeed, Asia is expected to account for between 50% to 60% of luxury sales within the next 10 years, despite the recent dip in high-end product revenues in the last couple of years, according to research firm Economist Intelligence Unit.
Just last month, Jean-Marc Duplaix, finance director at Kering, which owns Gucci and Bottega Veneta, told analysts on a conference call that demand in China remained at levels “lower than what we have seen in the past.” Case in point: Gucci sales in Europe rose a higher-than-expected 10% in the second quarter and were up 6% in Japan but fell 4% in China.
Besides the general slowdown of the massive Chinese economy, government officials began an anti-luxury campaign aimed at curtailing the use of expensive “gifts” to high-level officials in order to seal deals or partnerships.
India Important Too
In a report in the Telegraph, EIU said any decreases in luxurygoods sales shouldn’t be the cause for concern over the long term.
“China is predicted to be the primary profit driver, with an estimated 13 million households on an average income of $150,000 or more by 2030.
“Fears of a slowdown have been heightened recently by China’s crackdown on displays of wealth and Japan’s shifting exchange rate,” said Jon Copestake, chief retail and consumergoods analyst at the EIU. “But even in this climate, some luxury firms have continued to deliver strong sales. With Europe stagnating and North America subdued, the focus is firmly on Asia’s potential.”
But China and Japan aren’t the only Asian nations where luxurygoods demand is increasing.
Rapid growth in India is also key where incomes of more than 30 million households are expected to exceed $50,000 over the next 10 years. As a result, EIU said India would become a “”key battleground for luxury brands as the retail market opens up to foreign investment,” added Copestake.
Other countries that will help drive growth include Indonesia, Malaysia and Thailand. However, EIU warned that dangers still remained when operating in Asia. Savvy shoppers, who will start to buy luxurygoods abroad, could dent growth.