Global luxury industry to be worth €490bn by 2020, report says

The global luxury market is expected to reach sales of over €490 billion ($599bn) by 2020, after achieving sales of €419 billion ($512bn) in 2016, according to the report The luxury and cosmetics financial factbook 2017 from consultant company Ernst & Young.

The company expects growth in the sector to be driven by emerging markets and the development of online channels.

“Trends in the luxury sector are changing rapidly, driven by the new digital consumer, who sees fashion from a different perspective and demands a more personalised relationship with brands. We are in a deeply disruptive moment in which, far from identifying a great trend that guides the sector’s evolution, we are seeing different behaviours according to different categories and markets,” said Patricia Fernandez Mesa, head of fashion retail at EY.

Specifically, the global luxury market was worth €269 billion ($328bn) in 2016 and is expected to grow at a compound annual growth rate of 3.4% by 2020.

This is higher than the 2.8% rate recorded in the 2012-2016 period, but contrasts with a strong CAGR of 11.7% experienced between 2009 and 2012.

According to EY, the luxury market is slowing down due to a shift in consumer behaviour as more consumers are now combining high-end products with more affordable items.

This is coupled with the irruption of the digital age, which has meant a direct impact on the global sales of the sector due to greater transparency and the ability to compare prices online. It has also contributed to a decline in footfall and in-store traffic, says the report.

Meanwhile, the premium and entry-to-luxury segment was worth €101 billion ($123bn) in 2016, with a CAGR of 4.4% between 2012 and 2016.

According to the EY report, the change in the market in favour of these two segments has been fuelled by the rise of the middle class in countries including China and India, an increase in the price range of luxury products, traditional luxury consumers increasingly adding premium and fast-fashion products to their wardrobes and the rise of casualwear.

Perfumes and cosmetics have seen sales increase from €47 billion to €49 billion ($59bn) in 2016, with an expected compound annual growth rate (CAGR) of 3.9% by 2020. This is the slowest rate in the last 8 years, after 5.9% growth between 2012 and 2016 and 4.9% between 2009 and 2012.