CAIRO: The Middle East luxury goods market will maintain positive growth in 2009, according to a semi-annual update of Bain & Company’s “Luxury Worldwide Market report released yesterday.
According to the report, the world’s largest luxury markets including North and South America, Europe and Japan can be expected to decline between 10 and 15 percent in the second half of 2009. These markets make up over 80 percent of international luxury sales.
Despite projected decline in these markets, smaller luxury markets are expected remain healthy in 2009. The Middle Eastern market is projected to grow at 2 percent while China’s luxury goods sector is set to expand at 7 percent.
While these expanding markets will provide a new focal point for luxury companies experiencing flagging business elsewhere, their brisk growth won’t be able to prop up the international luxury market which is expected to decline between 15 and 20 percent in the first half of 2009.
Within the luxury sector, clothing and apparel sales are expected to fall 15 percent, followed by jewelry and watch sales by 12 percent and leather goods, shoes and accessories by 10 percent. Cosmetics and fragrance sales are expected to remain robust.
The report is optimistic however that the market will begin to stabilize in the second half of 2009, and predicts that the luxury sector will end the year with only a 10 percent overall decline in sales.
Although the luxury goods sector has traditionally been immune from financial ups and downs, the market has been hit hard in Egypt.
Minister of Trade and Industry Rachid Mohamed Rachid noted the luxury goods industry as one of the most affected by the current financial crisis.
“The luxury goods sector has been hit badly, particularly the luxury housing sector and durable goods, he said.
The slowdown in luxury retail sales has also had a tangible impact on the country’s large long-staple cotton industry. Long-staple cotton is used in high quality garments and other luxury textile products.
According to Yasmine Khamis, research and development manager at Oriental Weavers, overall demand for textiles has not decreased, but the structure of sales has.
“Because of the current situation, people are not willing to spend a lot of money, and are choosing less expensive items made from cheaper materials. Because of this, we have taken on the challenge of creating similar-looking products with cheaper materials which might include cotton blends instead of pure long-staple cotton, she said.
Bain & Company’s report echoes the sentiment that consumers are continuing to shop but are choosing lower-priced items.
“Consumers who are newly entering the luxury market, called ‘accessible luxury’ consumers, are purchasing items at the lower end of brands’ product lines, it states.
Bain & Company’s analysis shows a long-term trend in the luxury market with new sectors cropping up and new customer profiles entering the market, all of which suggests a bright future for the international luxury goods sector.
“Changing values and consumer habits are creating tremendous opportunities for brands to win new customers and strengthen their relationships with existing ones. While today’s economic turbulence is requiring a hard look at costs, luxury goods producers would be wise to keep an eye on the future, the report stated in conclusion.
