Sydney’s Gucci flagship at Westfield
Melinda O’Rourke, founder of MO Luxury, reveals the key insights from the second annual report on the Australian luxury market
The Australian luxury market has grown steadily over the past 20 years – no more strongly than the past five years – and prior to our first report released last year, there was limited hard data on this niche sector.
We wanted to identify a strong estimate, of the total sales value for personal luxury and premium goods in the Australian market. This includes fashion apparel, accessories, watches and fine jewellery, often known as hard luxury.
Conducting the report…
In obtaining the sales figures in our report, we obtained and employed results from 2006 to 2011 provided by luxury companies to the Australian Securities and Investment Commission (ASIC), for those available.
For those whose financial results were not available under ASIC, we have looked into the companies’ luxury international annual reports and adjusted the figures based on MO Luxury industry connections, as well as direct data provided by our luxury brand respondents.
Regional and distribution channel revenue, on the other hand, has been estimated on the basis of the number of points of sale by regions as well as MO Luxury industry knowledge.
“ Growth in the Australian luxury market sector in 2011 rose by 11.2% ”
Un-surprisingly we confirmed…
Sales of luxury goods continued to grow. In fact, growth in the Australian luxury market sector in 2011 rose by 11.2% against a global luxury goods growth of 8.9%.
The current growth estimate for the Australian luxury market exceeds that of global by a total of 2.3%, confirming that indeed the luxury market has defied the global economic downturn in 2011.
The analysis of the results between 2006 and 2011 has demonstrated the important growth of the Australian luxury market, as well as its resilience during the economic downturn despite the recent setback in 2010.
“ There has been an increase in luxury spending by a younger consumer demographic ”
Most surprisingly we found…
There has been an increase in luxury spending by a younger consumer demographic. We observe a rise in the number of luxury customers within age segments 29 years old and younger and 30 – 39 years old, whilst a slight decrease in the age range group of 50 – 59.
As retail trade sales have continued to fall since 2009, retailers outside of luxury may have been doubtful that luxury brands could really have seen such robust growth in the past years. Nonetheless, the comparison between our estimate of luxury sales, with the turnover of clothing, footwear and personal accessory retailing in Australia throughout the same time period, reveals some interesting insights.
While retail trade fell in 2011, luxury sales gained a surprising recovery since the drop in 2010, and is experiencing growth once again, confirming its resilience despite the current retail consumer wariness. We notice that majority of the 2011 revenue increase was due to the rise in sales from International Brands.
International retailers, who were previously put off with entering the market due to supply chain and logistical issues, now have more of a presence in the Asia Pacific region, and now have the capability to effectively serve the Australian market.
“ The boom in commodities has profited the resource-rich states ”
Since the last study…
We note that there has been a slight increase (1.6%) in potential luxury consumers to a total of 41.2%.
The boom in commodities has profited the resource-rich states. Brisbane is seen as an untapped market, including for luxury brands. Ranked the 11th most expensive shopping precinct in the world by CBRE, Brisbane has quickly expanded to include major international fashion houses within its city throughout the past year.
Western Australia also has an emerging future from the mining boom. Although, international brands have been more reticent to open in this state given the ‘boom bust’ history and expenses associated with operating in Perth. Queensland also is seen to be a larger tourist destination relatively for the Chinese and Japanese.
Increase in distribution points in emerging markets include:
• Zegna planning to open in Brisbane CBD early 2013
• Salvatore Ferragamo opened their first flagship in Brisbane, July 2012
• Bulgari and Gucci opened their first flagship stores in Brisbane, in January and August 2012 respectively
• Chanel also opened their first boutique in Brisbane, November 2011 as will their first Perth freestanding store follow quickly with an opening slated for November 2012
• Prada opened their first store in Western Australia, Perth, January 2011
• Hermès opened a flagship store in Brisbane, in November 2010
“ Australia remains a very attractive tourist destination, especially for Asian tourists ”
If we were to conduct this study in 12 months time, I would expect…
We expect to see organic growth of the luxury sector in the next 12 months. While this growth is positive, it is anticipated there may be a fall in 2012 sales due to macroeconomic issues affecting the world, such as the European Debt Crisis, and weak demand in the U.S. as well as China causing many luxury brands to revise expected profits for 2012 downwards.
We also estimate an increase in points of sale for luxury goods as we expect more luxury companies to open and expand their brands within Australia.
If readers remember only one thing it should be…
Australia continues to be an attractive investment opportunity for global luxury and premium brands, despite the relatively small population and geographical challenges associated with operating in the Australian market. The number of potential clients are increasing, they are educated and more knowledgeable and have proven to be loyal to brands entering the market.
In total since 2010, there has been an increase in the number of points of sales for luxury brands of up to 8.6%. Sydney and Melbourne remain the leading luxury cities in Australia. In the four regions – Sydney, Melbourne, Brisbane and Perth, the proportion of retail points versus wholesalers for international brands is 4:9.
In comparison to last year’s ratio of 1:4, we notice that there has been a significant increase in the number of retail stores relative to wholesalers, which reinforces that luxury brands like to ‘own’ and control their space.
“ There has been a significant increase in the number of retail stores relative to wholesalers ”
We observe that Australia remains a very attractive tourist destination, especially for the Asian tourists. The biggest boost for the Australian tourism industry of nearly 15% came from China visiting notably Melbourne and Tropical North Queensland. Besides China, tourists from Indonesia also have been observed to experience slight increasing growth in recent years. Although not at high rates, we do expect the number of Indonesian tourists to continue rising rapidly and exponentially.
While visitors to Australia from Asia are known to spend large amounts on gifts, especially on luxury goods, respondents of the luxury industry state that tourists currently represent only 30 to 40% of clients of international luxury brands in Australia. Hence, majority of luxury consumers still remain to be local although this international to local proportion definitely has the potential to increase in the next years to come.
For further information regarding the report, please visit the following link.
To further investigate the Australian luxury market on Luxury Society, we invite your to explore the related materials as follows:
Published on Nov. 12, 2012 under Markets