During the Opening Ceremony of February edition of Milano Unica International Textile Fair, Executive Director of the Altagamma Foundation, Italy’s luxury goods trade association, Armando Branchini, presented the forecasts on the sales trends of personal high end products as formulated by the top management of the biggest luxury retailers in the world.
According to Chairman Santo Versace, the economic crisis is not endemic to the luxury sector which, in fact, reacted quickly to the annus horribilis of 2009 and for the last two years has once again recorded positive growth levels.
For the United States, the biggest market for the industry, there are cautious forecasts for growth and specific focus on the choice of stock. Although Christmas sales restored the drive and confidence of retailers, the emphasis is on taking care of the details in all phases, from the choice of stock to relations with the end user.
According to Jack Mitchell, Chairman of Mitchell’s, “a good 2011 will be followed by a 2012 that we are cautiously optimistic about. Consumers have returned to the shops, driven by the desire to enjoy the purchasing experience in a comfortable and elegant environment where personal relations are increasingly important. I would also emphasise here the fact that luxury consumers have not downgraded: they may be purchasing less, but they always seek quality. The variety of our ranges is key: our customers want only the best for every occasion, whether formal or informal, tailored or casual, and they require solutions that reflect their personality, even if this constitutes a mixture of different styles.”
The same mix-and-match trend, above all among female consumers, was also highlighted by Ron Frasch, Chairman of the Saks Fifth Avenue in New York, who reiterated how customers are showing a greater level of awareness when making their purchases: “the trend we are observing will continue well beyond 2012: very savvy consumers looking for excellent service and exciting products that fit with their lifestyles. With particular focus on the price-quality ratio. I also have the impression that – because of the dollar-Euro relationship – US consumers expect product prices to come down.”
Shoes, bags and accessories are the most popular products among Saks’s customers. According to Frasch, the style trend that brands need to be aware of is that women are increasingly after colourful and sexy clothes, rather than tailored garments.
“For our part, we have to take important decisions regarding stock: as we do not intend to dramatically increase it, together with the brands we will have to make rational choices about which products to add to the inventory in order to both find the right mix that meets the expectations of consumers and to guarantee us a return on investment. By way of an example, bags are the biggest selling category and the product that all brands are pushing, but obviously we can’t meet all requests, particularly when it comes to brands for whom bags are not a historic core business.”
Bags, shoes and other accessories are also the leading category in South America, where Richard Barczinski, Chairman of Cidade Jardim, the Brazilian luxury shopping mall chain, predicts a very promising 2012. Although Brazil is regarded as an emerging market, its consumers are already very demanding as regards high end products: “our customers are attracted both by the glamour of brands and the intrinsic quality of products. Segmentation is complicated here because money moves very quickly in Brazil and new social classes are entering the luxury market. As such, we have to know how to respond effectively both to newcomers looking for the visibility guaranteed by well-known brands, and to more mature customers attentive to the quality of designs and fabrics. In this sense, Italian brands are seen as a benchmark both for the quality of their fabrics and for their creativity and innovation.”
More difficult times ahead are envisaged for Spain. Here the crisis has radically affected the purchasing power of consumers: “2012 will be a tough year for the Spanish” admits Luis Sans, Chairman of Sant’Eulalia, the most important luxury mall in Barcelona, “but our segment should enjoy slight growth all the same. This is mainly because of the purchases made by foreigners (Russians, Chinese and Americans above all), which will therefore assist tourist destinations.” This is another factor that favours accessories: “tourists are mostly interested in accessories, and mainly female accessories, so bags and shoes. Taking a wider view of consumption, we can observe the consolidation of the hourglass effect: both the low-cost and the high-end segments are widening, whilst the mid-level consumption band is narrowing.”
Russia confirms its particular nature, above all as regards best categories: “We are a ready-to-wear market”, remarks Khaled Jamil, Chairman of Jamilco. “Even if accessories are growing, clothing remains the main product. Ours is quite a particular market: in 2011 our main target was VIP customers, a small quantity of people that nonetheless represent 80% of our turnover.
Many of them are moving and making purchases in the other major European capitals, but they are being replaced by new representatives of the emerging upper-middle class: we therefore expect a stable 2012. Also because whereas the Government has announced a tax on luxury goods, Russia’s entry into the WTO should encourage purchases by tourists because of the possibility of reclaiming VAT.” Some advice for luxury brands? “Keep on an even keel: don’t reduce communications and marketing, don’t resort to pricing policies. Those who have stuck to their guns in this respect have been rewarded.”
As has been the case in recent years, Asia is a law unto itself. It is therefore no surprise to hear the optimism of Balbina
Wong, CEO of Imaginex, one of the biggest retailers in Hong Kong and China: “We recorded record sales in 2011. Even in these years of economic uncertainty our customers have not given up their habit of purchasing luxury products and we have opened new stores, particularly in Chinese cities of second and third level importance. The increase in salaries in these cities should result in a 30% growth in 2012 with China, in a year or two, overtaking the US as the biggest luxury goods market. Ready-to-wear clothing is likely to remain the biggest selling product category, although the entire segment is growing: accessories, leather goods, cosmetics.”
China is the market of the future. According to Balbina Wong, “it has been shown that strong brand presence in China will boost business all over the world.”
Positive forecasts are also coming out of Thailand, a smaller market that is nonetheless enjoying growth. According to Yuhwadee Chirathivat, Chairman of Bangkok shopping mall Central, “we expect two-figure growth, driven by accessories, bags and leather goods in general. Chinese tourists have a major impact.”
“2011 was a record year for luxury consumption and in 2012 we expect growth in the three main international macromarkets: the Americas, Europe and Asia” summarises Armando Branchini. “The different expectations in these three areas are chiefly shaped by the varying impact of the financial turbulence: the impact – until now more psychological than real – on consumption is expected to be greatest in Western Europe, milder in North America, and irrelevant in South America and Asia. There are also specific differences regarding the different consumer models in the areas in question. In South America and Asia the iconic products of female fashion consumption are once again accessories, particularly bags and shoes, while female clothing retains its strong appeal in the US and Russia. Men’s clothing continues to play a key role right across the northern hemisphere, with major growth in consumption in Asia, in both the Chinese and Japanese markets. As for the markets not considered by these studies, we expect growth in Japan, the Middle East and Germany.”
Gian Giacomo Ferraris, CEO of Versace Spa, also spoke at the conference, giving positive indications for 2011 and the current year: “We did very well in 2011 and we plan to continue with our expansion plan in the Far East, the USA and also in Europe. Within a few weeks we went from the mass global success of H+M, to the Paris haute couture catwalks where in January Signora Donatella presented, after an 8-year absence, a high fashion collection (Atelier Versace) whose success exceeded even our wildest of expectations.”