The luxury goods market has hit a bit of a slump. This year growth of the €250 billion euro (USD $282 billion) sector is expected to slow to only one percent as opposed to the 1.5 percent growth rate in 2015. After declining demand in the European and Chinese markets over the last two years, sales are expected to pick up again in 2017 and improve the market’s overall growth according to predictions by consultancy Bain & Co.
Reuters reports that Bain & Co. has been watching the industry closely, and despite negative reviews of the current market, is one of the few agencies expecting the luxury sector to take a positive turn by next year. In the coming weeks they’ll be releasing their report that forecasts their predictions for 2016, showcasing how current events are causing the slump and which negative causes will be rectified by 2017.
According to Bain & Co. the current election is giving the US a “wait-and-see” attitude about the economy and shoppers are putting off major purchases until after the elections in November. Numbers this year also continue to drop due to a slump in European tourism because of terrorist attacks, which may or may not cease by the coming year.
In China, new import tax laws and border controls are attempting to discourage overseas purchases. A few years ago the difference between prices in Europe and China peaked at around 70 percent. Today they have fallen to approximately 35 percent and are expected to drop to as low as 25 percent in the next year which would encourage more spending despite harsher customs taxes and stricter laws.
Overall the luxury goods market—apparel, accessories, watches, jewelry, etc.—has been on a downhill slide since 2011, when growth was hovering right around 13 percent. In 2012 growth dropped drastically to five percent and in 2013 remained low at six percent. To account for these changes several conglomerates have cut their earnings forecasts by as much as nine percent.