Luxury Bucks Retail Downturn Trend

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By Published On: March 28, 20180 Comments

Despite economic uncertainty and weakened consumer sentiment, luxury retail is on the rise, fuelled by inbound tourism and a new key demographic.

Despite the bleak retail environment, under threat of rising competition, luxury retail revenue continues to rise, according to research from IBISWorld.

“The Luxury Retailing industry has grown at a rapid pace over the past five years, with revenue expected to grow at an annualised 10.2% over the five years through 2017-18, to $2.1 billion,” said IBISWorld Senior Analyst, Ms Kim Do.

The growth has been driven by inbound tourism, particularly from Asian tourists. “IBISWorld anticipates that in 2017-18, approximately 30% of industry revenue will come from inbound tourists, especially from the rising middle class markets in Asia, such as China. This demographic has been one of the key markets for the industry, helping it to weather the effects of widespread economic uncertainty,” Do said.

According to Tourism Research Australia, China is expected to overtake New Zealand as Australia’s largest source of international visitors in 2017-18. It is estimated that Chinese visitors have the largest tourism expenditure of any international market. According to the latest available information from Tourism Australia, Chinese tourists collectively spent over $10.3 billion in Australian retail over the year ending September 2017. This accounts for over 25 percent of all tourism spending. The inbound tourism market has traditionally been drawn to heritage luxury labels such as Chanel, Louis Vuitton, Gucci and large flagship stores.

“Polarisation in the retail market involves consumers buying the majority of their clothes and accessories from the fast fashion segment and then complementing this with pieces from the luxury high-end market,” said Ms Do. “This has been particularly prevalent for items such as handbags, jewellery, belts and other accessories, which have grown as a share of industry revenue over the past five years.”

While the typical consumers of luxury goods have been the affluent, middle-aged cohort, the influence of social sharing and proliferation of Instagram has increased the demand for luxury items within younger consumers. This has means that many luxury retailers have changed their product ranges and marketing strategies to attract younger consumers.

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