New Bain & Co report highlights 'steady growth' in region; says Dubai accounts for 30%
The Middle East luxury good market was worth nearly $7.7bn in 2012 and is showing "steady growth", according to a new report by Bain & Company.
Its Luxury Goods Worldwide Market Study showed that the region is now the 10th biggest market in the world.
It added that Dubai, with its mix of high-end international retailers, commands about 30 percent of the entire regional luxury goods market.
"(The) Middle East is growing at a steady pace, with Dubai continuing as the centre of gravity and the only city attracting foreign luxury consumers," the report said.
Cyrille Fabre, Bain & Company partner who leads the Retail & Consumer Products practice for the Middle East added: "The Middle East is now the ten largest luxury goods market with sales exceeding €6bn ($7.69bn).
"Local consumption, intra-region tourism and the strong historic relevance of hard luxury and perfumes/cosmetics are key market drivers. Dubai is the heart of the regional market as the city alone commands around 30 percent of the luxury market of the region."
Globally, Bain and Company said luxury goods market revenues will grow as much as 50 percent faster than global GDP, with an expectation of 4-5 percent growth in 2013 and 5-6 per cent annual average through 2015.
The report also said sales were on track to break the €250bn sales threshold by mid-decade.
Bain confirmed that luxury revenues grew by 10 percent in 2012 (at current exchange rates), given the strong growth tailwinds present in the first half of last year.
Over the long term, Bain said it estimates that the global luxury goods market in 2025 will likely be more than five times larger than it stood in 1995.
The report highlighted the importance of tourists to the luxury goods market, saying they are changing their consumption habits and seeking out new destinations including Dubai.
Despite some recovery of spending on apparel, leather goods and other accessories continue their run over other categories while luxury watch consumption has sharply decelerated as retailers de-stock and as Chinese luxury consumers slow their purchasing, Bain added.
It said cosmetics are slowing down in mature markets, while still delivering growth in emerging markets
"We are seeing a more even distribution of global growth," said Claudia D'Arpizio, a Bain partner in Milan and lead author of the study. "In turn, brands are refocusing from short-term, reactive hot spot thinking to long-term sustained growth strategies."
"We are entering a new phase in the evolution of the luxury market, more markets, more segments, and more diversity of tastes all combine to create more variables to solve for when pursuing the right strategy for growth," added D'Arpizio.