As the threat of online shopping and global fast fashion chains loom over Australian retailers like an ominous cloud, the luxury sector has escaped the storm.
In fact, spending on the designer category in Australia is shining and it’s all down to consumers’ shifting attitudes, aspiring to wealth and an influx of tourism from Asia.
Euromonitor International, which specialises in producing industry specific reports across global and regional markets, released a report in January accrediting a 5 per cent current value growth to designer apparel.
Euromonitor communications executive, Bettina Kurnik, says that the report covers the total retail market, with data from the majority of brands analysed having been pulled from a range of categories including apparel, personal accessories, eyewear and beauty.
The company’s analyst, Emily Cox, supports the idea that growth in the market is down to a diverse range of consumers putting money down on low to high end goods.
“Luxury goods delivered robust growth in Australia in 2014, with spending underpinned by rising disposable incomes, the high population of high net worth individuals (HNWI), healthy inbound tourism and the continuous stream of international luxury brands either setting up shop or expanding their presence in Australia.
“China represents Australia’s second largest source of international visitors, with these tourists visiting the country not just for a holiday but to make luxury goods purchases. Luxury brands, such as Louis Vuitton, Ralph Lauren and Prada have built a strong presence in Australia, while newer entrants that are growing in popularity include Michael Kors and Kate Spade.”
An emphasis on the burgeoning force of male-orientated categories is also abundant. The report details spending on ready-to-wear designer apparel and footwear in Australia last year and cites men’s jackets and coats as the strongest force for growth at 11 per cent, with shirts following suit at 10 per cent. It raises a key opportunity for designers to hone in on a flourishing market.
Where the stereotypical uniform of Australian men once meant board shorts and thongs, Euromonitor believes that the internet has helped to “build interest, by educating men on brands, fashion and style.”
It appears that luxury brands are catching on.
Tom Ford now has two shop-in-shops through an exclusive partnership with Australian retailer Harrolds and according to the report, Prada is planning to double its menswear business and open more dedicated menswear boutiques. Despite the spike in male consumers splurging on designer goods, MO Luxury reports that the landscape is still predominantly female at 77 per cent. The latest MO Luxury report details findings from the Australian market, analysing spending from 45 brands, 17 of which pertained to Australian fine jewellery labels.
MO Luxury director Melinda O’Rourke shows confidence in the spending surge among Australians.
“2013 figures continue to show strong and confident performance for the sector. Australia’s growth rate of 7.8 per cent year on year, again tracks ahead of the global personal luxury goods market which grew at 6.5 per cent. Watches and fine jewellery sparkle in the mix and raise the overall sector to over AUD $1 billion.”
According to O’Rourke, this figure excludes Australian fine jewellery brands analysed in the mix.
Despite Sydney and Melbourne expectedly showing the most concentrated spending on designer goods at, Brisbane and Perth show promising signs of expansion, with global brands settling in to the cities.
Accessibility of luxury brands also plays a significant factor the increase of spending of luxury goods. Implementing diffusion lines into department stores such as MYER and David Jones means big business for designers. Brands such as Marc by Marc Jacobs, MICHAEL Michael Kors, KORS Michael Kors and Miu Miu by Prada might allow consumers a slice of luxury.
Euromonitor reports on a growing consumer segment referred to as ‘HENRYs’ (High Earners Not Yet Rich) who are contributing to the boom in Australia’s designer sector.
Watches and jewellery are within reach of Australia’s rising middle class, with social media platform Instagram the chosen medium, up to 3 times more than Facebook according to MO Luxury, for flaunting consumers’ indulgences.
The increase of inbound tourism from Asia has also spiked the luxury market’s revenue over the past few years. Those travelling from the region, particularly China, are considered as part of Australia’s expenditure on luxury items and according to MO Luxury, can be attributed to around 10 to 15 per cent of revenue generated in the luxury retail sector.
IBIS World senior industry analyst, Lauren Magner, channels findings from her latest research, which indicates that the designer category in Australia spans across a wide spectrum of global and local retailers.
“Rather than analysing individual businesses, the industry was examined as a whole. Based on relative ratios, the number of businesses operating in the industry was estimated to be around 170. As for the level of foreign ownership, IBISWorld estimates that approximately 60-70% of luxury brands in the industry are subsidiaries of global firms. Overall, imported clothing (including luxury and non-luxury) into Australia currently accounts for just over 50% of domestic demand.”
As a contingent, visitors from China reportedly drop around $4 billion on luxury items in Australia per year. The report believes that the prestige of brands in such as Gucci, Chanel and Louis Vuitton in Asian countries is significant to the surge.
While the gilded doors of global luxury boutiques are opening all over the country, the outlook for Australian designers might not be so certain. Considering the demise of Australian’s such as Josh Goot and Kirrily Johnston, Magner believes that niche retailers have got the right idea.
“Lots of Australian clothing designers have struggled with rising wage and operating costs over the past five years, however there are some firms that have been able to secure a niche in the market, like Cue and Gorman. Australia’s advantage does not lie in cost-competitive products or large volumes, but in the ability of domestic manufacturers to produce high-quality clothing items.
This has allowed designers with a more design-conscious niche to produce high quality garments. As such, there has been a rise in new luxury and designer clothing brands, such as Melbourne-based label Kuwaii. Other designer labels that have flourished in Melbourne over the past five-year period include Gorman, White Suede, Life with Bird and Yeojin Bae.”
Sass & Bide is also getting alook in, with IBISWorld comparing them to the likes of Kenzo and Acne more affordable designers. Analysts believe that these types of luxury brands are emerging in the market and appeal to a younger demographic.
“These luxury items are more flexibly priced, as they rely more on design and marketing to drive prestige rather than rare materials and craftsmanship.”
Australian Retail Association (ARA) executive director, Russell Zimmerman, believes that it’s an accumulation of factors that are causing Australia’s luxury and designer category to boom. Zimmerman cites prolific events in fashion such as Mercedes Benz Fashion Week Australia and the Virgin Australia Melbourne Fashion Festival as “putting Australian designers at the forefront of the industry.”
He also alluded to retail giants MYER and David Jones putting emerging labels on the map.
When asked about how the market has evolved over the years and why luxury is becoming increasingly aspirational to consumers, Zimmerman emphasises a key turning point in attitudes towards seeking value for money. He suggests that while Australians might once have shopped within price points that reflected their affluence, we’re leaning more towards investing in quality, even if it’s not so cheap. This could be an indication of why expenditure on designer clothing is on the up.
Of course, omni-channel retailing and innovative technology also plays its part. Zimmerman makes the point that even 5 years ago, mobile phones were nowhere near as functional as they are today. Now, we can stand in a store, access our bank accounts to transfer funds across when needed, browse for stock in other stores and check availability. Click and collect functions adopted across many retailers also makes the merging of online and offline shopping easier and more accessible to consumers.
Speaking about how tourism has impacted revenue on designer apparel, Zimmerman says that the market is starting to focus on appealing to overseas travellers, who he believes are willing spend on Australian-made items because the satisfactory ethical standards with which they’re made.
As well, investing in the expansion of shopping centres such as Westfield have paved the way for unique retailers to enter the market and cater to niche markets, potentially drawing in more traffic. Zimmerman notes centres such as Castle Hill, Chadstone and Melbourne Emporium as particularly influential in incorporating a designer market, with designers such as Zimmermann snapping up prime retail space in centres.
Looking to the future, the landscape for global luxury brands and Australian designers could be promising. Where Australians and inbound tourists are flocking to the flagship stores scattered around our cities, local designers are cottoning on to multi-channel retailing and new ways of marketing that could drive sales like never before.