Australian retail is not dead. This fashion category is outstripping counterparts all over the world.
The Australian personal luxury goods market reached a combined sales revenue of AUD$2.7 billion in 2013.
This is a 7.8 per cent estimated growth ahead of the global rate of 6.5 per cent and second only to Japan's year-on-year 12 per cent figure.
The findings are in the annual MO Report by MO Luxury.
In 2013, all categories experienced an increase in revenue with the exception of apparel.
The strongest growth was observed in hard luxury, which grew 14 per cent.
MO Luxury director Melinda O’Rourke said the figures continue to show strong growth and confident performance in the sector.
“Australia’s growth rate of 7.8 per cent again tracks ahead of the global personal luxury goods market, highlighting the strength of the Australian market and spending power of both local and international consumers.”
Luxury sales in Australia represent 5.97 per cent as a proportion of total retail for clothing, footwear and personal accessory retailing and continue to track ahead with the latter realising a growth of 7.2 per cent in 2013.
Key drivers for growth include:
- An increase in High net worth individuals domestically, as well as from Asian tourists and those spending their time between their home country and Australia.
- Education – in 2013, 30 per cent of Australians aged 25-64 years held a Bachelor degree or higher. Information available through the Internet has also helped to keep consumers informed and educated on luxury products and brands.
- Cultural Shift - both Asian and Australian consumers have increased their knowledge on luxury, becoming more aware of luxury brands with minimal or subtle logo detail, as well as becoming more discerning in their purchases.
- Variety through additional points of sale – consumers given increased access to luxury products through additional points of sale and an enhanced range of products.
- The economy – with stable economic and political environments, Australia remains a key market for luxury brand growth. The sector has witnessed double-digit growth since 2011, amounting to almost five times the growth of Australia’s total GDP over the three-year period.
Despite a slowdown of personal luxury goods sales in China, the Asian nation continued to dominate as the number one inbound tourist market in Australia where strong growth and high value spends were recorded.
“Significant increases were also observed in the number of younger customers purchasing in this sector with 44 per cent of consumers falling into the ‘under 29 years to 39 years of age’ category,” O’Rourke said.
“Notable increases in inbound tourism from South East Asia, in particular from Singapore and Malaysia, were also observed, as well as a continued increase in male consumers.”
Despite assumptions that luxury retailers survive off inbound tourism dollars alone, the data strongly indicates otherwise: 70-80 per cent of customers live locally with the remaining 20- 30 per cent from overseas destinations.
However, it is important to note that Asian residents who often live temporarily between their home country and Australia are still considered local when holding residency here.
Opportunities for additional points of sale were also expanded in 2013 with the opening of several new luxury brands across Australia, either as new entrants to the market with flagship boutiques.
These included Dolce & Gabbana and Dior or retail expansion from the likes of Tiffany & Co. and Ermenegildo Zegna.
Brisbane is due to see the most significant change to its luxury market in 2014 with the addition of four luxury brands, while Adelaide will receive its first high-end international brand at the end of this year.
“These new developments provide opportunities for brands to leverage strong market conditions in Australia and capitalise on the drivers benefitting the sector; ensuring that brands capture the expanding Asian tourist market; and offer heightened shopping experiences through omni-channel shopping (online, smart phone and in-store) experiences, particularly for affordable luxury brands,” O’Rourke said.
“While a slower growth rate is expected in 2014, we expect sales to continue in the high single or low double digit range due to the number of new points of distribution opening in 2014, enhanced footprints for some existing brands, increasing consumer confidence and boosted tourism figures, particularly from China and the South East Asia region.”