Asia-Pacific overtook Europe as the largest regional luxury goods market in 2010. Demand continued to grow to a staggering 38 per cent in 2011, with China leading that growth. Even in the midst of a global recession, the region is still showing upward growth in demand for luxury goods.
This highlights how resilient the Asian market is in comparison to those in the United States or Europe. This has also been reflected in the financial markets and featured in a recent HSBC report that downplayed expectations for market growth in the West, but remained positive for Asia.
Cody Sacha, head of client solutions at Millward Brown Shanghai, notes that the Asian luxury goods market has increased from about 37 per cent in 2007 to 48 per cent overall. This has been at the expense of market share in Europe, says Sacha.
The trend over the past three years in Southeast Asia was for most luxury brands to not renew their contracts with local partners or distributors. For example, Coach ended its partnership with Valiram Group in order to carry its own brand in Malaysia, and Prada did not renew its contract with Cipta Areco in Indonesia.
The moves come about as the brands began seeing growing viability in these markets and were willing to risk it on their own in the region, according to strategic consultancy 360m analysis.
In Australia, the luxury market is small in comparison to the US, Europe, Japan or China, according to 360m, and has stayed unchanged since 2011.
India, according to the “stage of luxury evo-lution” articulated by brand and marketing strat-egists Radha Chadna and Paul Husband in their book, The Cult of the Luxury Brand, is in a very early stage of adoption best understood as ‘subjugation’, compared to Japan at the other extreme, where luxury is a way of life. “China is in between and at a phase called ‘showing off’,” says Sacha.
Luxury in Asia, however, is not immune to a weak economy, says Angelito Tan, co-founder of Robert, Tan & Gao. He sees a general slowdown in terms of sales and a loss of foot traffic in major luxury department stores. Consumers are becoming more cautious with their spending, especially among the middle classes — a key demographic segment for driving luxury growth.
Sacha agrees. “We should not be so naïve as to believe or think that in hard times consumers will not tighten their purse strings. They will. This has been a common theme in the world and Asia when it comes to uncertainty in the future”.