Global Sales for Luxury Jewelry, Watches to Fall by 18% Says Bain & Co.

Bain & Co. does not expect this smile to last, forecasting an 18% drop in jewelry sales

Worldwide sales of luxury goods are expected to decline this year by 8 percent to $229 billion (€153 billion), reports Bain & Co.’s 8th edition of its annual “Luxury Goods Worldwide Market” study. The company’s findings do not bode well for the jewelry, watches and other hard luxury items category, sales of which are forecasted to decline by 18 percent.

While Bain & Co. finds that luxury sales in mature markets “show continued softness,” for 2009, they will be “buoyed” by a projected 12 percent year-over-year increase in luxury goods sales in mainland China and a 20 percent growth in online sales.

Divided by region, luxury goods sales will be down 16 percent in America, 10 percent in Japan and 8 percent in Europe versus 2008 levels, predicts Bain & Co., while further projecting that a 10 percent sales growth overall in Asia will soften the declines.

“Aspirational luxury shoppers in Asia and other emerging markets are fueling sales growth in 2009,” says Claudia D’Arpizio, a Milan-based Bain & Co. partner and global luxury goods industry expert. These emerging markets will also see the greatest growth in new openings of directly-operated stores, finds the study.

Following jewelry, watches and other hard luxury items, Bain predicts that the apparel category will suffer an 11 percent decline this year. These two categories will be most impacted by consumers’ preference for deferring purchases or suspending them altogether because of feelings of “luxury shame,” according to Bain.

Sales of leather, shoes and accessories will only experience a 1 percent decline while perfume and cosmetics are expected to fall by more than 4 percent, says the study.

Among the 10 global luxury trends for the coming decade starting in 2010, Bain predicts that younger consumers and working women will become the dominant segments as baby boomer age and retire.

“Luxury goods markets are stabilizing,” says D’Arpizio. “Growth will be timid in 2010 but it’s showing movement in the right direction.” The report concludes that the luxury goods market should not expect a full recovery until 2011, when the industry is expected to grow by 4.2 percent for the full year.