Gucci’s Sydney Collection, celebrating the 2011 opening of the 700sqm Sydney flagship
Australia is now a $1.07 billion (AUD) luxury market with the 9th highest concentration of HNWI’s in the world
When it comes to luxury, Australia is a promising nation. Wealth is growing steadily at the hands of a resources boom, the population is increasingly well travelled and the Internet has allowed international brands to pique the interest of Australian consumers like never before.
Yet rarely do we hear luxury brand executives or commentators discuss the luxury market in Australia. We are well informed about the promise of Africa, South America and Southeast Asia, but Australia is generally lumped into annual reports and wealth research as a mere part of Asia-Pacific.
In reality, it is now a $1.07 billion (AUD) luxury market with the ninth highest concentration of HNWI’s in the world.
Ayers Rock, the Great Barrier Reef and Sydney Harbour have long lured affluent tourists from neighbouring Asian nations, forcing the development of luxury hotels and retail outlets as early as the 1980’s. Australia now attracts more than half a million-plus Chinese tourists each year, whom spent $3.8 billion AUD in 2011.
Tourism Australia believes the inbound Chinese market has the potential to be worth up to $A9 billion alone, by the end of the decade.
“ It is now a $1.07 billion (AUD) luxury market with the 9th highest concentration of HNWI’s in the world ”
Domestic wealth is also on the rise. Wealth X’s World Ultra Wealth Report 2012-2013 confirms that Australia is now home to 30 billionaires, with a combined wealth of $90 billion. The UHNW population (net worth of US $30 million and above) has reached 3,350 individuals with a total wealth of $410 billion – a population increase of 6.7% on 2012.
According to 2012’s Capgemini/RBS’s World Wealth Report, Australia has the ninth largest HNW population in the world (those with US$1 million or more in investable assets). Trailing Switzerland (8th), Canada (7th) and France (6th), ahead of Italy (10th), Brazil (11th) and South Korea (12th).
And increasingly, it is the locals that are driving the Australian luxury market. Spending on luxury by local residents is estimated at 60-70% (Australian Luxury Market Report), compared to 30-40% by tourists, eschewing the common belief that the market is entirely driven by tourists from Japan and China.
There’s Nothing Like Australia campaign by Tourism Australia
The value of international luxury brands in Australia in 2012 exceeded the AU$1 billion mark for the first time, with sales revenue estimated at AU$1.07 billion, an 11.4% increase on 2011.
The increasing strength of Australia’s luxury market has been attributed in the report to several factors; the increase in HNW population, an increasing awareness of luxury and its brands, an improved range of products and points-of-sale and the emergence of Gen Y as a key consumer segment.
“While the 30-year evolution of freestanding luxury brand stores is relatively short, what is interesting is the speed of growth in the past 10 years, particularly the past five,” explains Melinda O’Rourke.
“In Australia, there are now close to 500 points of sale to purchase fashion apparel, handbags, shoes, watches and fine jewellery (not including major department stores). In the past 10 years there have been several new brands to market including Burberry, Dior, Coach, Bottega Veneta, Christian Louboutin, Jimmy Choo to name a few.”
“ Australians have flocked abroad to holiday and this has further fostered an appreciation for luxury ”
“Australian consumers have long felt like the cash cows of global brands,” aptly explains Euromonitor’s Luxury Goods in Australia report. “A wealthy country geographically isolated from much of the Western world, consumers were dealt a hefty premium for the convenience of purchasing their favourite brands domestically, with many estimates indicating a 30% price differential to international markets.”
“Post-GFC (Global Financial Crisis), the stellar performance of the Australian economy has brought new wealth, a stronger currency and more discerning consumers. Australians have flocked abroad to holiday and this has further fostered an appreciation for luxury. Simultaneously, consumers continue to move online to sites such as Net-A-Porter and My Wardrobe to satisfy their luxury demands.”
Indeed imports from sites such as Net-a-Porter – under the value of $1000 AUD – are delivered to consumers without local or international sales tax. Pricing information available online has forced local retailers to be more globally competitive when it comes to margins, opening up the luxury world to a swelling middle class. Retail expansion in affluent suburbs is only further fuelling the fire.
Burberry’s 820sqm Sydney flagship
Euromonitor is confident that such prosperity is set to continue. “Resources booms will continue to create new wealth away from the traditionally wealthy South Eastern states. Australia’s positioning among many Asian nations as a premier holiday destination will also continue to support growth in luxury categories.”
“With 23 million people and almost 500 points of sale to purchase, and with personal luxury goods sales coming in at $2.47 billion in 2012, the luxury sector paints a very appealing picture with continued growth for the short to medium term,” echoes Melinda O’Rourke.
“There are a few clouds on the horizon,” she concedes, namely Australia’s vague economic state and dependence on China as both customer and an economy. “We can expect the luxury market to be affected by this during 2013.”
“Nonetheless, the significant rise in international clients from other emerging Asian markets, as well as a growing domestic market, increased brands to market and points of sales, may cushion this downturn.”
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