Mass-market to surpass luxury goods in emerging countries by 2025

By

Anne-Sophie Savenier

Published
Sep 24, 2014

Can the mass market segment beat out luxury goods in emerging countries by 2025?

That is the conclusion reached by McKinsey & Company in a recent study, conducted via its LuxuryScope "city guide" tool.

At a time when most brands are betting on emerging markets to increase sales, the study is predicting demand from these countries for luxury ready-to-wear will grow only 10% during the next decade, representing 32% of the market by 2025. While the figure might be disappointing, the overall picture is not entirely negative.

According to the American firm, Brazilian or Asian nationals are likely to do their shopping abroad, making it difficult to obtain reliable estimates.

Luxury cosmetics will meanwhile show more dynamic, with its share of emerging markets to double and account for 47% of high-end beauty product sales by 2025.

Asian countries will help buoy this growth, which the big brands have already identified as important players in the market.

However, while such a prognosis is encouraging, it may look disappointing to the many luxury brands that heavily invested in what seemed to be a new El Dorado of luxury, particularly China and Brazil.

Even more disappointing is the fact that not all sectors seem to show slower growth. The mass market segment is widely expected to come out at the top. The consulting firm McKinsey predicts that emerging markets will account for over 55% of the mass-market apparel sector in 2025.

Not surprisingly, China will be the driving force with megacities such as Beijing, Shenzhen and Hong Kong, but with Brazil and Russia close on its heels.

The news will no doubt delight industry behemoths such as Zara and H&M, which have already opened stores in Asia and South America.

The U.S. consulting firm says that while figures for the luxury sector in emerging countries are not stupendous, the brands will be able to take comfort in their traditional and already mature markets.

The firm lists the twenty cities around the world that will represent the most dynamic markets in luxury ready-to-wear in 2025. However, not one Chinese city made the ranking and no emerging country reached the top five.

Brands will have to continue to pamper their traditional markets while surfing the waves of the emerging market or they run the risk of missing out on opportunities crucial to their growth.