The luxury goods market in the Middle East region continues to surge at a rapid pace with a 5 to 8 per cent year-on-year growth mainly driven by tourism boom despite regional worries, said a report.

The region maintains a positive outlook on global luxury goods segment, partly driven by tourism and the hunt for travel bargains which in turn is boosting expenditure on travel retail, outlet and online shopping, stated Bain & Company, a leading advisor to the global luxury goods industry.

Another major factor is that the Gulf nationals and residents continue to buy a large share of their luxury goods abroad to experience their favourite brands in their native environment, said the company in its report entitled "Luxury goods worldwide market study, Spring 2014."

The global market for personal luxury goods is holding its own despite lingering economic weakness in Europe, a fomenting market crisis in Russia and destabilizing exchange rate fluctuations around the world, with sales revenue growth in the first quarter in line with 2013’s full-year figures and expected to persist through the balance of the year, it added.

First quarter update of Bain’s bellwether industry report shows extension of 2013 trends; exchange rate fluctuations changing purchasing patterns and flows.

The overall growth for the first quarter extends the 2013 full year trend of 4-6 per cent—possibly a ‘new normal’ growth pattern according to Bain—with regional figures ranging from a projected 2014 decline of up to six per cent in Russia to an increase approaching a record 11 per cent in Japan.

According to Bain, the currency devaluations in Russia, Japan, Brazil and Indonesia are reducing or altering shopping and spending patterns globally, with resulting weaknesses offset by promising projections for Western Europe and strong projected growth in the US.

Outside of Japan, Asia Pacific markets are strongest in Southeast Asia, followed by China and South Korea. China, though maintaining low single digit growth in real terms, continues to boast a customer base that leads the world in terms of overall luxury consumption.

The additional key findings of Bain include:

*Tourism and the hunt for travel bargains are driving spending on travel retail, outlet and online shopping, making these categories top performers for 2014.

Traditional channels, including single and multibrand stores and department stores, will not fare as well, with fewer new store openings, challenges to international expansion, budget cutting and shrinking store networks.

*Among products, accessories are expected to be the strongest driver of the market’s performance, followed by jewellery, watches and other “hard” luxury goods; apparel and beauty products will see more modest growth. Men’s bags and menswear are trending and have the greatest momentum.

*China’s international purchasing patterns and consumer profile are sharply evolving, with significant touristic flows into all regions of the world.

According to experts, the spending from China will grow the fastest in Asia Pacific, followed by North America and Western Europe.

"With luxury goods, we are seeing the emergence of a new normal: The global market is maturing, stabilizing and consolidating," said Claudia D’Arpizio, a Bain partner in Milan and leader of the firm’s Global Luxury Goods and Fashion Practice.

“It is becoming more resilient to economic crises, more responsive to a demanding and highly mobile global consumer base, and less reliant on market booms for growth.  For all these reasons, luxury brands everywhere should be focusing on how to build growth organically,” he observed.

Cyrille Fabre, Bain & Company partner who leads the Retail & Consumer Products practice for the Middle East said: "In the GCC, the luxury goods market has continued to grow fast, at 5 to 8 per cent year-on-year. The market has been mainly driven by tourism growth while the resident market has been growing but at a slower rate."

"GCC nationals and residents continue to buy a large share of their luxury goods abroad to experience their favourite brands in their native environment. As GCC retailers continuously enhance the customer experience in-store, they may succeed in capturing this latent demand," he added.-TradeArabia News Service