Expensive taste: IBISWorld reveals inbound Asian tourists have become a lucrative market for luxury retailers
Inbound tourists, particularly from Asia, have been a major driver of strong revenue growth in Australian luxury retailing over the last five years.
Across the luxury retailing industry, which sells goods such as Swiss watches, lavish handbags and designer clothing, IBISWorld expects revenue to grow by an annualised 11.0% over the five years through 2016-17, to reach $1.8 billion. Growth is anticipated to continue over the five years through to 2021-22, at an annualised 8.2%.
Strong industry growth is largely due to the increasing number of tourists from China and elsewhere in Asia. By 2021-22, industry revenue is expected to top $2.7 billion.
IBISWorld anticipates that about 30% of industry revenue can be attributed to inbound tourists, especially from increasingly sophisticated markets in Asia.
The inbound tourism market has traditionally been drawn to heritage luxury labels and large flagship stores. This is largely due to the prestige and popularity of brands such as Gucci, Louis Vuitton and Chanel across Asia, particularly in China.
The Australian dollar has gradually depreciated since mid-2013. This has driven growth in inbound tourism, and consequently boosted demand for retail sales of luxury goods. This change has coincided with the increasing sophistication of high-value Asian tourism markets.
The number of international arrivals is forecast to reach 7.95 million in 2016-17, a 5.7% increase on the previous year. Strong growth is expected to come from China and South-East Asia, while improving economic conditions in the United States and Europe are also expected to contribute to increasing international arrival numbers.
Domestically, growing Australian discretionary incomes have made luxury products more accessible to a wider middle class. Growing demand from middle-class market has also been a key revenue driver over the past five years. In addition, fashion-conscious Australians have been increasingly exposed to international luxury labels through overseas travel and online retailing.