Despite slowing growth in emerging markets, in line with global macro-economic conditions, their middle and upper classes continue to expand. This redistribution of wealth is creating ever more opportunities for luxury brands, with McKinsey noting that, “Growth is increasingly shifting toward emerging markets across all luxury categories.”
Using broad sets of economic and sociodemographic data from 2,600 cities, McKinsey forecasts that emerging countries will account for close to a third of the luxury women’s ready-to-wear market by 2025, a fourfold increase from a decade ago. Emerging markets are expected to comprise almost half the global market in high-end cosmetics by 2025, and 44 percent of the market in luxury spirits—a much greater proportion than they do currently. Helping to drive this growth: the expansion of online retailers like Alibaba in China and Jumia in Africa, which are making luxury products more accessible.
According to McKinsey, much of this growth in demand will be highly concentrated in cities. The world’s top 600 cities are expected to account for 85 percent of growth in the luxury-apparel market by 2025. Several major Chinese cities, along with Rio de Janeiro, will likely join the list of top luxury cities in the world. Of the top 20 cities for luxury-apparel growth, seven are in “Next 15” countries, with China driving half this growth (not surprising considering that earlier this year, McKinsey forecast that China will add close to 300 million more urbanites by 2030). And as we explain in our report The Brazil Opportunity: A Guide for Marketers, Brazil will also represent a substantial growth opportunity for both luxury and mainstream brands.