The UK luxury sector is set to almost double in size over the next five years to £12.2 billion in 2017, it has been announced today.
Despite economic uncertainty across Europe, sales of luxury goods are to see double-digit growth annually for the next five years, according to research from non-profit organisation Walpole British Luxury and market research firm Ledbury Research.
Over the course of 2013, the sector is predicted to grow 12 per cent to £7.4 billion and 83 per cent of British brands expect a sales rise during the year.
International expansion is crucial in order to drive sales growth and emerging markets Brazil and India are a core focus for UK labels looking to expand.
Research found that only 13 per cent of brands surveyed currently have operations in Brazil though 52 per cent of UK brands have an interest in entering the country ahead of the Olympics and World Cup.
In the longer-term, while only 23 per cent of British luxury brands are currently operating in India, over 50 per cent have plans to enter the market though the country‘s lack of infrastructure and local regulatory environment are cause for caution, the report noted.
Russia and China are also key potential growth areas for the majority, while South Korea, Mexico, Indonesia and Vietnam have also been identified as “important target markets” for UK brands.
China has long been an area of focus of luxury brands as the Chinese economy flourishes and British brand Burberry last month announced a seven per cent rise in like-for-like sales over its second half thanks to double-digit store sales growth in China and Hong Kong.
Domestically, London continues to be the prime retail destination for luxury labels in the UK, though 81 per cent of brands have a presence outside the city, with the South East and North West the next largest regions.
“London is home to the majority of luxury goods sales and continues to attract vast numbers of international shoppers,” said Director of Walpole and Managing Director of luxury department store Harrods Michael Ward.
“It is important, however, not to overlook the regions; as the UK luxury benchmark study has identified, the majority of UK luxury brands have a presence outside of the capital and tier one cities such as Manchester and Edinburgh are key luxury hubs.”
In support of such physical expansion, digital innovation is also a priority, as the most popular initiative for UK brands was building a strong e-commerce and mobile offer.
Compared with last year, nearly double the amount of respondents involved in the study are set to invest in m-commerce in the year ahead.
Other important challenges facing the luxury industry include maintaining product quality and “reaching the next generation of consumers”, with 98 per cent believing the latter will present the greatest challenge.
Director at Ledbury Research James Lawson said: “Behind some buoyant numbers, this year‘s results reveal the key theme of innovation for the British luxury market.
“Innovation from the brands – including their use of technology and social media – and a next generation of new and inquisitive luxury consumers who are voracious users of these new platforms.”