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Summer 2007

Article selected from our quarterly magazine dedicated to the largest and most luxurious boats with information, interviews, technical articles, images and yachting news



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Article by
Tommaso Nastasi

The worldwide luxury goods market: extent, trends and positioning of superyachts in the top range product sector

The world of luxury yachting has been chiefly seen as a world apart from the luxury goods market. From a marketing management viewpoint this is certainly short-sightedness since dialectic comparison with the context of the broadest market today is, and will be more so tomorrow, a critical factor in success. In other words, pleasure craft marketing must absolutely tackle its own market context, which is more broadly represented by the luxury goods market, with view to understanding the evolutionary dynamics thereof. The main aim of this analysis is to understand on the one hand the performance of the luxury market and on the other hand compare the performance of the superyacht market within the luxury goods market.

As far as luxury products are concerned, the events of 11th September belong definitively to the past. According to a study carried out by Bain & Company in 2005, the luxury market had its first strong recovery also due to the fact of being freed from the effect of exchange rates.

That was the year in which overall turnover reached 146 billion euros as against the 134 of 2004, reaching 160 billion in 2006 (see figure 1).

Fig. 1

Positive results that confirm the dynamic nature of this segment within a macro economic context characterised by uncertainties and slow economic recoveries.

But over and above the positive results of recent years it is interesting to analyse the annual growth rate of the luxury goods market: this is represented in figure 2 which shows the trend over the past ten years, an average growth of 6.8%.

Fig. 2

The growth data confirm that in the course of 2005 there was a consolidated recovery in the worldwide luxury goods market. The crisis, which culminated in 2003, left its mark but now companies have found a new optimism and, thanks above all to the good performance of the East where millions of new consumers approach the market every year, are experiencing a very satisfactory period.

It would be reductive to speak of the worldwide luxury goods market without classification into the main geographic areas: figure 3 shows the growth rates that evidence a positive result in Japan with + 11% but above all in Asia where, thanks mainly to India and China, there is a growth rate of +16%.

Fig. 3

Needless to say, the United States head the list. Due above all to the boom of internet companies with their record profits, America is luxury goods market leader with figures of 53 billion euros.

Europe too is playing a respectable role as the second world market with a value in the course of 2005 of 50 billion euros, with a growth of 7% over 2004. Considered together, the United States and Europe represent 70% of the entire world luxury goods market (high market concentration).

Focusing on the USA market we see that it is in continual growth characterised by a clear dominance of European over local brands. The European market sets out already privileged by the tourism flow of the newly rich Russians, Chinese and Indians (in 2005 the Russian market was worth 2.5 billion euros). The Asian Pacific market is still growing, transversally with regard to all product categories. The most dynamic markets are China - 2 billion euros - and India with a value of 0.5 billion euros.

Independently of geographic distribution it is interesting to described the world luxury products market subdivided into classes of goods (in this sense we are helped by the study carried out by Bain & Company though it doesn't take account of the luxury pleasure boat market). As shown in figure 4, more than 75% of the world market is represented by the line of "fashion" products (32%), "perfumes & cosmetics" (23%) and "hard luxury" goods (20%). In analysing the dynamics of luxury products it is also interesting to consider the evolutionary trends of the various product classes. In general it is pointed out that in the course of 2005 the products with a growth rate over 10% were "fashion", "fashion accessories" and "hard luxury goods" whose respective growth was 10%, 15% and 11%. The product class which contrarily showed a negative trend was "Art de la table" which dropped by 4%. In general the value growth for 2005 was fundamentally fashion (including accessories) and the hard luxury world, chiefly jewellery and luxury watches.

Fig. 4

Given the geographical distribution of the luxury market and this classification by goods classes, we may legitimately ask how the main outlet markets are positioned with regard to these top of the range goods. Figure 5 describes their positioning analysis: as the map shows, there is a strong correlation between wealth increase among high net worth individuals and the increased consumption of luxury products within a specific geographical area. In this case too the United States and Europe are the most consolidated in comparison with, for example, the Pacific Asian market which in 2005 showed the best growth rate (16%) with an overall value of 15 billion euros.

Fig. 5

But no analysis of the luxury goods market would be complete without specific focus on the luxury yacht market, represented by superyachts (vessels over 24 metres). According to a study carried out by the Yachting Market Observatory of the Tor Vergata University in Rome, (, in the course of 2006 this market amounted at world level to 12.47 billion euros with almost 700 pleasure craft and an average annual market value growth rate of 14% over the last 5 yachting seasons. Figure 6 shows the superyacht market trend expressed in terms of vessels built.

Fig. 6

It is interesting to note the continual growth of the 150 feet plus superyacht market, vessels that are entirely and exclusively custom built to the owner's requirements. Even in the course of 2003, when the total market of superyacht orders dropped by 3%, the custom superyacht market continued to grow, showing a trend going absolutely counter-current and confirming the fact that we are dealing with a market that is non-cyclical with regard to fluctuations in the international macro economic context. For the sake of completeness the superyacht market trend analysis should also be represented in terms of feet built. In this sense figure 7 shows that in the course of 2006 the world superyacht market was 81.844 feet (from the sum of the lengths of all superyachts built) with an increase of 11% over the preceding year.

Fig. 7

From careful, across the board analysis of all this data it clearly emerges that the concept of luxury has changed a great deal over these years in the consumer's perception. Until a few years ago luxury existed in a logic of appearances. Increasingly today luxury is becoming a synonym of quality, of excellence, of a self-referential thing. It means giving yourself the best, it means an aspiration towards living well and surrounding yourself with high quality products.

The trend is towards the aesthetic improvement of everyday life. Yachts are certainly a symbol of exclusive luxury and find a wide field of application in the new concepts of advanced luxury. Over and above being status symbols, which satisfy their owners' need to show off, yachts also give the opportunity of experiencing unique sensations and atmospheres.

Why a yacht instead of another luxury item? The yacht is a product whose core benefit can be classified in at least two ways. On the one hand it's certainly a symbol of having arrived socially, which is to say the yacht as expression of your power and wealth and therefore a notable status symbol. On the other hand there's something linked to enjoyment, to leisure, to holidays, to fun with your family and friends. And we shouldn't exclude - at least in connection with big vessels (superyachts) - the advantage of the pleasure of being able to build a luxury toy as the expression of your dreams and aspirations, the pleasure of owning a yacht built in accordance with your own desires. This last core benefit presupposes plenty of money to spend and, as highlighted in previous Nautica Superyacht articles, is the privilege of ultra high net worth individuals since custom yachts come at a very high price.

It is precisely thanks to its high core benefit that the pleasure craft market in recent years has shown an absolute growth trend, becoming one of the "star" sectors of the wider luxury goods market. To grasp the extent to which this is true, figure 8 shows market performances of luxury products in comparison with the luxury pleasure craft market represented by superyachts.

Fig. 8

The interesting element emerging from the analysis is that the superyacht market always evinces market performance superior to the performances of other luxury products. According to the data gathered by Bain & Company and by the Yachting Market Observatory of the Tor Vergata University in Rome, the market value of luxury goods has grown on average by 4% as against the 14% of the superyacht market value. Moreover it was noted that on average the superyacht market demonstrates an extra performance of 10 percentage points in comparison with other luxury goods, data which only confirm the "star" position of pleasure craft within the luxury goods world.

Also in terms of competitive positioning, superyachts stand out in comparison with other luxury goods. As shown in figure 9, whose purpose is to clarify the "superyacht" cluster market position within the broader luxury goods context, the competitive positioning of superyachts is highly interesting inasmuch as it has the best growth performance with a rate of 7.2% of the total luxury market. As can be seen from the map, the interesting product classes are "fashion accessories" and "hard luxury" goods which show high growth rates and not inconsiderable market dimensions.

Fig. 9

As further confirmation of the foregoing, figure 10 shows a market breakdown of luxury products which evidences, in particular, the effect of the superyacht market between 2003 and 2005. It's important to underline the growth of the effect of luxury pleasure craft within the luxury products market from 6.5% in 2003 to 7.2% in 2005.

Fig. 10

What has been pointed out and highlighted above cannot obviously be considered as exhaustive treatment of such a wide ranging and complex subject. The study carried out by Bain & Company in fact notes how the international luxury goods map is highly complicated inasmuch as it embraces various typologies of consumer, each of which has specific needs/desires to satisfy. This is further confirmed by Bain & Company partner Claudia D'Arpizio who, in a telephone interview, clearly underlined how development of scientific marketing with activities of customer insight, client segmentation and development of personalised propositions for each target is a critical factor for the competitive success of a luxury enterprise.

In its constant monitoring of the pleasure craft market the Yachting Market Observatory of the Tor Vergata University in Rome ( points out how the pleasure craft market still has considerable managerial gaps in comparison with players in the broader luxury goods context. In other words, the new innovative frontier of pleasure craft industries consists in overturning strategic-operational orientation in order to become market oriented type industries. Substantially, the pleasure craft industries today must be forced and directed in their strategies, oriented in the fundamental choices of their operational situation by market pressures, thus transforming themselves into market driver companies.

For further information regarding the analysis, see