The luxury segment in Germany is booming thanks to its considerable strengths. High quality, technological innovation and unique design demonstrate the expertise of luxury companies and their employees. These virtues are paying off: all market segments grew substantially in the last half of 2012.
The outlook for the next six months is very positive too: 62% of company directors in the industry expect substantial sales growth in the first half of 2013. Almost one in two thus intends to hire more staff (48%) and invest in marketing (45%). One in three generally expects investment budgets to rise. Compared to other countries, Germany is a key growth market, with 55% of companies based there seeing better sales in Germany than in other markets.
Those are the key findings of a survey of 60 senior managers from leading companies for the first MEISTERKREIS index. This index tracks the mood in the German luxury segment and from now on will be conducted twice a year by MEISTERKREIS in collaboration with Roland Berger Strategy Consultants. In addition to market and sales development, the index evaluates aspects such as profitability and investment.
Good start to a new record-breaking year
The high expectations for this financial year come as no surprise: The industry for quality products and services has just completed an excellent financial year. Sales in the second half of 2012 developed well or very well at 81% of companies, while at a third of companies, sales rose by more than 10% and at 43% of companies they rose by 5 to 10%.
"Companies' consistent focus on quality is being rewarded by their customers' purchases. After excellent market development in 2012, this year they are planning another leap forward – for the fourth time in a row," according to Clemens Pflanz, CEO of the industry association MEISTERKREIS. The total value added by the companies (domestic sales and export revenues) is set to rise to over EUR 60 billion this year. Last year this figure grew 14% to EUR 56 billion.
Profitability and investment on the rise
But it is not just the industry's sales that are growing: over two thirds of companies also further improved their profits. Over half of companies are optimistic that the trend will continue in the first half of 2013. "The extremely positive trend over the past half-year is partly due to the fact that the luxury products segment invested heavily in marketing activities and qualified employees," says Philip Beil, Partner at Roland Berger Strategy Consultants. Some 90% of companies invested the same amount or more in new products and in expanding their business. Additional staff were hired by 62% of respondents, and around 60% of respondents spent more on marketing.
Laying the foundations for further growth
Growth will be driven in the first half of 2013 as well. Companies are planning more new hires (48%), higher marketing spending (45%) and investments (38%). In addition, most of those surveyed also aim to raise the average prices of their products in the first half of 2013.
"Overall, we rate the mood in the German market as very positive. Many companies are well positioned in their market segment and are achieving robust and profitable growth," Pflanz sums up. Companies' success depends on the work of highly qualified artists, designers, scientists, craftspeople, engineers and managers. Conditions are ideal for employing further staff.
The German market remains an engine of growth
In Germany, the luxury segment and service companies still offer considerable growth potential: at over half of all companies, sales in Germany developed better than in other markets last year. A third of companies believe this trend will continue.
What is also relevant is business with international customers who come to Germany to shop. "Sales to shopping tourists has been booming for many years," says Roland Berger expert Beil. International customers are important or very important to almost two thirds of the companies surveyed. However, domestic customers are most important for all companies; tourists from China (56%) and Russia (39%) come some way behind. "Satisfaction among regular customers is still the overarching goal," adds Beil. And buyers from Western Europe or the Middle East are relevant to 28% of the companies surveyed.
MEISTERKREIS index covers the entire industry for the first time
From now on, the MEISTERKREIS index will be published twice a year. It tracks the mood of the cultural and creative high-end segment in Germany and provides data on market and sales development and on aspects such as profitability and investment in marketing and human resources. "For the first time, the index covers the whole multifaceted industry," Pflanz says. "Companies in the luxury segment range from small craftsmen to international corporations, from pure service providers to industrial manufacturers, from the car, timepiece and jewelry industry to winemakers. The index pools all of this data."
The industry association MEISTERKREIS and Roland Berger Strategy Consultants conduct a survey twice a year among the CEOs of around 60 German companies and international companies with a German subsidiary.
