The luxury market is dominated by Italy and France, with the countries taking a 30 per cent and 25 per cent stake in the $40.5bn sector, the Italian-based Panbianco Institute told Woolmark.

Italy takes first place in luxury clothing (39.3% share), shoes (33.3%), leather goods (38%), and glasses (66.7%). France dominates different areas, including perfume (54.7%), cosmetics (51%), and jewellery (27.3%). It also takes 35% of the leather goods market.

The report found that the Italian luxury market is shared between a number of companies, with the top five firms taking up 56 per cent of the output. The story is different in France however, where the top five companies make up 95 per cent of the sector. LVMH is the clear global leader, with 13.2 per cent of total output.

Morgan Stanley Dean Witter analyst, Claire Kent, told Woolmark that Italy and France succeed in the luxury market because of their national image, which is strongly linked to culture and the arts. Other factors are also key, such as the high per capita income in the domestic market, a strong heritage background in terms of manufacturing and design, and excellent production and distribution systems.