The global luxury goods market is set to achieve a market value of €1.4 trillion in sales revenue this year, growing by 21% from 2021 (at current exchange rates).
- The sector seems much less affected than other sectors by highly uncertain economic and consumer market conditions.
- The global luxury goods market remains poised to see further expansion next year, and for the rest of the decade to 2030, even in the face of present economic turbulence, the 21st edition of the Bain & Company–Altagamma Luxury Study, said Tuesday.
Personal Luxury Goods: The personal luxury goods industry saw a further growth acceleration this year, coming on the heels of the V-shaped rebound enjoyed in 2021.
- Boosted by a strong market performance across quarters, and despite macro-economic indicators worsening globally, as well as specific challenges in China, the personal luxury sector is set to see the value of its sales jump to €353 billion in 2022, marking an advance of 22% at current exchange rates (or 15% at constant exchange rates) versus the previous year.
Watching China: The performance of the last quarter of this year, in determining the final outcome for 2022, will largely depend on the progressive lifting of COVID-19 pandemic restrictions in China, as well as evolution of European and American luxury consumer confidence in the face of rising inflation and cost of living pressures, and potential recession in the US and European economies.
- But despite present and continuing economic challenges, the luxury market continued to perform strongly throughout this year to date, with winners for brands across the board, and positive growth for 95% of brands.
Growth and Resilience: Luxury brand players are continuing to invest in future growth, even in the face of high inflation and rising costs, so that their profitability is slightly decreasing, following an unprecedented increase in 2021.
- The 2023 luxury market now set to be more resilient to recession than during the 2009 global financial crisis.
- Even with a possible global recession next year, the impact on the industry could be different from that of the 2008-2009 global financial crisis.
- The luxury market appears better equipped to cope with economic turbulence with its consumer base both larger and more concentrated, and customer-centricity and a multi-touchpoint ecosystem set to provide resiliency amid disruptions.
Growth Factor: A powerful factor for sector growth in the rest of the decade will be generational trends. 'Gen Y' and 'Gen Z' accounted for the entire growth of the market in 2022.
- In coming years, the spending of Gen Z and 'Gen Alpha' is set to grow three times faster than for other generations until 2030, making up a third of the market.
- This is, in part, driven by a more precocious attitude towards luxury, with Gen Z consumers starting to buy luxury items some 3-5 years earlier than Millennials (at 15 years-old, versus at 18-20), and Gen Alpha expected to behave in a similar way.
- This generational factor is one of the critical trends affecting the development of the luxury market in 2022, and for the rest of the decade, that are highlighted by today's report. Taken together, the study characterises these trends as the 'nouvelle vague' – or 'new wave' – of developments for the sector.
Old Continents Still Leading, New Markets Surprising: While US luxury market is still strong, and Europe managed to recover beyond 2019 thanks to solid local demand alongside an extra-boost from US and Middle Eastern tourist shoppers, new markets are surprising the industry. South-east Asia and Korea are winning in terms of growth and potential.
- Although there will never be "another China" in terms of growth' contribution to the industry, India and emerging Southeast Asian and African countries have a significant potential nevertheless.
- India stands out for growth potential, which could see its luxury market expand to 3.5 times today's size by 2030, propelled by an increasing interest and evolving attitudes and behaviours among (young) customers towards luxury goods.
- China meanwhile remains crucial to the long-term of the luxury market, and continues to confront a challenging phase due to Covid lockdowns and is still performing below 2021 figures. China's luxury market is expected to recover between H1 and H2 2023.
What They Said:
The nouvelle vague – the new wave – of the luxury goods market will demand evolution amid disruption, adaptation amid uncertainty, and an expansion of creativity in all of the basics – all while new trends and concepts develop.
— Claudia D'Arpizio
Partner / Leader
Bain & Company / Global Luxury Goods and Fashion practice
In their path to 2030, luxury brands will need to leverage their cultural avant-garde position and insurgent excellence to overcome the challenges ahead and shape the world. Just as they recently did through excellent products and human-centric engagement, they must now deal with new priorities: ESG, creativity chain, tech & data. These domains are rich with opportunities for luxury brands – but investments for future growth are crucial.
— Federica Levato
Paertner / Leader
Bain & Company / EMEA Luxury Goods and Fashion practice
