Global Luxury Sees Record Growth in 2022; Market to Double by 2030

The West: Despite holding onto about $900 billion in unspent savings, US consumers are refraining from spending, due to economic uncertainties and the end of Covid relief funding. 

• Top US customers are holding up, yet partially shifting their spending abroad as price differentials widen, and aspirational customers are spending less. 
• In this context, US luxury consumers are focusing their purchases on statement pieces across categories as well as new formal and occasion wear. 
• In the meantime, a rebalancing of the luxury map is taking place: the "giants," such as New York and California, are coming back while holiday destinations, such as Hawaii and Las Vegas, are recovering yet still behind their 2019 peaks.
• Europe has started the year off strong, with sustained performance in the first quarter, especially due to top spenders. 
• The region, however, is awaiting "a moment of truth," which will pressure test its resilience in the summer as locals face an end to their "luxury shopping haven"—the long tail of US and Middle Eastern tourists in the first half of the year is now expected to slow down. 
• In the last months, Europe has experienced its first Chinese tourists back, with a solid return expected later in the year.  

In Asia: The market in Mainland China, which saw Q1 growth, is expected to rise again this year, with some, but not all, brands back to 2021 levels. In the meantime, the Asian market is experiencing a reshuffling, with old and new luxury magnets. 

• Hong Kong and Macau posted a sharp acceleration as primary destinations for Chinese tourism since the country reopened, with additional tailwinds from government policies (~€5 billion market value in 2022). 
• Southeast Asia continued its brilliant growth path, sustained by an influx of Russian tourist spending, the first arrivals of Chinese consumers, and a strong appetite for jewellery and watches (~€12 billion market value in 2022). 
• South Korea, on the other hand, is slowing down with a rebalancing of locals spending on purchases abroad and travel retail accelerating, due to inflows from Southeast Asia and despite limited Chinese arrivals so far (~€21 billion market value in 2022). 
• Japan is the rising star in this landscape: local customers are keeping up their spending, and growth is coming from inbound tourists that are hungry for best-seller accessories, including the first signs of Chinese arrivals (~€24 billion market value in 2022).

Top customers voracious across categories: The study shows a cross-category "quest for elevation," driven by iconic and uber-lux pieces, with customers looking for "less but better" purchases. 

• Top performing categories include watches—iconic models with a few giant brands driving growth—and jewellery, with uber-lux pieces driving growth. 
• Iconic bags continue to drive spending as they are increasingly perceived as valuable assets. 
• Shoes are booming in Asia, while slowing down in the Western world, transcending beyond sneakers. 
• In beauty, the study shows growth in fragrances, fuelled by niche offerings and the recovery of duty-free, while makeup and skincare maintain positive trajectories.
• In terms of channels, experientiality and travel retail are gaining back shine, tapping into other luxury territories. 
• Travel retail is finally recovering after a long-awaited rebound, thanks to a dynamism from Southeast Asia and Japan. 
• The monobrand category continued its solid growth from 2022, fuelled by an ongoing appetite for in-store experiences and shifts in consumer flows. 
• Direct retail also remains on a solid growth path, increasingly boosted by the dawn of tech-enabled consumers and omnichannel 3.0-enabled sales.

Expectations for 2023 and beyond: The luxury market is set to grow to between €360 and €380 billion in 2023, up from €345 billion in 2022. 

The Bain-Altagamma analysis sets out two scenarios:

1. A positive scenario shows a solid growth path in 2023, driven by China's recovery and sustained growth from Europe and the Americas, although stabilising, with sales growth in the personal luxury goods market projected to be between 9 and 12%, versus 2022.
2. A realistic scenario shows overall growth more severely impacted by a slowdown in mature markets, potentially adversely influencing luxury customer spending, as well as a slower recovery in China. In this scenario, sales growth in the personal luxury goods market is expected to be between 5 and 8%, versus 2022.

Looking further out to 2030, the personal luxury goods market is likely to experience growth driven by solid market fundamentals, boosting its value to between €530 and €570 billion—around 2.5 times the size of the 2020 luxury market. 

WHAT THEY SAID:

The luxury industry is experiencing a new phase after its post-pandemic growth, with renewed drivers of resilience establishing winners and losers. Brands who want to succeed need to focus holistically on consumers; balance their exposure across geographies; offer a high value proposition with elevated entry clienteling and experientiality at scale; and push on icons, timeless, and statement pieces.

— Claudia D'Arpizio (Lead author)
Partner / Lead Author
Bain & Company 

Luxury is entering the 'literally me' era, marked by a desire to show ourselves moving beyond purely aspirational items, valuing uniqueness over status. Meanwhile timeless, iconic pieces remain coveted due to their scarcity and continuous appreciation. This means many newcomers are overperforming, but they are competing in a world of giants, who are also experiencing much success. To remain relevant in the long run, brands will need to continue to channel an insurgent mindset, championing hero products and their founders' visions, while also tooling up to sustain long-term growth by getting the business fundamentals right.

— Federica Levato
Partner / Co-Author
Bain & Company