Despite all the uncertainties, the global luxury goods industry continues to grow and is expected to further expand in 2023 and until 2030. According to the latest Bain & Company Luxury Study in collaboration with Fondazione Altagamma, presented in Milan today, the global luxury goods industry overall is projected to achieve a market value of around 1.4 trillion euros in sales in 2022, up 21 percent from the previous year.
In particular, the personal luxury goods industry is poised to see revenues climb 22 percent to 353 billion euros in 2022 compared to 2021. The performance of the last quarter of this year will largely depend on the progressive lifting of COVID-19 restrictions in China, and the consumer confidence of European and American luxury consumers as inflation rises.
The personal luxury market is forecast to see a growth of at least 3 to 8 percent next year, even given a downturn in global economic conditions, and by 2030 the market value is expected to climb to around 550 to 570 billion euros, a rise of 60 percent or more compared to 2022. The luxury market is set to be more resilient to recession next year than during the 2009 global financial crisis.
“In the second half of 2008, consumer confidence in luxury was down and there was a dose of luxury shaming, while the customer attitude now is different, and sustained almost everywhere, with big tickets and an elevated choice of product,” said Federica Levato, partner at Bain & Company, leader of its EMEA Luxury Goods and Fashion practice, and co-author of the report. Also, Levato pointed to a larger and more global customer base, as the Chinese market was still small in 2008 and 2009.
She also noted that companies, having gone through COVID-19, are more prepared to directly engage customers and continue to invest in activations and marketing, in digital and physical technologies, even in the face of high inflation and rising costs, which lead their profitability to slightly decrease on the back of growing sales, following an unprecedented increase in 2021.
“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”, said Claudia D’Arpizio, a Bain & Company partner, leader of Bain’s Global Luxury Goods and Fashion practice, and the lead author of the study.
In coming years, the spending of Gen Z and ‘Gen Alpha’ is set to grow some 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 toward luxury, with Gen Z consumers starting to buy luxury items some three to five years earlier than Millennials, and Gen Alpha expected to behave in a similar way.
Levato said that companies will have to now deal with new priorities: ESG, creativity chain, technology and data. “These domains are rich with opportunities for luxury brands – but investments for future growth are crucial.” The study also points to other key trends, such as a return to physical retail, which was “not unexpected,” said Levato. “We factored this in in previous estimates, believing that when tourism restarted, it would be normal to go back to stores.”
The U.S. and Europe have been showing strength, but there are also new markets that are showing potential, such as South East Asia and Korea. India and emerging South East Asian and African countries have a significant potential, although they need to improve their infrastructure, the study stated. China remains crucial to the luxury market, but is still performing below 2021 figures, due to the ongoing restrictions, and is expected to recover between the first and second half of 2023.
The luxury market’s consumer base is broadening with some 400 million consumers in 2022 forecast to expand to 500 million by 2030. The higher and top end of the luxury market have been expanding and accounted for some 40 percent of market value in 2022 compared with 35 percent in 2021. Levato said all luxury categories have now recovered to 2019 levels or better, with hard luxury, leather goods and apparel leading the resurgence following the pandemic.
“There is a shift to the ‘post-streetwear’ era, which maintains some elements such as gender fluidity, occasion-less apparel, inclusivity and sports-driven inspiration, but goes beyond its style codes through new and enhanced techniques, materials and functionalities, such as sartorial and casual integration, high tech and sustainable fabrics,” concluded Levato.
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