According to a report by Bain & Company and Altagamma, the luxury goods industry is set to have another strong year, defying fears of a global economic slowdown. The report reveals that all categories of luxury goods have thrived, with sales expected to grow at about 95% of brands in 2022. Notably, South Korea and Southeast Asia have emerged as standout markets, while the US and Europe have also experienced strong growth. Although there has been a slight slowdown in growth, it has not derailed the overall growth trajectory of the luxury market. The report predicts a growth rate of 22% at constant exchange rates in 2022, which is slightly lower than the average growth rate of 26% from 2019 to 2021.
Bain expects the luxury market to reach a value of €353 billion by the end of the year, a significant increase from the pre-pandemic figure of €281 billion in 2019. Inflation has played a role in driving this growth, with price increases in key items like handbags accounting for about 60% of the overall growth. However, the report suggests that inflation is not the sole factor contributing to the market’s expansion. It highlights the resilience of the luxury market and its ability to weather economic turbulence. Even with the possibility of a global recession in 2023, the luxury market is expected to experience growth of 3% to 8%. The recovery of the Chinese market, as well as economic conditions in the US and Europe, will play a crucial role in determining the final growth figure.
The report also emphasizes the importance of the ultra-luxury shopper in driving the success of luxury fashion and accessories. Luxury brands have increasingly focused on catering to the needs of this affluent segment, resulting in strong sales performance. The top 2% of spenders now account for 40% of luxury sales, an increase from 35% in 2009. This group’s ability to sustain luxury purchases, regardless of stock market losses, has significantly contributed to the industry’s overall growth. Furthermore, the report notes that savings accumulated during the pandemic have been unleashed, further boosting the luxury market.
The rise of “new” luxury markets, such as India, South Korea, and Mexico, is also expected to drive growth in the future. Bain predicts that an additional 10 million consumers will enter the luxury market annually in these regions as their wealth increases. Additionally, the report highlights the significant role of Generation Z in luxury purchases. This demographic, born between 1997 and 2012, is projected to account for about a third of luxury purchases by the end of the decade. Younger shoppers are entering the luxury market at an earlier age than previous generations, with the average age of their first luxury goods purchase being around 15. This is attributed to brands’ effective digital communication strategies and the expansion of product categories that appeal to teenagers, such as trainers and casualwear.
Overall, the luxury market is displaying resilience and continued growth, driven by higher prices, the emergence of new luxury markets, and the purchasing power of Generation Z. Despite concerns about a global economic slowdown, luxury goods are expected to thrive in the coming years.
Here are two links related to the topic:
1. Reuters – China, Southeast Asia should drive luxury growth in 2023
2. Bain & Company – The Global Luxury Market Study
