Introduction
Bain & Company’s Luxury Goods together with Altagamma (the Italian luxury goods manufacturers' industry association) have launched their Spring Market Report for the luxury sector this week and following a record year in 2022, the report has suggested some very promising statistics for growth to 2030.
Taking a closer look by region
The personal luxury goods market posted a record year in 2022 reaching a market value of €345 billion, with growth continuing in Q1 2023 by 9-11% over 2022. The report broke perspectives down by regions:
- USA: US consumers are taking a cautious approach, influenced by economic uncertainties, and the end of Covid relief funding. Purchases are focused on statement pieces and although spend levels in New York and California are coming back, Hawaii, Vegas and other tourist destinations are flagging behind 2019 spending.
- Europe: Although Europe experienced a strong start to the year, US and Middle Eastern tourists are now expected to slow. However, the first of the Chinese tourists are back, and a solid return is due later this year.
- Asia: A reshuffling in the market has placed Hong Kong and Macau as primary Chinese tourist destinations, along with Southeast Asia which is continuing to grow due to Russian tourist spending and Chinese consumers, with a want of luxury goods including watches and jewellery. Whilst South Korea is slowing down, Japan is "the rising star" with locals and tourists alike keeping up their spend.
Quest for Elevation
A "quest for elevation" is driving customers towards a "less but better" approach, focussing on investing in fewer but more valuable purchases. Watches, jewellery and iconic bags, which are increasingly viewed as valuable assets continue to be a driving force behind consumer spending, with the shoe industry booming in Asia.
Projected figures for 2023 estimates the luxury market growing between €360 and €380 billion in 2023, up from €345 billion in 2022. A positive scenario projects growth between 9-12% versus 2022, and a realistic scenario puts growth between 5-8% versus 2022, with growth more severely impacted by a slowdown in mature markets and a slightly slower recovery in China. In any event, by 2030 the luxury goods market is estimated to be around 2.5 times the size of the 2020 luxury market, between €530 and €570 billion.
Future Challenges
The report also summarizes challenges ahead, including ESG pressures requiring brands to decouple business growth from the absolute growth of emissions. There is also the need for luxury brands to embrace new technologies which are set to impact all steps of the luxury value chain. Generative AI for example, has the ability to speed content development processes, helping to bring goods to market faster and sell them more efficiently, along with personalising and scaling clienteling services in previously unthought about ways will need to be embraced by companies if they want to stay ahead of the curve and create a competitive advantage against others in the market.
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