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The global luxury market is expected to grow by between 5 and 12 per cent year-on-year in 2023 as demand gathers momentum in the “post-pandemic” era, a new report by management consultancy Bain and Italian luxury association Altagamma shows.
The market is expected to reach between €360 and €380 billion in value this year, up from €345 billion in 2022. Bain predicts it could get to between €530 and €570 billion by 2030 — approximately 2.5 times its value in 2020. By geography, growth will come from Asia and Europe, while the US slowdown is expected to continue as rising inflation rates and a lingering recession causes aspirational luxury consumers to limit their spending.
“The overall record performance of the luxury market in 2022 and, despite economic uncertainties, [its] positive prospects this year (and beyond) are due to its solid fundamentals and to the expanding — while elevating — customer base,” says lead author of the study Claudia D’Arpizio, a Bain Company partner and leader of Bain’s Global Luxury Goods and Fashion practice. “The luxury industry is experiencing a new phase after its post-pandemic growth, with renewed drivers of resilience establishing winners and losers.”
The report notes that mainland China is “on the road to recovery” following last year’s lockdowns. Hong Kong and Macau — key destinations for Chinese tourists — have seen a sharp acceleration in luxury spending since the mainland reopened. Brands are tapping into this: Chanel held its A Journey Into the Allure exhibition in Hong Kong in April; others, like Louis Vuitton, are enlisting Hong Kong-born talent as brand ambassadors.
The Southeast Asian market is experiencing strong growth, thanks to an influx of high-spending Russian tourists, the arrival of Chinese consumers and an increased demand for jewellery and watches. The report highlights a rebalancing in South Korea, as locals begin to spend more abroad.
Japan is a “rising star”, the report says, as local customers continue to spend on luxury goods. Growth is also coming from inbound tourists who have a strong appetite for best-selling accessories, the report says.
In the US, luxury sales have continued to flatline, forcing brands to rethink their strategies. The Bain report highlights that US luxury consumers are purchasing statement pieces across categories, including formal and occasionwear. Many affluent Americans are choosing to purchase luxury goods abroad as “price differentials widen”, the report finds. Areas like New York and California are regaining popularity, while key holiday destinations such as Hawaii and Las Vegas have not yet returned to pre-pandemic levels.
Europe has proved resilient in the first quarter of 2023, but Bain says it is awaiting a “moment of truth” as the influx of US and Middle Eastern tourists lessens, which could impact its performance in the second half. The report notes that Chinese tourists are beginning to return to Europe.
The top-performing luxury categories are watches, jewellery and iconic bags, which consumers increasingly perceive as valuable assets. Apparel is performing well among top-spending consumers. The beauty sector continues to grow as duty free spending recovers and appetite grows among aspirational consumers.
Over the next three years, the report predicts that luxury brands will see a pressing focus on value chain decarbonisation, which will require them to decouple expected business growth from the absolute growth of emissions. “Key areas of focus for luxury players are linked to their capacity to embrace new technologies and to respond to ESG requirements and regulations. And above all, customer centricity is a mantra to win,” says D’Arpizio
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