These are the findings of a recent report by Bain & Company in collaboration with Altagamma, the Italian association of luxury goods manufacturers. The study highlights the resilience of the luxury sector, attributing growth to a resurgence in social interaction and travel, driving spending on luxury experiences to historic highs.
The report delves into regional perspectives, revealing a rebound in European tourism, a slowdown in American spending, and a thriving Asian luxury ecosystem driven by Chinese consumers.
Amid these dynamics, the study highlights the growth of the jewellery category, which is set to reach a market value of €30 billion by 2023. Driven by an investment mindset, fine jewellery is emerging as a bright spot for investment amidst market uncertainty. The overall positive growth trend extends to other luxury categories, including ready-to-wear, beauty, watches and leather goods. The monobrand channel is leading the distribution ecosystem, capitalising on consumers’ quest for physical experiences and the increasing role of loyalty in sales.
As brands navigate multi-generational complexity, catering to diverse consumer needs becomes critical. The report highlights the income growth potential of Generations X and Y, which account for the majority of luxury purchases, while also noting the influence of Generation Z, which is expected to account for 25-30% of luxury market purchases by 2030.
Looking ahead to 2030, the report predicts continued market growth, with Chinese consumers expected to account for 35-40% of the personal luxury goods market. Online and mono-brand channels are expected to dominate two-thirds of the total market by 2030, highlighting the importance for brands to focus on differentiation and meaningful experiences across the entire customer journey.
In this evolving landscape, sustainability and technology adoption will play a pivotal role in the future of the luxury market, driving a new season of mergers and acquisitions. Brands must maintain a purposeful approach, prioritising creativity and innovation to remain relevant in an increasingly crowded marketplace, and ensuring adaptability as a guiding principle to overcome short-term challenges.
Despite challenging macroeconomic conditions, the market showed robust growth of 11-13% at constant exchange rates, representing a significant ~€160 billion increase in spending across various luxury categories. The personal luxury goods segment, a key player, is expected to reach €362 billion by the end of the year, an increase of 4% from 2022 at current exchange rates.
While the luxury market has shown exceptional resilience, challenges loom on the horizon in the fourth quarter, including fragile consumer confidence, macroeconomic tensions in China and limited signs of recovery in the US. The research points to a potential softening in the performance of personal luxury goods in 2024, with growth forecast to be in the low to mid-single digits compared to 2023.
Lead author Claudia D’Arpizio, a Bain & Company partner and leader of the firm’s global Luxury Goods and Fashion practice, said: “This is a defining moment for brands, and the winners will distinguish themselves through resilience, relevance and renewal – the fundamentals of the new value-driven luxury equation. The luxury market will generate positive growth for 65-70% of brands in 2023, compared to 95% in 2022. To stay in the game, it will be crucial for brands to make bold choices on behalf of their customers.”
Federica Levato, Partner at Bain & Company and leader of the firm’s EMEA Luxury Goods and Fashion practice: “The market is poised for long-term growth based on strong fundamentals. Capturing and amplifying market potential will be key as the clear convergence of luxury markets allows for further expansion. Players have the opportunity, but also the responsibility, to reinforce their relevance while using strategic M&A to redefine the boundaries of the industry. These will be fundamental drivers of future growth.
