Milan—The global luxury market hit a record-breaking €1.5 trillion ($1.6 trillion) in sales in 2023 despite geopolitical and economic challenges, according to Bain & Company’s latest “Luxury Goods Worldwide Market Study,” produced in collaboration with Altagamma.
The surge was driven by a revival in luxury travel and a robust U.S. holiday season in the fourth quarter. However, the first quarter of 2024 has seen a slowdown across most regions due to macroeconomic pressures, the study noted.
Jewelry Leads in Performance
Jewelry emerged as a top performer in the luxury market, with investment-led purchases driving growth. Sales in jewelry outpaced those in watches, with strong performance seen in both entry-level and high-end pieces. Aspirational shoppers are also spending on smaller indulgences like makeup, fragrances, and eyewear.
Federica Levato, a partner at Bain & Company, emphasized the importance of a dual strategy targeting both top-tier clients and those seeking smaller luxuries. “Brands must rethink how they craft and deliver value propositions across multiple price points to grow their reach and build customer loyalty,” Levato said.
The report suggests that brands invest in growth enablers, defend core business elements, maintain agility in decision-making, and optimize stock management to ensure market responsiveness.
Goods vs. Services
The study highlights a continuing trend of consumers favoring experiences over physical goods, driven by growing demand for immersive experiences and a recovering tourism industry. Spending on hospitality, gourmet food, and fine dining is on the rise, with luxury travelers showing increased interest in intimate cruises, private jets, and yachts.
Conversely, the fine arts auction market is slowing down due to artwork shortages and economic uncertainty.
Generational Spending Patterns
A generational divide in luxury spending is evident, with Gen Z holding back due to rising unemployment and a bleak economic outlook. In contrast, Gen X and baby boomers are spending more, attracting the focus of high-end brands.
The report notes that many brands are adopting a dual strategy, targeting top clients through large-scale events while also expanding their reach into new areas like sports, with the upcoming 2024 Summer Olympics in Paris serving as a key opportunity.
Rethinking Value in Luxury
Personal luxury goods saw a slight decline in the first quarter of 2024. Claudia D’Arpizio, the study’s lead author, stressed the need for brands to rebuild their value propositions to emphasize trust and connection with consumers. “Luxury brands must navigate macroeconomic pressures and a polarized customer base by fostering a personal connection with their customers,” D’Arpizio said.
Addressing “Luxury Shame”
China’s luxury market faces dual challenges: a return to outbound tourism and weakening local demand due to economic uncertainties. This has led to “luxury shame,” where wealthy shoppers avoid flashy, label-heavy goods. The report draws parallels to the U.S. during the 2008-2009 financial crisis, noting that current macroeconomic pressures in the U.S. are similar despite some signs of recovery.
Europe and Japan, however, have shown notable resilience, bolstered by an influx of tourists in early 2024.
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