The luxury goods industry remains on course for success: After a peak of 345 billion euros in 2022 – an increase of around 19 percent from 2021 with 290 billion euros – the global market for personal luxury goods continues to grow solidly.
This is the conclusion reached by the international management consultancy Bain & Company and the Italian luxury goods association Fondazione Altagamma in the current spring update of their “Luxury Goods Worldwide Market Study”. Four growth drivers emerged: tourism, top customers, technology and sustainability.
570 billion euros by 2030?
According to the study, in the first three months of 2023, sales of luxury brands with clothing, shoes, leather goods, perfume and jewelry increased by up to 11 percent compared to the same quarter of the previous year, despite all economic risks and geopolitical instability. For 2023 as a whole, the management consultancy and the association expect an increase of between 5 and 12 percent, depending on economic development – by 2030 the global market volume could even increase to up to 570 billion euros.
“The luxury goods industry is entering a new post-pandemic growth phase in which adaptability and resilience will be crucial,” explains Bain partner and industry expert Marie-Therese Marek.
“Successful brands focus holistically on their customers, manage their regional orientation and offer a high-quality range with appropriate clienteling and experience character. They also specifically focus on selected iconic and timeless products,” adds Marek.
Growth drivers top customers
Iconic and ultra-luxurious products are in demand across all product categories. “Customers are now making targeted purchases that are fewer, but in their eyes all the more exclusive,” says Marek.
While the top customer segment accounted for around 2 percent of all luxury customers and around 40 percent of sales in 2022, this concentration has even increased slightly in recent years.
Growth driver tourism
However, the outlook for the industry varies from region to region. While Europe posted a strong first quarter of 2023 on the back of post-pandemic tourism and “continued shopping by the particularly wealthy”, Europe could soon see a ‘moment of truth’, according to Marek.
“The number of travelers from the US and the Middle East could fall in the coming months, so a slowdown in momentum is a possibility,” warns Marek. But there could be more tourists from China and the Far East again.
In addition to the economic uncertainty in the USA, government corona support measures are being phased out. “Although Americans have savings totaling around 900 billion euros, they are still holding back when it comes to shopping,” the study found. Instead of spending on luxury products, they spend money on trips or special occasions.
But here, too, it depends on the region: “New York and California are returning to their old strength, i.e. they are shopping strongholds again, and holiday destinations such as Hawaii and Las Vegas are gradually recovering, but are still below their peak values of 2019,” according to the study .
Growth driver sustainability
Despite all growth prospects, the study warns the luxury industry against resting on traditional strengths such as individuality and exclusivity. Instead, it is now important to deal more intensively with sustainability, the circular economy and the ESG criteria (environmental, social, governance) and to implement them.
“Decoupling expected business growth from emissions growth must be a priority for any luxury brand in the next three years and is also one of the biggest challenges,” emphasizes Marek.
Growth driver artificial intelligence
Luxury manufacturers can benefit from the rapid progress in the field of generative artificial intelligence (AI), for example by developing new AI-driven product designs, designing advertising campaigns and supporting sales.
“If you want to be among the winners of the future, you have to start pilot projects in the field of AI now. This is the only way companies will be able to exploit the associated advantages and potential for efficiency. And this is the only way to secure a competitive advantage,” advises Marek.