The global luxury market is expected to reach €1.5 trillion in 2023, representing growth of 8 to 10 percent compared to 2022. This was the result of a study carried out by the consulting firm Bain & Company together with the Italian industry association of luxury goods manufacturers Altagamma.
The result represents a new record for the industry and demonstrates its “unparalleled resilience,” according to Bain & Company. Spending on experiences in particular has recovered to historic highs, driven by a resurgence in social interactions and travel.
“This is a pivotal moment for brands, and the winners will demonstrate resilience, relevance and renewal – the foundations of the new value-driven luxury equation,” comments Claudia D’Arpizio, partner at Bain & Company and lead author of the study.
Luxury market demonstrates “unparalleled resilience”
Despite the difficult macroeconomic and geopolitical conditions, the market recorded robust growth of 11 to 13 percent at constant exchange rates. This is in line with last year’s growth rate and represents an increase in spending across all luxury categories of around €160 billion.
The key segment, personal luxury goods, which includes clothing, footwear and accessories, recorded sustained growth in 2023 and is expected to reach 362 billion euros by year-end, up 4 percent from 2022 at current exchange rates.
However, the year is not over yet and headwinds will continue into the fourth quarter, including weak consumer confidence, macroeconomic tensions in China and scant signs of recovery in the US.
As for next year, the study suggests a slowdown in luxury goods performance in 2024, with low to mid-single-digit growth predicted over 2023 based on current scenarios.
Jewelry and clothing are in demand
While all luxury categories have seen growth, jewelry is particularly popular: “Driven by an investment mentality, the jewelry market value is expected to reach €30 billion in 2023, with fine jewelry emerging as a bright spot for investment amid uncertainty,” the study said.
Ready-to-wear has also seen positive growth, with demand for superior quality and durability increasing. The beauty industry, especially makeup and perfumes, is also showing positive momentum, and the watch industry is thriving despite increasing polarization around a few industry winners. After the above-average development in recent years, growth in leather goods is slowing.
Luxury tourism is almost at pre-pandemic levels
The study shows that global purchases by luxury tourists have almost reached pre-pandemic levels, but there is still untapped potential in many areas. In Europe, tourism has gradually recovered, driving growth in all countries. “Even though macroeconomic instability impacted discerning local customers, the stable top customer pools continued to contribute to market growth,” it concluded.
The Americas, on the other hand, saw a slowdown throughout the year, with a decline of 8 percent compared to 2022, reflecting general uncertainty. “Top shoppers remain confident but have maintained their spending abroad as the US dollar remains strong against the euro and price differentials encourage purchases abroad,” the study said.
Saudi Arabia is on the rise, attracting investment from major luxury brands, while Australia has created fertile ground for growth. China posted a strong performance in the first quarter following its reopening, but this weakened as the year progressed.
“Hainan is on track to develop into a gleaming luxury hub, aiming to become a complete duty-free island by 2025. Japan is booming thanks to healthy local customers and the weak yen, which is encouraging tourist inflows. In contrast, South Korea is facing a difficult year, with unfavorable macroeconomic factors affecting local consumption and a strong currency encouraging tourists to shop elsewhere. Southeast Asian countries recorded positive dynamics thanks to strong intra-regional tourism and growing interest from local consumers, especially in Thailand,” concludes Asia.
“The luxury market will generate positive growth for 65 to 70 percent of brands in 2023, compared to 95 percent in 2022. To stay in the game, it will be crucial for brands to make bold decisions on behalf of their customers,” adds D’Arpizio.