The global luxury market is projected to grow by up to 12 percent in 2023, according to a new study released by Bain & Company and Altagamma, the Italian luxury goods manufacturers’ industry association.
Despite economic uncertainty, geopolitical tensions, and gradual emergence from the pandemic, the personal luxury goods market reported a record year in 2022 with a market value of EUR354 billion (USD386 billion).
Further out to 2030, the personal luxury goods market could grow between EUR530 and EUR570 billion, or around 2.5 times the size of the 2020 luxury market.
“The luxury industry is experiencing a new phase after its post-pandemic growth, with renewed drivers of resilience establishing winners and losers,” said Claudia D’Arpizio, a Bain & Company partner and leader of Bain’s Global Luxury Goods and Fashion practice.
Regional outlook: Rebalancing the luxury map
Asia is experiencing a “reshuffling” with new luxury consumers on the rise. According to the report, Japan is the “rising star” in Asia as locals maintain spending and inbound tourists boost shopping. On the other hand, South Korea is seeing locals spending more overseas as travel retail accelerates, partly due to limited Chinese tourists in recent months.
Mainland China is expected to return in 2023, with some brands likely to see sales rise to pre-pandemic levels. With Hong Kong and Macau also returning as primary destinations for Chinese tourism, these markets have posted a swift acceleration in luxury consumption.
Bolstered by Russian and Chinese tourist spending, Southeast Asia is also seeing a “brilliant growth path.”
US luxury consumers are slowly returning and focusing on statement pieces and formalwear, particularly in New York and California, but also in holiday destinations like Hawaii and Las Vegas. Meanwhile, Europe, which has begun seeing the fruits of the return of Chinese tourism spending, sustained performance in the first quarter of the year. The test for Europe comes after the waves of tourists subside in Q3 and Q4.
Quest for elevation: Less is more
The study reports customers are in pursuit of “less but better” purchases.
Top performing categories include watches, where iconic models are driving growth, and uber-luxe jewellery. The Federation of the Swiss Watch Industry last week reported three out of its top five destinations for Swiss watch imports in January to May 2023 were Asian markets: China, Hong Kong, and Japan ranked No. 2, 3, and 4, respectively, with the US at No. 1 and Singapore at No. 6.
Perceived as valuable assets, iconic bags remain coveted, while shoes continue to boom in Asia. Niche fragrances and travel retail offerings are seeing growth in prestige beauty.
“Luxury is entering the ‘literally me’ era, marked by a desire to show ourselves moving beyond purely aspirational items, valuing uniqueness over status,” said Federica Levato, partner at Bain & Company. “To remain relevant in the long run, brands will need to continue to channel an insurgent mindset, championing hero products and their founders’ visions, while also tooling up to sustain long-term growth by getting the business fundamentals right.”
Channeling sales
Travel retail is on its way to recovery, with more and more luxury brands expanding footprint in the world’s busiest airports. Southeast Asia and Japan, in particular, are driving the boost.
Experientiality and in-store experiences are also key factors in consumer spending, with monobrand stores continuing growth from 2022. Bain says direct retail remains on a solid growth path, thanks to tech-enabled consumers and omnichannel 3.0-enabled sales.
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“Brands who want to succeed need to focus holistically on consumers; balance their exposure across geographies; offer a high value proposition with elevated entry clienteling and experientiality at scale; and push on icons, timeless, and statement pieces,” says Bain’s D’Arpizio.