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The global luxury goods market took a further leap forward during 2022, despite highly uncertain economic conditions and consumer sentiment, it is poised to see further expansion next year, and for the rest of the decade to 2030, the just released 21st edition of the Bain & Company–Altagamma Luxury Study has reported.
According to the report, the global luxury goods industry overall is projected to achieve a market value of some €1.4 trillion in sales revenue in 2022, growing by 21 percent from 2021 at current exchange rates.
The personal luxury goods industry, in particular, saw a further growth acceleration this year, coming on the heels of the V-shaped rebound enjoyed in 2021, the research shows. Boosted by a strong market performance across quarters, and despite worsening macro-economic indicators, as well as challenges in China, it is set to see the value of its sales jump to €353 billion in 2022, marking an advance of 22 percent at current exchange rates, or 15 percent at constant exchange rates.
The luxury industries’ performance during the fourth and final quarter of 2022, which will determinethe final outcome for the year, will largely depend on the progressive lifting of COVID-19 pandemic restrictions in China, as well as evolution of European and American luxury consumer confidence in the face of rising inflation and cost of living pressures, and potential recession in the U.S and European economies, the report notes.
But the Bain team suggests that, even with a possible global recession next year, the impact on the industry could be different from that of the 2008-2009 global financial crisis. The luxury market now appears better equipped to cope with economic turbulence with its consumer base, a multi-touchpoint ecosystem set to provide resiliency amid disruptions, the report finds.
The report sets out two scenarios, with sales growth in the personal luxury goods market at constant exchange rates at 3 percent to 5 percent, or 6 percent to 8 percent, depending on the strength of economic recovery in China and the ability of the U.S. and Europe to withstand economic headwinds.
GEN Z AND GEN ALPHA
Prospects for personal luxury goods market out to 2030 are also highly positive, the report concludes, noting that that solid market fundamentals and new tech-enabled profit pools are set to boost the market’s value to €540-580 billion by the end of the present decade, from €353 billion estimated for 2022. This translates into a rise of 60 percent or more.
A powerful factor for sector growth in the rest of the decade will be generational trends. ‘Gen Y’ and ‘Gen Z’ accounted for the entire growth of the market in 2022, it notes.
In coming years, the spending of Gen Z and ‘Gen Alpha’ is set to grow some three times faster than for other generations until 2030, making up a third of the market. This is, in part, driven by a more precocious attitude towards luxury, with Gen Z consumers starting to buy luxury items some 3 to 5 years earlier than Millennials, starting at age 15, versus at 18 to 20, and Gen Alpha expected to behave in a similar way.
Taken together, the study characterizes these trends as the ‘nouvelle vague’ – or ‘new wave’ – of developments for the sector.
INDIA STANDS OUT
While U.S. luxury market is still strong, and Europe managed to recover beyond 2019 thanks to solid local demand alongside an extra-boost from American and Middle Eastern tourist shoppers, new markets are surprising the industry. South-east Asia and Korea are winning in terms of growth and potential.
Although there will never be “another China” in terms of growth’ contribution to the industry, the report says, India and emerging Southeast Asian and African countries have a significant potential nevertheless. Yet, they still require an infrastructure catch-up to facilitate the expansion locally.
Among the rising stars, India stands out for growth potential, which could see its luxury market expand to 3.5 times today’s size by 2030, propelled by an increasing interest and evolving attitudes and behaviors among younger customers towards luxury goods.
Retail continues to dominate. While online channels are seeing a normalization in their growth, the coming years will see a further blurring of the boundaries between ‘mono-brand’ and ecommerce, which will increasingly push brands to take an ‘Omnichannel 3.0’ approach, enabled and enhanced by new technologies, the report says.
The luxury market’s consumer base is broadening with some 400 million consumers in 2022 expected to expand to 500 million by 2030. This market growth is driven by factors that go beyond aspiration, with consumers becoming more knowledgeable and choosy, and intensified competition for loyalty and advocacy.
The higher and top end of the luxury market is also expanding at the same time and accounted for some 40 percentof market value in 2022, compared with 35 percent in 2021.