The global luxury market is expected to reach a new high of 1.5 trillion euros in 2023. Successful luxury brands will build stronger brand resilience, trigger stronger consumer resonance, and obtain more long-term development momentum.
Bain & Company recently released the "2023 Global Luxury Industry Research Report (Autumn edition)", the study shows that 2023 global luxury market sales (including luxury goods and luxury experiences) is expected to hit a new high, reaching 1.5 trillion euros, compared to 2022, the overall sales increase of about 160 billion euros, an increase of 8-10%. Among them, driven by the recovery of social interaction and global travel, luxury experience consumption rebounded strongly in 2023, returning to the highest point in history.
The research shows that at constant exchange rates, the global luxury goods market has continued the growth trend of last year, achieving 11-13% growth. In addition, the core segment of the personal luxury goods market continues to grow, with sales expected to reach €362 billion, up 4% year-on-year (at current exchange rates). Facing 2024, due to the impact of a series of macro factors on the global luxury goods market in the fourth quarter of this year, the study predicts that the performance of the global personal luxury goods market in 2024 will be weak, and the year-on-year growth rate will remain at a low to mid-single digit level.
Bruno, senior global Partner at Bain & Company, said: "65-70% of luxury brands will see positive growth in 2023, however, this proportion is down from 95% in 2022. At present, luxury brands are at a decisive moment, in order to maintain their competitiveness, brands must think what customers want, to meet the needs of consumers as their own responsibility, and decisive decisions. In the future, those successful luxury brands will build stronger brand resilience, generate stronger consumer resonance, and gain longer momentum to stand out and win new growth in a new market environment centered on value."
Xing Weiwei, global partner at Bain & Company, said: "The foundation of the global luxury industry is solid, and the growth momentum will not change in the long run. We see a clear convergence between the various luxury markets, providing new opportunities for brands to expand further. In this context, luxury brands should seize and expand the market potential, further strengthen their brand connotation, and through strategic mergers and acquisitions, redefine the boundaries of the industry, so as to lay the foundation for future development."
Global luxury market performance by region
China: The mainland market had a strong performance in the first quarter, but the growth rate slowed gradually amid macroeconomic pressure. Looking forward to the future, by 2025, with the establishment of a special customs supervision area for customs operation on the whole island of Hainan (that is, the whole island of Hainan becomes a "domestic customs" area, and Hainan can enjoy preferential policies such as zero tariffs), Hainan is expected to become an emerging luxury consumption center.
Elsewhere in Asia: Japanese domestic customers maintain strong spending power, while the Japanese market is booming due to a large number of inbound foreign tourists. In contrast, in South Korea, macroeconomic headwinds have affected domestic consumption, in addition, the volatility of the won exchange rate has made shopping costs rise, which has brought certain challenges to the South Korean market. The luxury goods market in Southeast Asia, especially Thailand, is showing positive momentum thanks to strong regional tourism and growing interest from local consumers. The Saudi market is accelerating, attracting investment from mainstream luxury brands. The Australian market is also well positioned for growth.
Americas: Overall sales in the Americas market declined 8% year-over-year compared to 2022. On the one hand, the general uncertainty of many "admiring" consumers has suppressed the willingness to buy luxury goods. On the other hand, although the top customers maintain a firm consumer confidence, due to the continued strength of the US dollar against the euro and the price difference in domestic and foreign markets, this type of consumers are more willing to go overseas to spend.
Europe: The gradual recovery of tourism in Europe has led to the growth of luxury consumption in various countries, among which long-distance resorts and major luxury shopping cities are favored by high-spending people. Even though macroeconomic instability has affected the buying intentions of local "admiring" consumers, the top customers in the European market remain stable and show positive momentum, driving market growth.
Segment category and channel performance
Category aspect. Due to price increases, sales of some luxury categories have declined, but this has driven sales growth in all categories. Jewelry categories, especially fine jewelry, have become a hot investment spot in an uncertain environment. Driven by this, sales of the jewelry category are expected to reach 30 billion euros in 2023. The popularity of the ready-to-wear category, especially the ultra-premium ready-to-wear category, among top consumers shows the growing demand for superior, durable products. The "lipstick effect" in the American and European markets has been highlighted, driving the beauty category, especially the two major sub-categories of makeup and perfume to achieve positive growth. The watch category continues to improve, but the trend of polarization has intensified, and only a few brands have become winners. The leather goods category has achieved excellent performance in recent years, but the current growth rate has slowed down.
Channel aspect. As consumers' desire for a physical shopping experience grows and customer service becomes more important in sales, single-brand stores dominate the distribution system. In addition, the gradual convergence of physical and digital experiences requires brands to deliver exceptional experiences at every stage of the customer journey. In contrast, the growth of the multi-brand sales format, represented by department stores and luxury specialty stores, has slowed dramatically - forcing practitioners to think about how to adapt their value proposition to meet consumer needs more effectively.
There are obvious differences between generations of consumer groups
According to the study, the differences between the different generations of consumers have increased: Generation X and Generation Y are at the peak of their incomes, they are the main force of luxury consumption, and they will be the main source of income growth in the coming years. In contrast, Gen Z's current spending power is less than that of their predecessors, but they are at the forefront of social and cultural change, able to influence the value systems of other generations of consumers, and have a deep desire to experience and actively explore the meaning of life. This demonstrates the enormous spending potential of Gen Z, which is expected to account for 25-30% of the global luxury goods market by 2030, with Millennials accounting for 50-55%. To succeed in an increasingly complex market landscape, brands must strive to meet the needs of different consumer groups.
Looking to the Future: Global Luxury Market Outlook to 2030
Looking ahead to 2030, the global luxury market may have its ups and downs, but its solid fundamentals will continue to drive growth. The study predicts that Chinese consumers will contribute 35-40% of sales to the personal luxury market, with European and American consumers contributing 40% combined. In addition, online and single-brand exclusivity channels will account for two-thirds of the total market by 2030. To this end, luxury brands must focus on delivering differentiated, meaningful experiences at every interactive touch point throughout the customer journey. Bain believes that M&A is one of the key solutions to luxury brands' major challenges, and the industry will usher in a new wave of mergers and acquisitions. In the process, luxury brands are also committed to becoming leaders in sustainability and using technology to build differentiation.
Xing suggested that the key to long-term success for luxury brands is to always be clear and targeted. In an increasingly competitive market, brands must focus on creativity and innovation, deepen the resonance with consumers, and the ultimate goal is to cultivate brand enthusiasts and expand brand influence.
In addition to preparing for long-term growth, luxury brands need to proactively address short-term challenges. Bain recommends that in business operations, luxury brands should follow the guiding principles of rapid response and flexible adjustment, establish a flexible business structure, and optimize governance mechanisms and business processes to achieve high efficiency.
