Despite challenging geopolitical events impacting the world, the global luxury market remained resilient during 2022.
It seems that the highly uncertain consumer market and economic conditions hasn’t led to a contraction in the market. And in fact, expansion is likely to continue throughout 2023.
Luxury market set to remain resilient in the face of recession
According to the 21st Altagamma Luxury Study by Bain & Company, the luxury goods sector will continue to expand through to 2030, despite the continuing uncertainty caused by war in Europe, the ongoing pandemic, steep increases in energy costs and political events.
By the end of 2022, the luxury market reached sales revenue of 1.4 trillion Euros, which marks and increase of 21% over the year prior.
Research shows that the personal luxury goods market specifically accelerated in 2022. This was off the back of the V-shaped recovery following the worst impact of the global pandemic in 2021. There was a strong market performance throughout 2022 for personal luxury goods, which is particularly interesting given the unique stressors facing China and macro-economic conditions worsening in general around the world.
Despite all this, sales increased to be worth 353 billion Euros in 2022, which represents an increase of 22% on 2021’s sales.
Inflation is rising in Europe
Rising inflation in Europe and the US has impacted consumer confidence, and while it remains high across much of the Western world, the US is now getting it under control. This is likely to further boost interest in the personal luxury goods market once more. The report also shows that 95% of luxury brands experienced positive growth in 2022, which again marks the resilience of the consumer confidence in luxury goods.
Turning to 2023, it’s likely that major brands will continue to elevate their own investment in growth, which will mean a slight decrease in profits. Given this is leading on from unprecedented increases in profits in 2021, this will not do any long-term damage.
Evolution, disruption and innovation will be key for the new wave or luxury goods brands in 2023 and beyond. Creativity will expand in among the uncertainty and disruption of the wider world and economic condition, leading to exciting new trends and developments for luxury consumers.
Luxury market has developed a recession-proof outlook
Economic experts believe that the luxury market will remain relatively robust even in the face of potential recessions around the world in 2023. The reports show that sales are expected to increase along with market value.
This is in contrast to the market collapse during the 2008/2009 global financial crisis, Experts say this is because the luxury market has adapted and is now better equipped to deal with even severe economic ups and downs.
Since the 2008 crisis, the luxury consumer base is both much bigger and more concentrated, which allows resilience to win out.
However, even the analysis is hedging its bets in a way. The Bain/Altagamma report sets out two different possibilities for 2023:
- Personal luxury goods sales will increase between 3% and 5%.
- Personal luxury goods sales will increase between 6% and 8%.
The winning scenario will depend on how China manages its way of the latest economic crisis due to the sudden cessation of its zero COVID programme. This has led to an explosion in cases and disruption to many industry sectors.
How much sales increase will also depend, to an extent, on how Europe and the US continue to manage the economic uncertainties that have risen from the Russian invasion of Ukraine and the continuing economic fallout from Brexit.
Next ten years will see huge growth for luxury sector
Sector growth over the next ten years is guaranteed, with market fundamentals and new technology pools working together to increase the personal luxury goods market to be worth around 560 billion Euros b y 2030. This is an increase of around 60% from the 2022 figure.
It’s thought that generational trends are driving this growth, with spending power of Gen Z and Gen Alpha (born after 2010) set to increase three times faster than any other generation. By 2030, these two demographics will make up 33% of the market.
Interestingly, Gen Z are far more likely to be interested in luxury products than Millennials. Furthermore, they’re more likely to start buying much earlier in their lives than older generations. Data shows that the youngest generations are starting to buy luxury goods by the age of 15.
Emerging regions for personal luxury goods
In terms of regional markets, the US and Europe are still going strong for the luxury market. Emerging markets for luxury goods include Korea and generally across Southeast Asia.
There is huge potential for the emerging SE Asian market, along with countries in Africa and India too. However, in order to make this happen there needs to be several leaps forward in terms of infrastructure in these regions so that they can catch up with demand.
India is probably the stand-out market for growth, with experts predicting that it will be 3.5 times bigger by 2030, compared with today. China remains crucial for the global luxury market and, while there are plenty of challenges for the country, it’s likely that recovery will start to emerge in the last half of 2023.
Every category within the luxury market has now recovered to at least the levels of 2019, which means that the pandemic hit has been successfully managed. Leather, hard luxury (which of course, includes diamonds as well as watches and jewellery) and clothing have emerged as the biggest growth areas since the pandemic, which is good news for investors.