MILAN – The personal luxury goods market is expected to record 4 percent growth by the end of 2023, swelling to an estimated 362 billion euros, according to the Altagamma-Bain & Company Worldwide Luxury Market Monitor 2023 presented in Milan on Tuesday. A spring update back in June had projected growth of between 5 and 12 percent in 2023, or between 360 billion and 380 billion euros.
The global luxury market is forecasting gains of between 8 and 10 percent in 2023 compared with 2022, reaching sales of 1.5 trillion euros, which is a new record and proves its resilience, said Federica Levato, co-author of the study with Claudia D’Arpizio. Both women are senior partners at Bain & Company. At constant exchange rates, the industry is projecting growth of between 11 and 13 percent at constant exchange rates, in line with last year.
Levato noted that macro-economic and geographic uncertainties “substantially reverberated on luxury consumer spending, and especially the last quarter is showing a slowdown, affected by China’s economic tensions, the Israel conflict with Gaza, the consolidation in the U.S. and in Europe, and the increase in interest rates and the high inflation, even though these are seen in progressive normalization.”
The headwinds are not stopping medium-term growth, as Bain expects a mid-single digit gain until 2030, leveraging “super solid fundamentals.”
Europe benefited from a recovery in tourism as well as local spending, although a slight slowdown is reported in the last quarter. Americans and Asians, in particular visitors from Thailand, as well as Chinese were cited as strong clusters of shoppers. Now Chinese spending amounts to 40 percent of what it was in 2019, “which is a great result,” said Levato, considering the pandemic.
U.S. spending registered a deceleration in the year, with an 8 percent contraction versus 2022.
Higher growth was expected in China, but Chinese tourists helped drive sales in Japan. “The country is the number one in terms of growth, driven also by local spending and a weak yen, which boosts tourism,” said Levato, who also singled out Hong Kong and Macao, as well as South East Asia, as showing growth.
Generally, there has been “an elevation” of the market, with a contraction in volumes because of higher average retail prices of products, said Levato.
All categories are growing, with a shift toward investment pieces. Sales of apparel of a more elevated quality are growing, as is the jewelry category.
By 2030, Gen Z will account for between 25 and 30 percent of luxury goods purchases while Millennials will account for between 50 and 55 percent.
Bain expects more M&A deals driven by the need to tackle such challenges as sustainability and digitalization.
Stefania Lazzaroni, general director of Altagamma, presented the foundation’s Consensus study, which estimates earnings before interest, taxes, depreciation and amortization of luxury companies to stand at around 4 percent in 2024, following the need for companies last year to increase retail prices to compensate higher costs. Sales are expected to grow from 5 to 6 percent.