Luxury goods market maintains robust growth momentum

The global market for personal luxury goods continues to grow, with a record-breaking 2022 and an additional 10 percent growth in Q1 2023, according to data from Bain & Company. The recovery of Chinese consumption and strong performance in Europe are driving this expansion, despite concerns about the US market and various macroeconomic challenges.

The luxury industry remains well-positioned for growth, supported by the resilient consumer base of "ultra-affluent" individuals who prioritise quality and elevated experiences. Environmental, social, and governance (ESG) factors and emerging technologies like Generative AI are expected to shape the sector's medium-term prospects.

Bain & Company predicts further progression in the luxury goods market this year, with growth estimates ranging between 5 and 8 percent, potentially reaching 9-12 percent in an optimistic scenario. The long-term outlook remains positive, with experts projecting a value of 530 to 570 billion euros by the end of the decade. Europe has benefited from the return of tourists, attracting tax-free shoppers from the UK and prompting analysts to revise growth estimates from 5 to 10 percent. The US market presents a mixed outlook due to inflationary pressures and the fading effects of stimulus measures, posing challenges for aspirational brands but offering continued growth opportunities for top-tier brands. The anticipated growth rate for the US market in 2023 is 3 percent.

In the Far East, Japan and China show promising prospects, with Japan expected to grow by around 10 percent and China poised to become the world's largest luxury market, driving growth in the rest of the Asian region at an impressive rate of 14 percent, Bain said. The Middle East also demonstrates positive growth (+10 percent), particularly in areas like the United Arab Emirates, benefiting from Russian consumption. As regions gradually return to normalcy, physical retail stores are projected to experience an 11 percent growth, while digital retail is expected to sustain its upward trajectory at 10 percent. However, the growth rates for physical wholesale (+4 percent) and digital wholesale (+5 percent) are anticipated to be less pronounced.

High demand for leather goods

In terms of specific segments, the leather goods industry is projected to have the highest growth rate in 2023, reaching 11 percent. Footwear also sees an upward revision in its growth forecast, with an anticipated increase of 9 percent. Apparel, cosmetics, and watches are all expected to exhibit growth rates of 8 percent, with watches being increasingly perceived as timeless investments based on the steady appreciation of pre-owned luxury timepieces in recent years.