The luxury goods market can stand firm, even if a recession were to arrive. Sales will grow by another 60 % in the next eight years, a new report predicts.
Even if a recession hits, the luxury market will continue to grow: the sector is significantly stronger today than it was during the 2008-09 financial crisis, as it now has a larger consumer base. Their stronger customer focus and multi-touchpoint ecosystems also give luxury brands resilience today, Bain & Co concludes in its annual study of the (personal) luxury goods market.
An astonishing 95 % of luxury brands grew this year, even though their profitability often fell as they continued to invest in innovation. The personal luxury goods sector in particular saw growth accelerate this year, despite the current economic turbulence and lockdown challenges in China. At current exchange rates, Bain forecasts luxury goods sales of 353 billion euros this year, 22 % higher than a year earlier.
Young people start early
That growth was mostly generated through young people, as Gen Z starts buying luxury goods about 3 to 5 years earlier than millennials did: as early the age of 15 they make their first luxury purchases. Their successors from Gen Alpha are expected to behave similarly. In fact, Gen Y and Gen Z accounted for the entire growth of the market in 2022.
By 2030, Gen Z and Gen Alpha spending will account for a third of the market, according to Bain & Co. But since sustainability, creativity, tech and data are priorities for these generations, brands will have to follow them in this. Bain calls it the ‘nouvelle vague’ of luxury.
With that ‘new wave’ also come the emerging markets. While the US luxury market is still strong and Europe managed to recover, new markets are surprising the sector. Southeast Asia and South Korea are winning in terms of growth and potential. While there will never be “another China”, India and emerging Southeast Asian and African countries also offer significant opportunities. India’s luxury market in particular could more than quadruple by 2030.
100 million more luxury shoppers
Even if economic conditions deteriorate, the luxury goods market will be able to grow between 3 and 8 % next year. The outlook to 2030 is equally positive: according to the analysis, the value of the market will rise to between 540 and 580 billion euros by the end of the current decade, an increase of 60 %. As many as 500 million consumers worldwide will buy personal luxury products in 2030, 100 million more people than today.
The high-end segment in particular is continuing to expand, the report concluded from the fact that last year’s price increases did not even lead to a drop in volume. These consumers are looking for unique products and experiences, expect Very Important Client strategies and are interested in luxury items as art as well as “elevated” streetwear, Bain summarised the future trends.