Growth
Southeast Asia continued its brilliant growth path, sustained by an influx of Russian tourists’ spending, the first arrivals of Chinese consumers, and a strong appetite for jewellery and watches (~€12 billion market value in 2022). South Korea, on the other hand, is slowing down with a rebalancing of locals spending on purchases abroad and travel retail accelerating, due to inflows from Southeast Asia and despite limited Chinese arrivals so far (~€21 billion market value in 2022). Japan is the rising star in this landscape: local customers are keeping up their spending, and growth is coming from inbound tourists that are hungry for best-seller accessories, including the first signs of Chinese arrivals (~€24 billion market value in 2022).
The study shows a cross-category “quest for elevation,” driven by iconic and uber-lux pieces, with customers looking for “less but better” purchases. Top performing categories include watches – iconic models with a few giant brands driving growth – and jewellery, with uber-lux pieces driving growth. Iconic bags continue to drive spending as they are increasingly perceived as valuable assets. Shoes are booming in Asia, while slowing down in the Western world, transcending beyond sneakers. In beauty, the study shows growth in fragrances, fuelled by niche offerings and the recovery of duty-free, while makeup and skincare maintain positive trajectories.
In terms of channels, experientiality and travel retail are gaining back shine, tapping into other luxury territories. Travel retail is finally recovering after a long-awaited rebound, thanks to a dynamism from Southeast Asia and Japan. The monobrand category continued its solid growth from 2022, fuelled by an ongoing appetite for in-store experiences and shifts in consumer flows. Direct retail also remains on a solid growth path, increasingly boosted by the dawn of tech-enabled consumers and omnichannel 3.0-enabled sales.
Expectations
The luxury market is set to grow to between €360 and €380 billion in 2023, up from €345 billion in 2022. Bain-Altagamma analysis sets out two scenarios:
* A positive scenario shows a solid growth path in 2023, driven by China’s recovery and sustained growth from Europe and the Americas, although stabilizing, with sales growth in the personal luxury goods market projected to be between 9 and 12%, versus 2022.
* A realistic scenario shows overall growth more severely impacted by a slowdown in mature markets, potentially adversely influencing luxury customer spending, as well as a slower recovery in China. In this scenario, sales growth in the personal luxury goods market is expected to be between 5 and 8%, versus 2022.
Looking further out to 2030, the personal luxury goods market is likely to experience growth driven by solid market fundamentals, boosting its value to between €530 and €570 billion—around 2.5 times the size of the 2020 luxury market.
In response to regulatory ESG pressures, luxury brands over the next three years will see a pressing focus on value chain decarbonisation, known as scope 3 emissions, requiring them to decouple expected business growth from the absolute growth of emissions.
Generative AI will impact all steps of the luxury value chain, from distribution to creativity—yet only partially—as it revolutionises business enablers across all functions. As we saw with digital channels, leaders of tomorrow will be the ones able to stay ahead of the curve and create a competitive advantage through new technologies.
“Luxury is entering the ‘literally me’ era, marked by a desire to show ourselves moving beyond purely aspirational items, valuing uniqueness over status,” said Federica Levato, partner at Bain & Company and leader of the firm’s EMEA Luxury Goods and Fashion practice, co-author of today’s report. “Meanwhile timeless, iconic pieces remain coveted due to their scarcity and continuous appreciation. This means many newcomers are overperforming, but they are competing in a world of giants, who are also experiencing much success. To remain relevant in the long run, brands will need to continue to channel an insurgent mindset, championing hero products and their founders’ visions, while also tooling up to sustain long-term growth by getting the business fundamentals right.”
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