Amidst the looming threat of a global recession, the personal luxury goods industry is defying expectations by projecting further growth in 2023. Unlike the 2008-09 financial crises, the luxury market is proving to be more resilient in the face of economic turmoil.
A combination of factors, including a larger consumer base consisting of customers who are less affected by economic downturns, customer-centric strategies, and a robust multi-touch point ecosystem, positions the luxury industry to weather economic turbulence.
According to a study by Bain & Company, the global luxury goods market experienced a remarkable 21% surge in sales in 2022, reaching a total of approx 1,554 billion USD. Sales of personal luxury goods, which include apparel, watches, and jewelry, are expected to jump by 22% with a growth rate ranging between 3% and 8% this year. This positive trajectory persists despite inflation and ongoing market challenges resulting from geopolitical upheavals.
Following a significant contraction in 2020 due to the COVID-19 pandemic, the market rebounded to approximately 1.293 trillion USD in 2021, exceeding expectations by growing between 19% and 21% in 2022. This growth primarily favored personal luxury goods, while experience-based goods showed more moderate growth. The recovery of the experiential luxury sector is expected to be gradual and contingent upon the resumption of international tourism and business travel.
The rise of sustainability concerns among millennials and Gen Z consumers is driving a significant shift in the luxury industry. Bain & Company predicts that by 2025, millennials will represent 45% of the global personal luxury goods market, while Gen Z is anticipated to contribute 40% of global luxury purchases by 2035, a considerable increase from a mere 4% in 2019.
Additionally, the market for pre-loved fashion is gaining traction as a facet of sustainable luxury. Bain & Company emphasizes that winning brands in this evolving landscape will be those that leverage their existing excellence while embracing an insurgent mindset to reimagine the future. Luxury players must boldly rewrite the rules of the game, transform their operations, and redefine their purpose to meet the evolving demands of customers, particularly younger generations who are expected to drive the majority of market growth from 2025 onwards.
