The luxury goods market, including cars, watches, experiences and
hospitality, has shown resistance to the effects of Covid-19 and is set
to overcome economic recessionary trends.
The latest Bain-Altagamma study reveals that the Indian luxury
market, driven by younger customers and a growing upper and middle
class, could grow to three and a half times its current size by 2030.
The report also states that the number of wealthy consumers worldwide
is driving the projected growth in the luxury market, with the consumer
base expected to grow from 400 million in 2022 to 500 million.
When do we want it? We want it now
Generational trends are also in play. Generation Y (millennials) and
Generation Z accounted for all the market’s growth in 2022. The spending
of Gen Z and the even younger Generation Alpha is set to grow three
times faster than other generations’ through 2030, making up a third of
the market.
Gen Z consumers are starting to buy luxury items some three to five years earlier than millennials did (at 15 vs. at 18–20).
“This reflects a more precocious attitude toward luxury, with Gen Z
consumers starting to buy luxury items some three to five years earlier
than millennials did (at 15 vs. at 18–20),” Bain-Altagamma says.
Gen Alpha is expected to behave in a similar way.
In-person shopping is back in favour
Given the spending power of younger generations, Bain expects they
will contribute significantly to annual luxury marker growth rates
between 5% and 7% until 2030.
The report also found that while the pandemic initially changed
consumers’ shopping habits when people locked-down shoppers went online
to purchase luxury goods, many are now embracing the familiarity of
in-person shopping.
Retail continued to grow faster than wholesale and reached parity in terms of market share in 2022.
The steepest growth rate between 2019 and 2022 belonged to personal
luxury goods, followed by experience-based goods, such as fine art and
luxury cars. Demand for luxury experiences has been improving, but this
segment will be the last of the three to regain its 2019 levels,
probably in 2023, the report found.
Secondhand is first choice for investment
Interestingly, while old favourites like leather goods, accessories,
apparel, beauty and jewellery led the way in luxury purchases, sales of
new watches grew by 22%–24% and reached a record €52 billion (US$56
billion), reflecting solid demand for top-of-the-range models and iconic
pieces.
According to the Bain-Altagamma study, sales of secondhand watches
rapidly grew in 2022, fuelled by the appetite of Generation Z and
millennials for investment and resale opportunities, given the high
resilience of the category during crises.
Overall, the global luxury market has fully recovered from the Covid-19 crisis, having grown 8%-10% over 2019.
Asia surged by 43% when mainland China and Japan were excluded, reflecting the booming performance of Thailand and other Southeast Asian countries, as well as a stellar year for South Korea.
Asia surged by 43% when mainland China and Japan were excluded,
reflecting the booming performance of Thailand and other South-east
Asian countries, as well as a stellar year for South Korea, which
narrowed the gap with Japan in terms of market size. Hong Kong and Macau
were weaker spots, while Taiwan slowly recovered.
The report notes India and emerging South-east Asian and African
countries have significant potential, “if the luxury industry’s
infrastructure (such as malls) and regulation can evolve quickly enough
in those markets”.
Technology will drive growth
Looking ahead, the study expects the growth of new types of
activities, often powered by technology, will result in an additional
€60 billion to €120 billion of luxury industry sales.
This could include revenues generated by:
• the metaverse and NFTs, such as through collectibles and other new products and services
• the monetisation of communities through virtual events and data monetisation, for instance
• brand-related media content such as movies, music, and art
• secondhand luxury goods
• and '3.0 experiences' such as virtual stores, digital shopping assistants, and ultra-luxury travel and hospitality