The personal luxury-goods segment reported vibrant growth in 2021 as markets rebounded from the global health pandemic. Worldwide value sales reached €288bn in 2021, or +7%, according to a new report from Bain & Company and this upward momentum is forecast to continue going by first-quarter 2022 sales.
“After its worst dip in history, the personal luxury-goods market has experienced a v-shaped rebound, reaching €288 billion in value,” notes Rerouting the Future, a study from consultancy Bain & Company in partnership with Italian industry association Fondazione Altagamma.
While China’s luxury-goods market saw double-digit growth in 2021, Western markets “sustained local demand”, with the US performing particularly well. Luxury players’ growing focus on “diversity and inclusion” is already attracting a wider range of consumers to the segment, especially in the US.
The market’s positive streak continued into early 2022, namely in Europe and the US with first-quarter growth up by 17-19% (at current exchange). “Despite significant macro-economic challenges, including hyperinflation, slowing GDP growth and the Russia-Ukraine conflict, the personal luxury-goods market proved resilient once again,” commented Bain & Company partner Claudia D’Arpizio.
The war in Ukraine is not impeding growth in Europe, and thus far has only impacted local markets, says the consultancy. “A fierce back to normal attitude and a rebound in intraregional tourism” signals that the European market can reach 2019 levels earlier than expected.
Predictably, China’s luxury segment has been impacted by the new set of lockdowns imposed this year, despite gains up until March 2022. “The country’s spending has been challenged by its strict Covid restrictions, which proved much more significant than its 2020 policies. Yet, local consumer appetite remains strong and will potentially lead the country to recover between in late 2022 to early 2023,” noted the report.
Virtual initiatives will be one of luxury’s main growth engines for the future: “by the end of 2030, digital assets and the metaverse will comprise 5-10% of the luxury market,” notes Bain. Direct-to-consumer retail channels are another source of growth, as brands look to “build a new intimacy with their customers”.
Bain forecasts one of two scenarios for the full year: either first-half growth continues throughout the year and the market sees an uptick of 10-15% over 2021 to reach annual sales of €320bn-€330bn or a less rosy outlook where sluggish sales in China coupled with inflation in mature markets will produce slower growth of 5-10% resulting in €305bn-€320bn in sales for the year.
Whatever the outcome, luxury brands’ suppliers concur that their order books are full, and that consumption is in full swing. Watch this space.