The luxury market exceeded $303 billion in 2021 and could grow by 10-15% in 2022

The personal luxury goods market reached 288 billion euros ($303.9 billion) in value in 2021, and 2022 “started strong”, with sales in the United States and Europe leading the growth . Up 7% from 2019 before the pandemic, luxury goods sales in 2021 saw a “V-shaped rebound,” according to Bath & Co.enjoying an “exuberant” 2021 holiday shopping season across all regions, continuing to see double-digit growth in China, and experiencing sustained local demand in Western markets like the U.S., which “maintained momentum , even after the federal administration [pandemic] stimulus checks have ended.

Despite rising inflation, geopolitical turmoil and the stark impact of COVID-19 lockdowns in China, the personal luxury goods market saw “remarkable performance in the first quarter of 2022,” Bain found, growing 17-19% at current exchange rates (13-15% at constant exchange rates), over the same period in 2021, the Boston-based management consulting firm pointing to a number of key factors contributing to the rise of 2022. The U.S. market, for example, is seeing “unprecedented growth as luxury brands unleash the true power of diversity and inclusion, uncovering the true potential of the entire U.S. customer base.”

Sales of luxury goods in Europe are on the rise thanks to “booming local demand driven by a fierce “return to normal” and a rebound in intraregional tourism” and “limited consequences [of the Russia-Ukraine war] on the sentiment and spending of global luxury customers. While spending in China has taken a hit due to strict COVID-related restrictions, Bain says “local consumer appetite remains strong and will potentially lead the country to a recovery between late 2022 and early 2023.” And yet, the luxury goods market in South Korea is undergoing a “profound transformation,” growing in size and cultural importance and replacing tourism spending with local demand.

Given the above, Bain analysts say the medium-term direction of the luxury market remains unchanged and the company estimates market growth will reach €360-380 billion by 2025. Optimistically , if the growth trajectory of the first half of 2022 continues throughout the whole year, the market would reach approximately 320 to 330 billion euros by the end of 2022, growing by 10 to 15 % from 2021. On the other hand, in a slower pace scenario, which foresees a potentially reduced pace of growth due to a slowing recovery from mainland China and difficult spending in mature markets caused by pressure inflationary and macroeconomic slowdown, the market will reach 305-320 billion euros by the end of 2022, growing 5-10% compared to 2021.

In a note dated June 15, analysts at Bernstein pondered recovery scenarios in Chinese consumer sectors and in terms of luxury goods, in particular, said that “early signs indicate that demand is recovering in China, as lockdowns are lifted – with purchases Shanghai malls report sales at 80% of pre-lockdown levels. They note that in emerging from existing lockdowns, “demand appears to be returning to a keel trajectory and even growth – on par with what we had seen up to Chinese New Year – despite softer macro-economic conditions.”

(Regarding apparel and footwear sales in China, Bernstein analysts observed that “underlying demand remains strong in China for our sector, and we expect to see a rebound as restrictions ease. are easing, led by e-commerce, as China fulfillment centers and last-mile delivery are back on track.”

Looking ahead, Claudia D’Arpizio and Federica Levato de Bain point to growth opportunities for luxury brands, which range from “answering the call of sustainability” to “out-innovating”.[ing] on sustainability to create competitive advantage” to make inroads into the virtual world. Regarding the latter, they note that in addition to the growth brought by traditional luxury goods, digital assets and the virtual world (i.e. metaverse, social media and games)” will play an increasingly relevant role in the value propositions of luxury brands.” By the end of 2030, they expect “digital assets and the metaverse [to] represent 5 to 10% of the luxury market. Luxury brands have the opportunity to play a key role in shaping the burgeoning virtual worlds, acting as creators and builders. »

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