After its worst dip in history, the personal luxury goods market has experienced a V-shaped rebound, reaching €288 billion ($303.5 billion) in value, according to the key findings from Bain & Company’s Luxury 2022 Spring Update – Rerouting the Future. The market benefited from an exuberant 2021 holiday shopping season across regions, with a 7% increase over the same period in 2019. Additionally, China continued to see double-digit growth last year and Western markets experience sustained local demand—the United States, in particular, maintained momentum, even after federal stimulus cheques ended.
The study was released in collaboration with Fondazione Altagamma, the Italian luxury goods manufacturers’ industry foundation.
“Despite significant macro-economic challenges, including hyperinflation, slowing GDP growth and the Russia-Ukraine conflict, the personal luxury goods market proved resilient once again,” said Claudia D’Arpizio, a Bain & Company partner and lead author of the study. “Luxury goods brands started this year showing especially strong growth while also playing a leading role in the world’s ongoing sustainable and digital transformation.”
Bain said 2022 started strong, with the US and Europe leading growth. The personal luxury goods market experienced remarkable performance in the first quarter of 2022, growing by 17-19% at current exchange rates over the same period in 2021 driven by booming local demand in Europe, unprecedented growth of the US luxury market, strong momentum in China during the Chinese New Year and through March 2022, and South Korea’s increased cultural relevance and local demand.
In addition to growth delivered by traditional luxury products, digital assets and the virtual world—the metaverse, social media and gaming—will play an increasingly relevant role in luxury brands’ value propositions, Bain noted. By the end of 2030, digital assets and the metaverse will comprise 5-10% of the luxury market, it added.
Despite the challenges and disruptions that happened in early 2022, the mid-term direction of the luxury market remains unchanged. Bain & Company estimates market growth to reach €360-380 billion by 2025, highlighting two possible trajectories for 2022:
- An optimistic scenario, where the first half of 2022 growth path continues throughout the entire year. In this scenario, the market would reach around €320-330 billion by the end of 2022, growing 10-15% over 2021.
- A slower pace scenario, which projects a potentially reduced growth pace due to a slower recovery of mainland China and challenged spending in mature markets caused by inflationary pressure and macroeconomic slowdown. According to this scenario, the market will reach €305-320 billion by the end of 2022, growing 5-10% over 2021.
“In the last few months, luxury brands have been forced to reroute their futures” said Federica Levato, a Bain & Company Partner and Co-author of the report. “Winners will rapidly embrace the changes, ensuring they fully understand the implications of new geopolitical dynamics and cultural trends for all of their stakeholders: consumers, investors, employees and society at large. Those that come out ahead will take advantage of the opportunities presented by the virtual world, the sustainability transformation and preferences of younger generations.”