Consulting firm Bain & Company, in partnership with Fondazione Altagamma, has just published its annual study on the global state of the luxury goods industry. Against a backdrop of sluggish sales in China over the past year for most established players, and a highly uncertain geopolitical and economic landscape, this 23rd edition of the study reveals a slowdown of unprecedented proportions for the sector, excluding pandemics.
Global luxury spending is expected to reach nearly 1,500 billion euros in 2024, relatively stable compared to 2023, with an estimated year-on-year growth rate of between -1 and 1%. Yet the luxury sector is facing a series of headwinds, as evidenced by the recent quarterly results of LVMH, Kering and Richemont.
Is this simply an eclipse of the sun, and therefore economically cyclical , or more problematic and structural? In any case, not all luxury players necessarily share the optimistic view of a situation perceived as a “bad moment to pass”.
While there is no sign yet of a lasting twilight for the sector, it does seem that the luxury goods market is entering its second biggest slowdown in history, since the Great Recession (2007-2008), with the exception of the pandemic period. So much so, in fact, that the market must prepare for a “potential 2% erosion in value between now and 2024”.
This is the prediction of Bain & Company’s latest Global Luxury Report, produced in partnership with Fondazione Altagamma, the Italian association of luxury goods manufacturers.
In addition to a probable shift in consumption towards immaterial experiences (hotels, restaurants and ultra-high-end experiential products), the study points to a shrinking luxury customer base. This phenomenon is accentuated by the combination of persistent economic uncertainty, rising prices and declining customer support, particularly among the younger generations. Faced with this situation, the luxury sector must “rethink its offer”.
A change called Z
“Luxury spending has shown remarkable stability this year, despite macroeconomic uncertainty, thanks in large part to consumers’ appetite for luxury experiences”, said Claudia D’Arpizio, partner at Bain & Company and head of the firm’s global fashion and luxury practice, lead author of the study.
Faced with macroeconomic uncertainty and the continuing rise in the cost of living, luxury customers are reducing their discretionary spending, the study shows. This is also true of aspirational customers, particularly Generation Z.
Interest in luxury brands among certain members of this cohort, born between 1997 and 2010, continues to decline. A disdain for luxury that has already led to a reduction in the luxury clientele of around 50 million people “whether they have withdrawn from the market or been forced to do so” over the past two years. Pricing perceived as prohibitive and difficult to understand in terms of quality is the main cause.
While some are leaving the market, others continue to consume luxury goods, particularly small leather accessories and entry-level items.
Small luxuries for some, exclusive privileges for others
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