Fuelled by the personal luxury goods segment, the global luxury market is projected to reach €1.5tr in 2023, according to the findings of the latest Bain & Company report with Altagamma, the Italian luxury goods manufacturers’ industry association. This represents an 8% to 10% growth over 2022, setting a new record for the industry, the report noted.

The personal luxury goods segment itself is projected to reach €362bn by the end of this, which is 4% higher than 2022 at current exchange rates. 

Taro Ishida, founder and creative director of his eponymous luxury shoe brand, commented: “Luxury, sustained by an unwavering clientele base, is often less swayed by market challenges. Our clients tend to gravitate towards timeless quality products and enduring experiences over fleeting fashion trends during such times.”

However, for 2024, the research suggests a softening personal luxury goods performance with low-to-mid single-digit growth over this year’s levels.

“This is a defining moment for brands,” said the report’s lead author Claudia D’Arpizio, a Bain & Company partner and leader of its luxury goods and fashion practice. D’Arpizio noted that the luxury market is generating positive growth for 65% to 70% of brands in 2023, compared to 95% in 2022. “To stay in the game, it will be crucial for brands to take bold decisions on behalf of their customers.”

While the report shows all luxury categories achieving growth, top performers include fine jewellery, watches, ready-to-wear and beauty, particularly make-up and fragrances. The report says the jewellery sector is projected to reach €30bn in market value in 2023.

Another bright spot is global luxury tourist purchases, which have nearly reached pre-pandemic levels and have been fuelled by a resurgence in social interactions and travel. For example, Europe has seen a progressive pick-up in tourism, driving growth across countries with long-haul resort locations attracting high spenders in key luxury cities. Conversely, the Americas have experienced a deceleration throughout the year, posting an 8% drop from 2022, as widespread uncertainty continues to affect customer spending. 

“Top customers remain confident but have maintained their spending abroad, as the US dollar remains strong against the euro and price differentials favour overseas purchases,” the report said.

Other country trends include strong growth projections in Saudi Arabia – which is attracting major luxury brand investments – Australia and Japan, as well as Southeast Asian countries. Mainland China posted strong results in the first quarter but slowed as new macroeconomic trends arose. 

The report said that ‘solid fundamentals’ will continue to drive market growth as the luxury sector looks ahead to 2030. The report stated: “Brands will have to focus on providing differentiation and meaningful experiences along the whole customer journey, regardless of the touchpoint of interaction. This will also lead to a new season of M&A, driven by the necessity to address key challenges of the industry. Leading on sustainability and embracing tech will be key.”

Indeed, this year’s M&A activity added to the diverse portfolios of the large luxury conglomerates like LVMH, Kering and Richemont. Foley & Lardner’s fashion apparel and beauty industry team co-chair Laura Ganoza commented: “Merger activity has been quite active in the industry if you consider the numerous collaborations that have taken place. Collaborations to create unique experiences and touchpoints for customers can be seen as the indicator that forecasts M&A activity.”

She added: “It will be exciting to see how luxury brands will redefine the customer experience through M&A and what they’ve learned through a lesser form of mergers – collaborations.”

According to Bain & Company partner and report co-author Federica Levato, the market is set for long-term growth on strong fundamentals. She said: “Players have the opportunity but also the responsibility to reinforce their meaning while leveraging strategic M&A to redefine the boundaries of the industry. These will be foundational drivers for growth in the future.”