These are some of the conclusions of the 20th edition of the Bain & Company Luxury Study, published in Milan in collaboration with the Fondazione Altagamma, the Italian foundation for the luxury goods manufacturers sector.
“The changes in the luxury industry in the last 20 years have been remarkable, and the exit from the Covid crisis comes as a renaissance for luxury brands,” said Alejandro Pérez de Rosso, partner at Bain & Company in Argentina. “Where once it was about status, logos and exclusivity, luxury brands are now actors in social conversations, driven by a renewed sense of purpose and responsibility.“he added
Notable recovery driven by dual engine growth
After navigating an unpredictable year, the luxury industry returned to growth in the second and third quarters compared to 2019. Bain expects the most likely outcome for the fourth quarter to be 1% growth versus 2019, which it would allow to end the year with a positive value.
The engine of this growth is a notable boost from China, where the market size has doubled since 2019, as well as strong growth in the United States, where a new luxury map is rapidly emerging with an increased importance of secondary cities and suburban areas. The North American country is now the world’s largest luxury market, accounting for € 89 billion or 31% of the world market, while China now accounts for € 60 billion or 21%.
On the other hand, The Middle East was another bright spot, with Dubai and Saudi Arabia leading the way.. And in the case of Europe, Japan and the rest of Asia only partially recovered during 2021 and have not yet reached pre-crisis levels. Its recovery is linked to the resumption of global travel, but Japan is expected to return to pre-crisis levels in 2023 and Europe in 2024.
The second-hand market thrived during the crisis
Bain estimates that the second-hand luxury market has skyrocketed to € 33 billion in 2021, driven by increased demand and an increasingly competitive environment. For comparison, the second-hand market has grown 65% between 2017 and 2021, compared to a growth of 12% in the same period in first-hand luxury
The online channel almost doubled in the last two years
After a 50% jump from 2019 to 2020, the online channel continues to grow, growing by 27% from 2020 to 2021 to reach an estimated market value of 62 billion euros this year, thanks to accelerated adoption during COVID with newly acquired customers. Brand-controlled websites now account for 40% of the online segment, up from 30% in 2019. Online and single-brand stores combined were the key channels for the 2021 recovery and will lead growth in the medium term.
Market concentration increased, but there is still room for rising stars
In the last 20 years, the leading brands have increased both their market share – which now reaches about 33% compared to 17% in 2000 – and their relative size compared to other players, which is now 18 times greater than the market share. average vs. 7 times 20 years ago. That said, there is still a place for the rising stars of the sector. These companies currently represent 2% of the market, but are growing twice as fast as the overall market as they adapt to new consumer trends.
In broader luxury markets, consumers indulge in buying products rather than experiences
If you look at the luxury market in general, there is a divergence between goods and experience-based goods (particularly furniture, design, and good food and wine) versus experiences such as travel and hospitality. However, the willingness to return to the experiences is at its highest point, and its recovery depends mainly on the normalization of travel.
Luxury players find their voice in a changing global landscape
The growing universe of luxury customers expects more than ever from brands. Beyond the products, They seek personalization and alignment with their values, a strong voice on social issues, and real action and responsibility when it comes to sustainability..
“It is interesting to think in what situation the sector will find itself in 20 years,” says Alejandro Pérez de Rosso. “The crisis is likely to mark a turning point for luxury as we knew it: luxury brands will continue to redefine themselves, expanding their mission beyond creativity and excellence to become facilitators of social and cultural change,” he concluded .