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Unpacking luxury’s growth drivers, now and next year

The European market is expected to grow 7 per cent to €102 billion in 2023, as a rebound in tourism offsets a weakening in local consumer spending, the report found. Tourist spending has surpassed pre-pandemic levels, driven by full-price products. In the UK, the luxury market faces setbacks as the removal of tax-free shopping and lack of tourists slows growth. In 2024, the report predicts real GDP growth to edge up by 1.4 per cent.

The US market continues to slow due to macro-economic tensions including inflation; a weakened luxury ecosystem in the US as department stores navigate a decline in consumer demand and face ongoing markdown pressures to clear out excess stock; and a lack of post-lockdown savings. Nevertheless, modest GDP growth of 1.5 per cent is forecast for 2024. Levato points out that the US has become a much more significant market for luxury than it was pre-Covid, growing to €101 billion in 2023 (per the full-year forecast) from €81 billion in 2019.

There’s been positive growth among all luxury product categories, with jewellery and high-end apparel leading the way, the report found. This has led to higher prices and positive attitudes towards investment pieces, says Levato. “Categories that were overperforming in the last couple of years — watches and leather goods — are still positively performing but consolidating after big growth,” she adds.

Looking ahead, the luxury market in 2024 is likely to increase low-single digits to mid-single digits, depending on the macroeconomic and geopolitical headwinds, Bain predicts. Brands need to be agile, says Levato. “[Brands] need to react to customer signals… We are going through some bumps in the market, but it’s important not to lose strategic direction.”

Clarification: Updated to clarify the growth in personal luxury goods versus the wider luxury market. (15/11/23)

Comments, questions or feedback? Email us at feedback@voguebusiness.com.

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