The luxury goods market, which had a successful year, is now struggling with how to balance serving their top clients while also expanding their reach to new audiences in the midst of ongoing challenges, as reported by the recent Bain & Company Luxury Goods Worldwide Market Study in collaboration with Altagamma.
The personal luxury goods market experienced a slight decline in the first quarter of 2024, with the key to stable growth being luxury brands’ ability to address rising prices while maintaining a strong price-value equation for consumers. The global luxury market remained stable in 2023, surpassing €1.5 trillion. Growth was driven by luxury travel and a strong US holiday season, but the first quarter of 2024 saw a slowdown in most regions due to macroeconomic pressures, except for Japan which continued to thrive.
The study showcases a growing preference for experiential products over material goods, especially in China due to factors such as increasing outbound tourism and economic uncertainties. This has led to a sense of “luxury shame” among middle-class consumers, similar to what was observed in the Americas during the 2008-09 financial crisis. The US is also facing economic pressures despite some improvements in GDP and consumer confidence.
Generation Z is feeling the pressure as luxury brands shift their focus towards older generations with more wealth. With rising unemployment and economic uncertainty, younger consumers are holding off on purchasing luxury goods. Meanwhile, Gen X and Baby Boomers are spending more, leading to the overall growth of the luxury market.
Luxury brands are adopting a dual strategy by catering to top clients through exclusive events and expanding into new markets, including sports like padel and racing. The focus on sports as a branding opportunity is evolving, with luxury brands set to have a significant presence at the 2024 Paris Olympics. To thrive in uncertain times, brands must invest in growth, protect core business functions, stay agile in decision-making, and optimize stock management for efficiency and responsiveness to market needs.
