Global luxury goods market comes roaring back to hit new record

Following a sharp contraction during the first year of the corona crisis, the global personal luxury goods industry has come roaring back in 2021 and expected to hit €283 billion by year end, according to the latest market analysis by Bain & Company and Fondazione Altagamma.

This time round last year, the personal luxury goods industry – spanning anything from jewellery to high end watches and expansive bags and accessories – was in shambles. The sector had just seen more than €50 billion wiped off from its market value, throwing the industry back to 2014 levels.

In May this year, the authors predicted the personal luxury goods industry would need “years to recover to its pre-pandemic level”, but in the in between six months, consumers have staged a remarkable comeback in terms of spending. The strategy consulting firm has now revisited its prediction to €283 billion, meaning that the sector will have closed Covid-19’s income gap in the space of just one year.

But the picture is not as rosy in all regions. Driving the rebound is remarkable momentum in China, where the market size has doubled since 2019, as well as solid growth in the US, where personal luxury is rapidly gaining popularity in secondary cities and suburban areas (as opposed to the traditional concentration in tier-one cities).

The Americas is now the largest global market for luxury, representing €89 billion (or 31% of the global market), while China now represents €60 billion (21%). The Middle East was another growth engine with Dubai and Saudi Arabia the region’s bright spots.

Meanwhile, Europe, Japan and rest of Asia only partially recovered during 2021 and still hover below pre-Covid levels. According to the Bain & Company and Fondazione Altagamma analysis, their comeback is strongly linked to the resumption of global travel. Japan is expected to be back to pre-crisis levels by 2023 and Europe by 2024.

Three dominant trends

In their 40-page slide deck, the authors walk through a number of trends which have emerged or accelerated during the pandemic, with three notable ones deserving attention. Riding the broader online boom, e-commerce continues to power on in the personal luxury goods segment, growing by 27% from 2020 to 2021 to reach an estimated €62 billion in market value this year.

Brand-controlled websites now make up 40% of the online segment, up from 30% in 2019. Online and monobrand stores combined were the key channels for 2021’s recovery and will lead growth in the midterm.

With consumers tightening their spending, and sustainability becoming an increasingly relevant purchasing factor in mature markets, the secondhand luxury market soared to reach €33 billion in 2021. Between 2017 and 2021 the secondhand segment has now seen 65% growth, compared with 12% growth over the same period in the firsthand luxury segment.

Further reading: Second hand luxury market could thrive despite Covid-19

Thirdly, consumers are upping their expectations from luxury manufacturers and retailers. Well beyond products, they seek personalisation and alignment with their values, a strong voice on social issues, and real action and responsibility when it comes to sustainability.

Claudia D’Arpizio, a partner at Bain & Company and lead author of the study. “Where once it was all about status, logos and exclusivity, luxury brands are now actors in social conversations, driven by a renewed sense of purpose, diversity & inclusion and social responsibility.”

Leading Federica Levato, also a partner at Bain & Company and co-author of the report, to suggest that luxury goods companies will need to transform in order to remain relevant. “It’s likely that the crisis will mark a turning point for luxury as we knew it—luxury brands will continue to redefine themselves, expanding their mission beyond creativity and excellence, becoming enablers of social and cultural change.”

The entire luxury market – also encompassing other luxury goods (luxury cars, private jets and yachts, etc) and experiences (fine wines, luxury hospitality, design furniture, etc) – is below 2019 levels, reaching approximately €1.1 trillion by 2021 year end.

Founded in 1973, Bain & Company is a global strategy consulting firm that advises leaders on some of their most strategic and organisations topics. Established in 1982, Fondazione Altagamma is the Italian luxury brands association composed of companies in the fields of fashion, food, jewellery and hospitality. The two companies have been conducting their joint ‘Luxury Goods Market Study’ for several years.