Personal Luxury Goods Market Has Recovered Ahead Of Schedule, But

Brands in the luxury goods sector gave a collective sigh of relief when Bain and Company came out with its Fall 2021 Luxury Study. “Luxury market rebounds in 2021, set to return to historic growth trajectory,” the headline proclaims.

Conducted in association with Altagamma, the Italian luxury trade foundation and based upon company performance data through third quarter 2021 with estimates for fourth quarter and beyond, the study is one of the most authoritative in the industry.

Translating wholesale and licensing revenue to its retail equivalent, Bain estimates global personal luxury goods sales will reach €283 billion ($324 billion) by year end, marking a 1% increase over 2019 levels and 29% over 2020. Early on, full recovery wasn’t expect until well into 2022.

However, when looking across all luxury categories, including automobiles, wines and spirits, home furnishings, fine art and experiences including hospitality, jets, yachts and cruises, the total luxury market stands at about 9% below 2019 levels.

Projecting forward, Bain predicts personal luxury goods will continue its upward trajectory through 2025, advancing between 5% to 9% CAGR to reach €360 to €380 billion ($412-$435 billion).

However, Bain is hedging its beat for final fourth quarter performance, estimating actual growth levels may range between -5% under a worst case scenario to 3% in a best case.

The worst case scenario takes into account a softening in China demand and wind down of U.S. Covid relief programs. Under the best case scenario, China will continue to grow, the U.S. and EU will have a strong holiday season and Japan continues its fast-paced vaccination program.

Bain settled upon a 1% rate of growth for the fourth quarter which is how it reached its €283 billion estimate.

Noting that the Covid pandemic and recovery has fast-forwarded structural changes in the luxury market that will set the pace for the coming decades of its evolution, Bain partner and report co-author Federica Levato said, “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.”

Bain’s Claudia D’Arpizio added, “Where once it was all about status, logos and exclusivity, luxury brands are now actors in social conversations, driven by renewed sense of purpose and responsibility.”

Enter the next generation

That sense of purpose must be aligned with the cultural, social and environmental values of the next generation luxury consumers that Bain expects to contribute about 180% of the total market growth from 2019 through 2025.

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