Paris: Despite the volatility of the macroeconomic landscape, the international luxury market is doing well. It should reach 1,300 billion euros by 2026, representing an average annual growth rate of 6% over the period 2022-2026. With 40% of luxury consumers planning to increase their spending next year, the sector is unscathed. However, not all markets are progressing at the same speed: China and the United States are posting excellent forecasts, while those in Europe are more timid. Another development: the share of Millennials and Generation Z continues to rise and should reach 75% of buyers by 2026. This is revealed by the ninth edition of the True-Luxury Global Consumer Insight 2023 report conducted by BCG and the Altagamma Foundation.
The survey was carried out in 12 countries with a panel of 12,000 consumers who spend an average of 39,000 euros per year on luxury – the “True-Luxury consumers” . This population represents nearly 20 million luxury consumers worldwide and 40% of the luxury market, with 352 billion euros in 2022.
Internationally, the luxury market is reshaping, with strong momentum in Asia
The Chinese market is rebounding strongly, with expected growth of 15 to 20% in 2023 compared to 2022, driven by strong domestic consumption (82% of total spending in 2023). Some recovery in international spending is expected in the near future, but it is unlikely to return to pre-pandemic levels. Digital is also very present, with 46% of domestic purchases made online. Finally, the consumer base is diversifying, with more and more young people under 30 from medium-sized cities.
The Middle East, an opportunity for the luxury sector: the so-called “personal” luxury market is valued at 15 billion euros in 2022 in the Middle East and should reach 30 to 35 billion euros in 2030. The United Arab Emirates and Saudi Arabia are the two main drivers of this regional growth. For example, the so-called “personal” luxury market represents 3 billion euros in 2022 in Saudi Arabia. It is expected to double by 2030.
Consumers continue to show a great appetite for luxury despite geographical disparities: 40% of consumers surveyed plan to spend more on luxury in 2024. In China, the post-pandemic rebound is reflected in a strong propensity to purchase (+50% compared to the average of consumers surveyed), driven by the gradual reopening of the country. The United States also posted good forecasts (+40%), despite the pessimism linked to the macro-economic context. Europeans are more worried, with a net propensity to purchase of -40% compared to the average of consumers surveyed.
A market driven by younger consumers, more spenders but also more demanding
The continued rise of young consumers. In 2022, Millennials and Generation Z already weighed nearly 200 billion euros on the market, double compared to 2016. A figure that should double again by 2026. Millennials and Generation Z should then represent 75% of luxury consumers. They also spend 15% more than other generations.
Second-hand luxury and rental on the rise: among consumers surveyed, one in three (32%) bought second-hand luxury in 2022 (+7 percentage points compared to 2020), in particular Generation Z and Millennials (35%). Additionally, renting luxury items is growing in popularity, with 22% of consumers having rented luxury items in the past year (+4 points vs. 2020), particularly Gen Z and Millennials (26%).
More demanding consumers. Luxury brands have focused significant efforts on the in-store shopping experience. The level of satisfaction is moreover twice as high as that of large retailers. However, most Houses have not yet succeeded in creating a customer experience that manages to fully satisfy their consumers. Less than 50% of luxury consumers surveyed feel satisfied with their customer experience and 11% even say they are disappointed. This is not an isolated problem: all brands struggle to achieve a net satisfaction level above 50%. These results can be explained in particular by a digital shopping experience that is not always at the level of e-commerce practices.
This lack of satisfaction is particularly pronounced among Generation Z and in Europe. One in five young people find their online experience disappointing compared to one in ten baby boomers. 22% of French customers consider their experience disappointing (vs. 13% in China, driven by technological advances that allow for more immersive and personalized online experiences).
According to Joël Hazan, associate director at BCG and expert in the luxury sector: “To win the loyalty of young consumers, a challenge is imposed on all the Houses. It’s about rethinking the shopping journey and the consumer experience to meet the demands of a more diverse, digital-native audience that is increasingly interested in virtual fashion. With more than one in two consumers surveyed planning to increase their spending on virtual fashion next year, generative AI and Web 3 are great tools for brands to deliver highly personalized and immersive customer experiences.”
