Global Luxury Goods Sales on Track to Hit Record High, According to Study

Louis Vuitton logo brad is seen outside a Louis Vuitton store in Paris, France, on Jan. 27, 2020. (Gonzalo Fuentes/Reuters)

Global sales of luxury goods are in the middle of a boom, despite growing inflation rates, according to industry forecasts.

Growth appears to be encouraged by a surge in post-pandemic demand by younger consumers, for apparel, handbags, jewelry, footwear, and other accessories.

European high-end product firms are still making strong gains, despite the rise in prices caused by severe material shortages and rising energy costs, according to the consultancy firm Bain, which was commissioned by Altagamma, the Italian association of luxury item producers.

The report, which was released on Nov. 15, predicted that sales of personal luxury goods would rise 22 percent, to $367 billion, by the end of the year, from $300 billion in 2021. This is well ahead of the previous estimate in June, which predicted a $344 billion sales increase for 2022.

Sales have been climbing since 2021, when the U.S. economy started to recover after pandemic restrictions were eased toward the end of the year.

Consumers, who had built up savings and assisted by government stimulus aid during the lockdowns, immediately treated themselves to a massive buying spree, including high-end items.

Recent third-quarter results have shown that the luxury goods industry was able to defy rising inflation and the cost of living, even during a gloomy economic climate.

Bain said that economic uncertainty, caused by fears of a recession next year, will probably not prevent the luxury market sector from growing by $568–589 billion over the next five years,

“Consumption is back at pre-crisis levels, but it is also a rebirth, since there is a new consumer base that is younger, and some pockets of consumers that have been unlocked during COVID are here to stay and growing, like subcultures and ethnic groups in the United States,’’ Claudia D’Arpizio, a Bain partner, told the Associated Press.

However, she warned that the luxury goods industry is not recession-proof, but it is more resilient than it was during the Great Recession over a decade ago, when sales plummeted in that sector.

The Rise of the Zoomers

Consumers born between 1996 and 2012, also known as Gen Z, or Zoomers, and their older millennial cohorts, born between 1982 to early 1995, have led growth in the luxury market this year, according to the Bain report.

The older Gen Xers and the baby boomers are finally being eclipsed by the younger generation of consumers.

The younger age cohort entered the luxury market scene between the ages of 18 and 24 years old.

At least 50 percent of all purchases were made by people in their mid-20s to early 40s, while the younger Zoomers account for nearly 20 percent of luxury sales.

The next group, born in the late 1990s through the present day, are expected to buy high-end goods at the earlier age of 15, due to growing up with social media.

“They have been exposed earlier to these kind of brands thanks to digital technologies and thanks to social media that has made them very knowledgeable luxury observers since they were kids,” Bain’s Federica Levato told Reuters.

Since the end of the pandemic, the luxury industry has benefited from this newly enlarged customer base.

Vital improvements in social media and in-store shopping experiences have together boosted brand loyalty among the younger generation of shoppers.

Western Luxury Markets Stabilize, While Chinese Purchasing Power Dips

Established markets in the United States and Europe still remain the strongest performers, as sales growth in both regions is expected to rise by about 25 percent.

American luxury sales are projected to hit $117 billion this year, while sales in the European Union and the United Kingdom are estimated at $97 billion.

Still, there is some concern that luxury-item purchases by younger, but less financially established consumers in the Western and East Asian markets, will start to wane as prices continue to rise, cutting into their disposable incomes.

Although the high-spending Chinese youth demographic is now facing increasing unemployment due to the impact of continuous lockdowns, China still remains a strong driver in the luxury sector, D’Arpizio reported.

However, Bain has since lowered its earlier prediction that Chinese shoppers would represent 50 percent of global luxury market by 2025, to around 40 percent by 2030.

Meanwhile, the removal of the Russian market due to Western-imposed sanctions has had “almost zero impact,’’ according to Bain. Russian buyers once represented only 2 percent of luxury sales before the war.

The Associated Press and Reuters contributed to this report.