Luxury towards +4% by the end of 2024. The unknown factors: China and the USA

Double-digit growth and equally vertiginous declines. All in all, a substantial stability: after a slightly negative first quarter (between -1 and -3% at constant exchange rates, in euro), the global market for luxury personal goods is holding up, while under the feet of companies, reference targets on which they had invested a lot (Gen Z, -6% between 2020 and 2023, compared to 2017-19) are crumbling and two of the most important markets in the world, the USA and China, are still an unknown quantity.

The mid-year update to the Altagamma Bain Monitor forecasts a small growth for the luxury personal goods market: +4 per cent at constant exchange rates (which will translate into a drop at current exchange rates), bringing the value to 365 billion euros, compared to 362 billion recorded in 2023, up 8 per cent at constant exchange rates and +4 per cent at current exchange rates on 2022. With a slowdown in profitability: the Ebit margin of companies in the sector will grow, on average, between zero and four per cent. "It is a complicated moment: the balances of the past have broken down," explains Claudia D'Arpizio, senior partner at Bain&Co and co-author of the study, "and we are in a phase of rebalancing strategies. There is a strong polarisation in the performance of companies: there are high-growth companies, others in a turnaround phase'. Overall, 'the market has proven to hold up, despite the exogenous shocks,' continues D'Arpizio.

The reference is to the trend in the USA, which, after a negative 2023, is expected to recover in the second half of 2024, a critical moment due to the elections. But above all to that of China: luxury in the People's Republic is going through what, economically speaking, looks like a crisis, but is to all intents and purposes a moment of redefinition in consumption. "China is the market that is doing worst locally," confirms Federica Levato, senior partner at Bain&Co and co-author of the report, "because the "normalised" GDP growth rates have had a strong impact on consumer confidence, but also because a sort of shame is spreading linked to making purchases of luxury products and, above all, to the display of these purchases. While it is unclear how consumption in China - which was a candidate to become the first luxury market by value - will evolve, it is certain that the Chinese have resumed travelling and shopping abroad. With a positive reflection on two markets: Europe and Japan. "Japan is the only market growing sharply," continues D'Arpizio, "an increase that is linked to the weakness of the currency that attracts tourists from all over the world, especially from China and Asia. For the first time, the price differential between Japan and Europe is around 5 per cent'.

The success of sales in the Rising Sun shows that where prices are more affordable, there is no shortage of demand for luxury products: "Brands have implemented a policy of increases and have focused on high-spending consumers (who number 7-8 million out of 400 million consumers, ed.). In this way, however, they cut off a segment of consumers who appreciate the brand and would like to buy the products, but are held back by the prices," says D'Arpizio. The report shows that the best-selling product categories are those at the opposite poles of the price range: jewellery on the one hand, glasses and beauty on the other. This proves that the aspirational consumer segment, which accounts for almost 200 million people worldwide, is still alive, but can only afford a very small portion of luxury brands' products.

The resilience of the Old Continent is also linked inseparably to the presence (and shopping) of tourists: 'European consumers, who had bought a lot after the pandemic, are in a bit of a slump because of the price increase, but it has returned to attract tourists with a different profile who support the market with their purchases'. The centrality of tourism (see the piece opposite) is increasingly evident: 'It is a trend that is destined to remain strong,' comments Matteo Lunelli, president of Altagamma, 'and for Italy it is a great opportunity that will be fully grasped if we know how to reposition ourselves on a high-end tourist, differentiating ourselves from other countries. To do this we must create a context that takes into account, for example, safety: a requirement that travellers consider increasingly important. It is not an Italian problem, but a European issue'.