Luxury at 1.5 trillion euros in 2023

The luxury market for 2023 generated revenues of 1.5 trillion euros, with a turnover of 362 billion for personal goods and business margins around +4%. Despite the complexities of the macroeconomic scenario, the high-end sector has once again demonstrated its stability. Three years after the pandemic caused by Covid-19, the 22nd Osservatorio Altagamma presented its findings yesterday in Milan. The results indicate a new record year, with growth in the high-end sector estimated to be between 8% and 10% by Bain & company. This noteworthy increase is mainly due to spending on experiences, which has now reached all-time highs. Several unknowns could impact the fourth quarter, including fragile consumer sentiment, macroeconomic tensions in China, and weak signs of recovery in the US. These factors may result in a slowdown in growth in 2024, which could fall in the mid-to-low single-digit growth range based on current scenarios.

«In 2023, companies increased prices to offset rising costs, resulting in higher profit margins. Analysts predict normalized growth next year amid economic uncertainty and volatility», Fondazione Altagamma general manager Stefania Lazzaroni stated from the Teatro lirico Giorgio Gaber stage, presenting findings from the Altagamma consensus 2024. «Revenues are expected to maintain a positive trend, estimated at a low single digit of +5-6%. Ebitda for 2024 is expected to grow by around 4%, with more moderate growth», Bain & company experts Claudia D’Arpizio and Federica Levato, who are respectively senior partner and global head of the fashion and luxury practice, and senior partner and head of Emea fashion and luxury, outlined the main evidence from the latest luxury goods worldwide market study. The analysis showed that global luxury tourist purchases have almost returned to pre-pandemic levels. In Europe, tourism is slowly bouncing back thanks to a mix of classic upscale cities and resorts, as well as newer destinations that have enticed affluent travelers. Despite the impact of the macroeconomic environment on European aspirational consumers, the industry has experienced growth due to the presence of high-spending consumer groups. However, the US spending has decreased by 8% in 2022, and widespread uncertainty continues to affect the spending habits of aspirational consumers. Top consumers continue to be attracted to the industry but due to the strong US dollar against the euro and price differences, they have shifted their spending to Europe. Meanwhile, Saudi Arabia is rapidly accelerating and attracting investment from major luxury players. Mainland China reported a strong initial performance following re-openings in the first quarter, but experienced a gradual slowdown due to emerging macroeconomic complexities both novel to the region and typical of western economies. Hainan is establishing itself as a prominent luxury destination and will become a duty-free zone in its entirety by 2025. Japan’s economy is thriving thanks to local purchaser spending and a weak yen that encourages tourists to visit. South Korea is facing a challenging year with an adverse macroeconomic climate impacting the local consumption, and a robust currency driving tourists to purchase elsewhere. Meanwhile, Southeast Asian countries maintain a positive momentum due to robust intra-regional tourism and growing interest from local consumers, with Thailand leading the pack. Among the more established markets, Australia has been a fertile ground for industry growth.

«The market has strong fundamentals for long-term growth. To fully realize its potential, capturing and amplifying it will be essential, considering the convergence of luxury markets that can enable further expansion», the study authors added. «Players in the industry have the opportunity and responsibility to enhance their raison d’être, including utilizing strategic mergers and acquisitions to redefine industry boundaries. These factors will be crucial for future growth». What can we expect as we approach the end of the decade? Bain & company predicts continued market growth given the company’s strong fundamentals, despite potential slowdowns. They warn that «the industry will face significant challenges in the future, including sustainability and digitization, prompting an upcoming wave of mergers and acquisitions», they concluded.

Future challenges discussed in a series of talks with Renzo Rosso, Otb group founder and chairman, Alexander Boquel, director of Lvmh Métiers d’Excellence, Attila Kiss, Gruppo Florence ceo, Horacio Pagani, founder and chief designer of Pagani automobili, and Angelo Zegna, consumer and retail excellence director of Zegna. The top executive at Otb, which includes Diesel, Marni, Jil Sander, Maison Margiela, Viktor & Rolf, and Amiri, highlighted the crucial role of sustainability and technology. «Luxury allows for sustainability, as it promotes a specific type of investment that contributes to a more ecologically responsible economy. Furthermore, significant investment in technology has revolutionized modern businesses. For small businesses, aggregation can be a significant aid», the entrepreneur stated, who also discussed their involvement with institutions to further promote the sector. «I have spoken with the Government multiple times, and one issue is the allocation of excessive funding without the assurance of returns. The ideal approach would involve providing funding to medium and large enterprises, which can then work together with the supply chain to ensure that an investment is made and yields a return». Attila Kiss restated his plan to take Florence group public. «Our journey will likely culminate in a stock market listing, as the entrepreneurs in our network are collaborative and share our vision», the company’s leader stated. «The Italian supply chain often seems vulnerable presently, and we believe we can bolster it», Altagamma president Matteo Lunelli closed the conference, noting that despite the uncertain context, the market continues to grow strongly. «However, there is a weakness in investment support. Though the Government is engaging in open dialogue, it is hoped that support for the companies that made Made in Italy great will not be lost».

Americans and Arabs are the highest spenders on tax-free goods in Europe

Tax-free luxury sales have exceeded pre-pandemic levels by 15%. US and Arab tourists are fueling the recovery with a surge in tax-free spending on high-end products in Europe, resulting in growth of 250% and 170% compared to 2019, respectively. Yesterday morning, Global blue presented data at the annual Osservatorio Altagamma event, indicating a strong recovery in October for visitors from the US, with a level of 260%, compared to 258% in the third quarter of 2023. Additionally, travelers from Gulf countries witnessed a rate of 241% last month, as compared to 200% in the third quarter. Chinese shoppers also partially returned to the Old Continent, with peak spending up 52% in October. «Chinese travelers are resuming their exploration of Europe and investing in its markets. While they were the top nationality for tax-free purchases in 2019, their complete recovery is still in progress», Pier Francesco Nervini, coo of North & Central Europe and global accounts at Global blue clarified during his speech. «The recovery is mainly attributed to a different shopper profile, a younger generation oriented towards fashion and clothing purchases, with a higher inclination to spend, specifically on luxury goods». (All rights reserved)