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The global luxury goods market size was USD 316.16 billion in 2019. The global impact of COVID-19 has been unprecedented and staggering, with luxury goods witnessing a negative demand shock across all regions amid the pandemic. Based on our analysis, the global market will exhibit a huge decline of 18.63% in 2020. The market is projected to grow from USD 257.26 billion in 2020 to USD 352.84 billion in 2027 at a CAGR of 4.6% in the 2020-2027 period. The rise in CAGR is attributable to this market’s demand and growth, returning to pre-pandemic levels once the pandemic is over.
Premium products are key entities showcasing the status symbol of their owner. The excellent quality and high durability of such products come with the highest price point, which is affordable to only a small group of the global population. Therefore, companies are targeting a wealthy population with creative designs, as the product cost is usually not the criteria for such groups, wherein the uniqueness and eminence of the product are the key deciding factors before their purchase.
For instance, in June 2020, Garmin International, Inc. released its luxury MARQ Golfer smartwatch. This is made up of premium materials such as a 46 mm titanium case and ceramic bezel that is designed with custom etched 1-18 golf hole markings. The watch is further equipped with PlaysLike Distance, Hazard View, and Virtual Caddie features that would help the golf player enhance his game performance.
Therefore, the introduction of novel product designs would help this market to grow rapidly in the forecast period.
Sharp Decline in Product Demand amid COVID-19 to Affect Market Size
The low-income group of the population usually avoids investment in extravagant items. Being non-essential products, luxury goods experienced a negative demand during the pandemic, as people were struggling to purchase daily required goods.
The loss of employment and reduction in salaries led to changes in the income level of the working groups in the year 2020. Similarly, stay-at-home orders decreased the need to own such premium products. The lockdown also led to the cancellation or postponement of several fashion-related events and celebrations, thereby impacting the demand for this type of goods. Besides, the cancellation of tours and trips also had a negative impact on the purchase of such products during travel, such as those purchased in duty-free shops on airports or cruises.
For instance, as per the financial result of the first half of 2020 released in July 2020 by LVMH, revenue generation from all luxury product categories declined in 2020 due to the pandemic. As per the same source, the company recorded a decline in revenue from the perfumes & cosmetics segment by about 29% in the first half of 2020 compared to the same period in 2019, wherein revenue for the watches & jewelry segment decreased by 38%. However, it reported that online sales achieved positive attributes from customers due to the closures of retail stores.
Therefore, the global personal luxury goods market is likely to gain back momentum through online channels in the near future, wherein releasing lockdown restrictions would further boost market proliferation.
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The Emergence of Technology Embedded Products is a Prominent Trend
Innovatively created and fashion-forward goods that combine technology elements in jewelry items, handbags, or goggles are likely to augment product demand. For instance, in April 2019, Totwoo Fashion Technology Co., Ltd., a smart jewelry manufacturer, launched a new collection, ‘Wonderland,’ showcasing social interactive wearable technology pendants having intelligent cores. The core is used for information transmission from the jewelry to mobile applications using Bluetooth.
Similarly, in 2020, Totwoo released its new collection, ‘Morse Code Series,’ designed for couples, wherein a Morse code rhythm necklace will send a notification to the other person whenever the first person taps his/her necklace. The necklace also has other features, including long-distance remote sensing (Love rhythm), love code couple chat, steps tracking, call notification, custom alert, and private diary. Therefore, the introduction of smart luxury goods is likely to fuel product demand.
Rising Number of Wealthy Population to Boost Market Expansion
Luxury goods, as the name suggests, are products majorly explored by the high-income group of the population. A rising number of wealthy people are therefore set to propel the growth of the market. For instance, as per Oxfam International’s data published in January 2020, about 2,153 billionaires present worldwide have more wealth as compared to about 4.6 billion people who make up 60% of the global population.
Companies are targeting the millennial and GenZ population with customized product offerings to gain their attention. For instance, Louis Vuitton lets the customer personalize their handbags using hot-stamping or hand-painting. Therefore, the increasing demand for high-end fashion products from the rich population would support the market growth.
Inclination towards Sustainable Products to Offer Growth Opportunities
The sustainability trend has also entered into the luxury business where environmentally friendly raw materials and responsible use of utilities are being promoted. Plant-based leather, such as the one derived from pineapple and other natural materials, can be used to produce jackets, footwear, and handbags instead of leather goods derived from animals. For instance, in June 2020, Vikki Jones, a luxury products retailer, launched its new line of eco-friendly tote bags that are made up of 100% vegan leather, ensuring no animals were harmed in the process.
Besides, lower electricity usage, less water, and safer raw materials are being stressed to ensure sustainability throughout the supply chain. For instance, in November 2019, the Prada Group signed a Sustainability Linked Loan agreement with the Crédit Agricole Group. If Prada achieves the sustainability targets, it will enable the company to reduce interest rates on a 50 million euros five-year sustainability term loan. The sustainability targets include the use of Re-Nylon (regenerated nylon) for the production of goods or receiving a LEED Gold or Platinum Certification for the company’s stores, among others.
Therefore, rising initiatives towards sustainable luxury goods production are likely to drive the demand for eco-friendly products.
Growing Adoption of Second-hand Branded Items to Hamper Demand
An increasing trend of purchasing second-hand branded products or renting luxury goods is likely to hamper the market of original luxury products as the second-hand products are offered at a lower cost than the original price of the product. Similarly, the growing counterfeiting trend, wherein products resembling the luxury brands are offered at lower prices, is further likely to restrain the market growth.
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Clothing Segment to Dominate owing to Rapidly Changing Fashion Trends
Based on the product type, the market is segmented as watches & jewelry, perfumes & cosmetics, clothing, bags/purses, and others. The clothing segment is expected to hold a major share owing to its increasing demand from both men and women end-users along with rapidly changing fashion trends. However, the bags segment is expected to grow rapidly because of the increasing demand, specifically for leather-based products. The demand for fashionable and matching handbags is increasing from end-users that, in turn, can be used for varied applications such as office bags, party bags, or casual bags as per the need. For instance, in February 2020, Loewe luxury brand launched its Balloon bag, which was made available in all three sizes, namely, small, medium, and large, as per customer requirements.
The watches & jewelry segment is expected to hold a significant share due to the increasing demand for smart luxury watches and varied types of jewelry items. For instance, as per a report of Savills Global Luxury Retail 2019 Outlook, the share of new jewelry stores opened increased from about 10% in 2017 to 13% in 2018 in total new luxury store openings worldwide. The other segment includes products such as footwear and eyewear, which is expected to gain traction due to the introduction of new product designs in the market.
Women Segment Would Hold Highest Share Backed by Surging Inclination towards Beautification
Based on the end-user, the market is segmented into men and women. The majority of luxury products, including cosmetics, fragrances, handbags, necklaces, earrings, and bracelets, are primarily used by women end-users, making them a major segment of the market.
However, emerging male grooming trends would support the growth of the men segment wherein branded shirts, goggles, and high-end watches would experience greater demand from them. Therefore, numerous players are focusing on introducing products that can cater to the varied demands of both end-users. For instance, in January 2020, OMEGA launched a new luxury eyewear collection featuring various sunglasses that are suitable for both men, as well as women.
Online Channel Would Exhibit Fastest Growth due to its Greater Convenience in Purchasing
Based on the distribution channel, the market is segmented into offline and online. The offline segment is expected to hold a major luxury goods market share, as it allows the customer to physically see and touch the product and thereby compare their features in-person at the store. Companies are trying to increase their presence through retail or department stores to have a strong foothold in the market. For instance, in February 2020, Burberry announced to acquire Printemps in Paris. Printemps is a department store chain offering a wide range of luxury products along with apparel and beauty products.
However, the purchase conveniences of online channels would make it the fastest-growing segment. The COVID-19 pandemic has further provided opportunities to strengthen online channels in the luxury business. For instance, in March 2020, Reliance announced its plans to introduce a new e-commerce platform for shopping luxury items in India. Therefore, the online shopping trend of luxury goods is likely to continue in the near future.
Europe Luxury Goods Market Size, 2019 (USD Billion)
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As per geography, Europe's market stood at USD 103.86 billion in 2019. The dominant share of Europe in the global market is attributed to the presence of a large number of key players in the region, including L’Oréal, LVMH, Burberry, and others. For instance, as per a report of Savills Global Luxury Retail 2019 Outlook, London ranked first in the top 5 cities globally, accounting for a share of 9.6% of the global new luxury store openings in 2018. It increased by about 38% as compared to 2017. As per the same source, Paris ranked 4th in the list, accounting for 4.7% in 2018. Similarly, Europe being a fashion hub spot, a large number of luxury fashion weeks are held in countries such as Italy, France, and the U.K., which is further likely to add impetus to market growth.
The North American market is characterized by the increasing presence of a large number of rich people, majorly in the U.S., that has supported the product demand. For instance, as per the report titled ‘Billionaire-Bonanza-2020,’ published in April 2020 by the Institute for Policy Studies, the number of billionaires increased from 298 in 2000 to about 614 in 2020 in the U.S. Besides, the presence of a population that is highly inclined towards fashionable apparel and accessories has added impetus to the growth of the market in this region.
The Asia Pacific market is projected to grow rapidly due to the increasing disposable incomes of the region's middle-class population. Similarly, the rising access to global luxury brands would lead to the increased product consumption. For instance, in July 2020, Burberry, a U.K.-based luxury products company, announced its first social retail store in Shenzhen, for Chinese consumers, along with Tencent’s partnership. The store spans about 539 sqm/5800 sqft area with about ten rooms offering various interactive, personalized retailing experiences. Moreover, a surging number of working women in the region has accelerated the consumption of women-centric luxury goods such as handbags, high-end footwear, and jewelry products with their growing disposable income.
The South American market is likely to grow at a steady rate as the urban population is increasing in countries such as Brazil and Chile. Changes in the standard of living are therefore expected to augment the consumer spending on luxury brands in the region.
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Besides, the Middle East and Africa is likely to show a growing trend with the increasing demand for luxury products from Gulf countries such as the U.A.E. and Saudi Arabia. Therefore, key players have opportunities to expand their businesses in this region.
Key Players Focus on Strategies such as Partnerships and New Product Developments to Gain More Market Share
Top companies hold a major market share due to their strong product portfolios and a wider reach in the majority of the regional markets. Luxury players are focusing on adopting various strategies such as partnerships, new product launches, and acquisitions to strengthen their foothold in the market. For instance, on 11th December 2020, L'Oréal signed an agreement with Prada S.p.A. that will allow the company to create, develop, and distribute luxury beauty products of the latter.
An Infographic Representation of Luxury Goods Market
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The global luxury goods market research report provides a detailed analysis of the market and focuses on key aspects such as competitive landscape, distribution channel, and leading product types. Besides this, it offers insights into the market trends and highlights key industry developments. In addition to the aforementioned factors, the report encompasses several factors that have contributed to the market's growth in recent years.
Value (USD Billion)
By Product Type
By Distribution Channel
Fortune Business Insights says that the global market size was USD 316.16 billion in 2019 and is projected to reach USD 352.84 billion by 2027.
In 2019, the Europe market value stood at USD 103.86 billion.
Registering a CAGR of 4.6%, the market is estimated to exhibit a steady growth rate during the forecast period (2020-2027).
Based on product type, the clothing segment is expected to lead the market.
The rising number of wealthy people is a major factor driving the growth of the market.
LVMH, Richemont, Kering, and Estee Lauder are a few major players in the global market.
Europe held the highest market share in 2019.
The emergence of technology embedded and eco-friendly products are expected to drive the adoption of these goods.
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