China’s rebound and Middle East’s rise to drive luxury market next year

While the luxury market remained fairly consistent throughout the course of the pandemic, the sector is still set to embark on a notable increase as consumers from various regions up their spending. This is according to the ninth edition of the Altagamma Consumer and Retail Insight, a Milan-based event hosted by Altagamma chairman Mattero Lunelli and centred around the company’s TrueLuxury Global Consumer Insight report.

During his opening speech, Lunelli noted that “the high-end consumer has a double figures increasing propensity to spend”, while there had also been a significant rise in the creation of unique brand experiences that are increasingly personalised. The report, which used Boston Consulting Group’s proprietary mapping of 2,600 luxury customer journeys, provided insight into the dissatisfaction with the digital experience, as well as the rise in demand for the physical channel, which was said to be twice as high in luxury than in mass market.

According to the results of the study, 40 percent of ‘true luxury’ consumers are expected to increase their spending in the coming year, largely led by the US and China, for which spending appetite was on the rise. Meanwhile, European consumers had a net buying propensity of minus 40 percent, largely down to the uncertainty of the macroeconomic environment.

China was cited to be a large player in the luxury market’s foreseeable future as the region rebounds with a projected growth of 15 to 20 percent and the expectation for local demand to account for 82 percent of total spending in 2023.

The Middle East was also considered a promising opportunity area for the luxury sector, with a personal luxury market valued at around 15 billion dollars in 2023, which is then expected to reach between 30 and 35 billion euros by 2030. According to the report, the United Arab Emirates and the Kingdom of Saudi Arabia are expected to be the main drivers of regional growth, both offering untapped opportunities due to increased domestic demand, a growth in high-end tourism and local development fuelled by the region’s Vision 2030 strategy.

Luxury brand retail networks shrink by 1 percent

In terms of retail, large scale brands have been found to be prioritising bigger and more meaningful stores, escalating the size and quality of flagships and integrating DNA and the location into their architecture. Despite this, the retail network of major luxury brands has shrunk by 1 percent since 2019, with luxury retail tending to focus on a small number of cities.

The report suggested that smaller brands needed to invest in stores that can “make an impression”, while finding new locations that cost less. It added: “You need humility and realism, to start small and maybe grow when you can afford it: better to have a small and profitable store, maybe even a little ‘eccentric’ than the luxury route, because the profits from this store will help support the development and growth of the brand. Having a large store and then lacking the means to do communication is a strategy that does not pay.”