Osservatorio Altagamma: a record year
The 21st edition of Osservatorio Altagamma, which took place in Milan and was attended by the Minister for Business and Made in Italy, Adolfo Urso, confirmed the strong tendency for growth in all areas of the luxury sector worldwide. Despite the ongoing economic turbulence, the global luxury market will grow by 21% in 2022, reaching €1,400 billion, while personal luxury goods are estimated to rise 22% to €353 billion. The outlook is also positive for 2023, with a projected 6% rise in profitability for luxury brands.
These figures are set against a backdrop in which growth is also expected in the long term: by 2030 the value of the personal luxury goods market is forecast to rise to approximately €540-580 billion, an increase of at least 60% compared to 2022. The figures on the current market situation and future expectations are taken from the Altagamma Consensus 2023, presented by Stefania Lazzaroni, Director General of Altagamma, and carried out with the backing of major financial analysts, and the Altagamma-Bain Worldwide Luxury Market Monitor, presented by Claudia D’Arpizio and Federica Levato, Senior Partners at Bain & Company. The results of the research were discussed with Francesca Bellettini, President and CEO of Yves Saint Laurent; Sabina Belli, CEO of the Pomellato Group; Pier Francesco Nervini, COO for Northern and Central Europe and Global Accounts at Global Blue; Cristina Scocchia, CEO of illycaffè; Daniel Talens, CEO of Alessi and Stephan Winkelmann, Chairman and CEO of Automobili Lamborghini.
«Following the deep decline due to the pandemic, the luxury sector has completed its journey to recovery, with a record-breaking increase of 21% globally in 2022”, according to Altagamma’s President Matteo Lunelli. “In this scenario, Italian brands continue to excel, despite the current situation of profound uncertainty and numerous challenges. As Minister Urso - here at Altagamma Monitor today - recently said, we must not only protect, but grow our fantastic Italian companies and the excellent production chains that are a driving factor for entire sectors. Ultimately, luxury goods and services can be an engine for the growth of the Italian economy.»
The Minister for Business and Made in Italy, Adolfo Urso, highlighted the importance of the luxury sector: «The change in name to Minister for Business and Made in Italy is not merely lexical, but a clear indication of the new mission this government is committed to: to promote, protect and valorise our brand in the world. The Made in Italy excellence represented by Altagamma is the crowning glory of our manufacturing industry, and has succeeded in retaining its leading role in the world during an extremely challenging period, contributing significantly to our GDP. There is still plenty of room for growth, and we therefore plan to work jointly with intermediary bodies and associations in order to strengthen the foundations of our exceptional industries, support their development and promote them worldwide.»
«The new upsurge which is affecting the luxury industry and shaping new trends will require change in the sector’s businesses, which will need to improve their preparedness for uncertainty and focus on creativity in every aspect of their operations. Looking to 2023, luxury brands will need to leverage their position at the cultural cutting edge and the excellence that has always distinguished them, and find new applications. Just as they have always done by their very nature, and in recent times too, with highly creative products and customer care, in order to overcome the challenges they face, luxury businesses need to target investment to where most opportunities lie: ESG, creativity, technology and data. Their growth has no choice but to rely on these drivers, whose potential is enormous», commented Claudia D’Arpizio and Federica Levato, Senior Partners at Bain & Company and authors of the research.
Markets. Europe is expected to grow by 5%, thanks to the increase in international travels (especially from the USA, thanks to the favorable euro-dollar exchange rate, but also from Arab countries) which will compensate for the weaker domestic demand. Also for the United States, with the development of new territories and a stronger domestic demand than in Europe, growth of 5% is forecast. Latin America and Japan also grew (+6%) thanks to the development, beyond the capitals, of important cities driven by real estate development. China and Asia are more difficult to estimate: in particular in China, the lockdown policies for the containment of Covid-19 could bring unexpected effects. The market should still benefit from an opening and thanks to the rebound effect, consumption could grow by 9%. In the long run, China remains the largest luxury market, driven by the prosperity of the middle class, new generations and the development of new poles. A +7% is expected for the Middle East, with areas such as the United Arab Emirates (but also Turkey) which - not having imposed sanctions - are taking advantage of Russian consumption.
Consumers. The world macro-economic situation favors polarization between richer and less well-off sections of the population: worldwide, the middle class suffers, with the exception of the Chinese which, thanks to the "Common Prosperity" policies implemented by the Government, tends to strengthen and drive consumption: Chinese consumers will be the best performers in 2023 with a +10%. The rebound effect of consumption will benefit Asian consumers in general, who will see an increase of 8%. On the other hand, Japanese consumption will be less brilliant (+5%). American consumption will stand at +5%. In the US, high-end consumers are less affected by cost increases thanks to a stronger labor market and accumulated savings. European spending is cautious, which stands at +4%: the increase in inflation and costs will have a significant impact on consumption, in particular of luxury goods.
Product categories. All categories will see an increase in sales not only thanks to an increase in prices, but also an increase in volumes. Therefore, grow in value. The leadership of accessories is reconfirmed, continuing their positive trend: +8.5% for leather goods and +7% for footwear. However, due to the widening of the social gap, the entry price suffers and demand is weaker for aspirational products. Apparel (+6%) and cosmetics (+5.5%) confirm the growth rate of 2022. Cosmetics in particular is driven by Asia, while Apparel will see a clear contrast between accessible and luxury. Hard luxury continues its positive trend, particularly in jewellery with +8%: jewellery remains a safe haven and investment asset. The growth of watches was lower, marking +5% and continuing to strengthen the "handmade" or the search for the unique piece.
Distribution channels. The retail channel, both physical and digital, will continue to thrive, allowing a direct relationship with consumers and greater control of all touchpoints, allowing brands to strengthen an omnichannel strategy. Growth of 8% is expected for digital retail, therefore expanding, but more moderate than in previous years marked by the online boom due to the pandemic. Physical stores mark a +7% and continue to be relevant for the sector thanks to increasingly personalized and phygital approaches that improve consumer engagement. Many luxury brands also look to secondary cities and new territories that are developing in expanding markets (for example in the USA and the United Arab Emirates). The physical wholesale remains fragile with a +3.5%, while after the double-digit growth of the past years the digital wholesale will see a normalization of the channel with a +5.5%.