After two years of strong growth, 2023 will be mostly subdued on the global luxury market front, according to a study by The Luxury Institute. Members of the organization are comprised of prominent luxury goods and services CEOs, C-levels and consultants, as well as other top-tier luxury executives and experts.
The survey of its Global Luxury Expert Network asked about key macro-economic challenges for 2023 and whether members thought the current slowdown in luxury is turning into an economic downturn or recession.
Luxury market: Key macro-economic potential challenges
According to the survey, key challenges that will impact the luxury market is continued global fragility around inflation, and high interest rates. Also, continued tech, finance and corporate layoffs affecting luxury demand in key markets. Plus fears of a major cybersecurity event that would bring major economies to a halt, the global and regional instability brought on by Russia’s attack on Ukraine, negatively impacting economic growth. And what about China? Lots of talk about de-tangling Western economies from the Chinese Communist Party, plus worries about real estate bankruptcies and consumption risks there.
According to the study, true luxury will be resilient based on top HNW and UHNW (20% customers = 70% sales) customer spending. Each brand is affected differently based on target client and category.
The new Canopy by Hilton Toronto Yorkville, which opened this week, King bed.
Survey says: Category breakdowns
In fashion and leather goods, 2023 vs 2022: Up mid-single digits, especially leather goods. Apparel may remain flat because of lack of newness, and it is highly discretionary. A few top-tier winners grow, while mediocre brands flatten or fall down. Previously owned continues to grow, people consume less but want better quality.
Not a surprise: Classic leather goods from top brands remain strong as people still desire statement pieces.
In travel and hospitality: Up low double digits. Key reasons according to the survey is while growth is solid as pent-up travel demand continues, that growth will be slower. High room rates and airline prices may become more of a challenge for aspirational consumers. There’s lots of new luxury properties opening that will create more competition.
And ain’t this the truth: Airline service levels and supply are big wildcards, plus airport chaos, all making it tough to predict travel growth.
Automotive market uncertainties
According to Luxury Institute members, the luxury automotive industry compared to 2022 will be flat to down. Key reasons there point to improvements in supply after a net down year, but high prices and interest rates will dampen demand. Electric cars are driving new car demand but can’t make up for negative market factors, which also includes luxury upgrades continuing at a slower rate.
And watches and jewelry: Up high single digits. There will be continued growth in iconic, branded pieces as investment items. Emotionally powerful and storied special occasions pieces remain popular. It’s all about quality over quantity!
Rolex Cosmograph Daytona
Members see the luxury real estate market up low single digits. Key reasons there: Top-tier properties continue to sell at high prices, but are limited in volume. Plus, few affluent people want or need to buy or sell into a declining market, so they are holding back. Easing of interest might ease the declines in prices and volume seen over the past year. And new luxury home construction has been slow to build up needed inventory.
Luxury Institute is a trusted research, training, and elite business solutions partner for luxury and premium goods and services brands. With its global network of luxury executives and experts, Luxury Institute has the ability to provide its clients with high-performance, leading-edge solutions developed by the best, most successful minds in the industry.
In the last 20 years, Luxury Institute has served over 1,100 luxury and premium goods and services brands. Research of the global luxury industry is a big part of what they do.