In 2024, the luxury category is poised to once again dominate the global fashion industry, leading in profitability, as indicated by McKinsey's State of Fashion 2024 report. The luxury segment showcased remarkable resilience in 2023, boasting a staggering 36 per cent surge in profit, outshining all other fashion categories and compensating for weaknesses elsewhere. Strong margin performance catapulted the industry's economic profit to more than double the figures recorded between 2011 and 2020, except for one standout year.
This data underscores the luxury sector's ability to withstand economic and political challenges that typically erode profit margins in other fashion segments. McKinsey's analysis of fashion forecasts projects a 2 to 4 per cent top-line growth for the global industry in 2024, with variations at regional and country levels. Once again, the luxury segment is anticipated to command the largest share of profits. However, companies within this segment will face challenges amid a demanding economic landscape.
Globally, the luxury segment is projected to grow 3 to 5 per cent, a slight dip from the 5 to 7 per cent witnessed in 2023. The report raises concerns that the predicted growth range of 3 to 5 per cent may narrow to 1 to 4 per cent if Europe fails to meet the 2022 standards, and if the US and China do not shake off sluggish spending on luxury fashion items.
Global growth signals shift towards experiences over products
In a recent Euro News article, Bain & Company's report predicts a robust 8 to 10 per cent global revenue growth for the luxury goods sector. This aligns with McKinsey's State of Fashion 2024 projections, foreseeing a consistent 5 to 7 per cent annual growth until 2030. Despite the post-pandemic rebound somewhat slowing, the market is still thriving at $1.6 trillion in 2023. Joëlle de Montgolfier, Head, Bain & Company's luxury division notes a decelerated 4 per cent growth rate.
The personal luxury goods market, encompassing fashion, leather, jewelry, watches, and beauty, is expected to reach $391 billion in 2023, reflecting a return to pre-pandemic trends. Notably, luxury consumers now seek experiences over mere ownership, evident in a 14 per cent surge in luxury hotel patronage, a 10 per cent rise in high-end restaurant visits, and an astonishing 113 per cent growth in luxury cruise demand. This shift underscores that luxury fashion is no longer the primary driver in the upscale segment.
India emerges as a powerhouse in the global luxury market
Meanwhile, Institute Marangoni highlights India's rapid ascent as one of the fastest-growing markets in the global luxury industry, poised to surpass $200 billion by 2030. According to market research by Statista, Indian luxury market is expected to exhibit an annual growth rate of 8.03 per cent until 2025. No wonder, renowned international brands such as Louis Vuitton, Hermès, and Gucci have not only solidified their presence but also strengthened customer relationships, leading to increased profits and sales in the Indian market.
The inauguration of India's largest luxury mall in Mumbai on November 1, 2023, serves as a testament to the expanding customer base in the world's fifth-largest economy. Undoubtedly, the luxury category stands out as the foremost opportunity globally for those eyeing investments in the fashion sector. Whether facing headwinds or enjoying smooth sailing, luxury is expected to consistently deliver attractive returns.
