According to a recent report by consultancy firm Bain & Company, the global sales of luxury goods are projected to undergo minimal growth in the fourth quarter of 2023. The key determinant for spending in Europe will be the flow of tourists, as local shoppers are tightening their budgets following three years of robust growth post-pandemic.

Federica Levato, a partner at Bain, emphasized the reliance on tourist flows and highlighted the reduced spending of local shoppers. While there were initial trip cancellations to Europe from Americans due to the Israel-Hamas conflict, the current situation is considered “normal”.

Bain’s biannual report indicates that sales of personal luxury goods, encompassing clothing, accessories, and beauty products, are expected to remain relatively stagnant in the fourth quarter compared to the previous year’s figures. In the third quarter, these sales already experienced a 3% decline at current exchange rates.

Looking ahead to 2024, Bain’s “probable scenario” suggests a growth rate of 1% to 4% at constant exchange rates. However, there is a more optimistic range that anticipates a rise of up to 7%, with tourist flows potentially surpassing local demand. This year, sales of personal luxury goods are predicted to grow by 8% at constant exchange rates, reaching 362 billion euros ($387 billion). This growth can be attributed to a return of spending in the United States and Europe to more normalized levels after a surge in the past three years.

Federica Levato predicts that Chinese tourists, who are currently driving growth in Asia, will likely fully return to Europe by the end of next year. She mentioned that they are already spending 40% of the levels seen in 2019. Levato also noted that shoppers currently have a preference for high-end jewelry, which is viewed as an investment, as well as fragrance and makeup, with leading brands experiencing the most success.

Useful links:
1. Bain & Company’s research on luxury goods and fashion
2. Impact of Chinese consumers on the global luxury industry