The Southeast Asian (SEA) luxury market is experiencing positive momentum from intraregional tourism investments and growing local interest, according to consulting firm Bain & Co. and Italian luxury goods manufacturers association Altagamma.
The Bain-Altagamma global luxury fall 2023 report recognized Thailand as the leading player in the region.
It said the luxury market in the Asia Pacific and Japan region is estimated at about €560 billion, accounting for the biggest share globally at 37%, with a 6-8% compound annual growth rate from 2019 to this year.
“The market is set for long-term growth, rooted in strong fundamentals,” Federica Levato, Bain partner and report co-author, said in an e-mailed press release to reporters on Monday.
“Capturing and amplifying the market potential will be key, as the clear convergence among luxury markets allows for further expansion,” she added.
“Players have the opportunity, but also the responsibility, to reinforce their meaning, while leveraging strategic M&A [mergers and acquisitions] to redefine the boundaries of the industry. These will be foundational drivers for growth in the future.”
The report said the global luxury market is projected to reach €1.5 trillion this year, an 8-10% growth, and over €160 billion increase from last year across luxury categories.
The luxury market has nearly reached pre-pandemic levels in the thick of geopolitical and macroeconomic shifts, which are expected to continue, it noted.
“Headwinds remain heading into the fourth quarter, including fragile consumer confidence, macroeconomic tensions in China, and sparse signs of recovery in the US,” it added.
Claudia D’Aripizio, Bain partner and lead author of the report, noted resilience, relevance, and renewal as the new key ingredients to unlocking further potential in the luxury industry.
She said only 65-70% of luxury brands this year are generating growth, a significant decrease from 95% last year. “To stay in the game, it will be crucial for brands to make bold decisions on behalf of their customers.”
“In an increasingly crowded market, brands must focus on creativity and innovation to enhance relevance to consumers, with the ultimate goal of cultivating a base of brand lovers to broaden their reach,” she added.
Among categories, Bain and Altagamma deemed fine jewelry as a “bright spot for investments amid uncertainty,” due to a €30 billion market value projection this year.
The ready-to-wear, beauty, and watches categories are being favored by consumers this year, while leather goods slowed down after an overperformance in recent years, it said.
Monobrand channels lead the distribution ecosystem this year with consumer demand for physical experiences and sales clienteling, or building long-term relationships with customers, it added.
“Conversely, multi-brand environments suffer a sharp slowdown in both department and specialty stores, with rising questions on how to evolve their value proposition to best serve consumers’ needs.”
Additionally, brands must cater to the varying needs across their consumer base given the rise of ‘multigenerational complexity,’ it said.
“Generation X and Y are in their peak income years, representing the bulk of luxury purchases and the key pool of income growth in the near future,” it added.
However, it also noted Gen Z is positioned at the forefront of sociocultural change, with a strong desire for lived experiences and meaning.
“By 2030, Gen Z will account for 25-30% of luxury market purchases, while millennials will account for 50-55%.” — Miguel Hanz L. Antivola