• by Sarah Mahoney  @mahoney_sarah, November 14, 2023

Gucci is among the luxury brands struggling.

The wealthiest shoppers are throwing themselves into travel, fueling record luxury spending this year. In its latest report on the luxury sector, Bain & Co. expects the global luxury market to finish the year at 1.5 trillion Euros, roughly $1.63 trillion U.S. dollars. The consulting company says that represents an 8 to 10% gain over 2022 and a record. On a constant currency basis, that amounts to a gain of between 11 and 13% at constant exchange rates.

Bain projects that the personal luxury goods segment will reach 362 billion euros by year’s end, a 4% increase from 2022.

It says the sector’s resiliency is remarkable, given the many financial and geopolitical challenges impacting various regions.

But with “fragile consumer confidence, macroeconomic tensions in China, and sparse signs of recovery in the U.S.,” Bain sees slower growth in the coming year, with gains in the low to mid-single digits.

The tougher climate makes it harder for luxury brands to do well. “The luxury market is generating positive growth for 65%-70% of brands in 2023, compared to 95% in 2022,” writes Claudia D'Arpizio, a Bain & Company partner and lead author. “To stay in the game, it will be crucial for brands to take bold decisions on behalf of their customers."

Kering, for example, which owns Gucci, Yves Saint Laurent and Bottega Veneta, recently reported a 13% decline in sales for the third quarter. And LVMH, which owns Tiffany, Dior and Louis Vuitton, announced that sales in the second half -- while still growing -- are much softer.

Those results have led some to call this year “the end of the roaring ‘20s,” following three years of intense post-pandemic splurging.

Bain reports that global luxury tourist purchases have almost reached pre-pandemic levels, with Europe gaining visitors.

Saudi Arabia is gaining, as is Australia. And Japan is positively booming.

China posted robust sales after its first quarter reopening but has slowed since then.

In the Americas, luxury sales sank 8% “as widespread uncertainty continues to impact aspirational customers' spending,” the report says. And when the wealthiest Americans are buying, they travel to Europe to do so, where the dollar’s strength against the euro favors overseas shopping sprees.

Luxury sales in South Korea are also faltering.

By category, jewelry, watches, ready-to-wear and beauty all did well. Sales of leather goods are slowing.

“Monobrand,” or direct sales, are the favorite channel, while purchases at both department and specialty stores declined. That trend is accelerating, and Bain anticipates that online and monobrand channels will account for two-thirds of the entire market by 2030.

Bain conducted the study with Altagamma, the Italian luxury goods association, which analyzes luxury spending twice a year.