Luxury Fashion Market

Market Overview

The global luxury fashion market size was valued at USD 123.05 billion in 2022. It is estimated to reach USD 198.55 billion by 2031, growing at a CAGR of 5.46% during the forecast period (2023–2031).

The term luxury fashion refers to apparel and other things created from premium materials, frequently with care and attention to detail. Silk, leather, fur, and wool are just a few materials that may be used to make luxury fashion products. Luxury fashion includes exclusive products with original designs, unique brand value, and high-quality raw materials. Typically, luxury fashion products are created to be more comfortable than their less expensive counterparts.

These goods have extraordinary features, premium pricing, top-notch quality, aesthetic designs, and appearance. The exclusivity of luxury fashion brands makes them the ultimate prestige symbol for those with substantial wealth (HNWIs). Luxury fashion products are also connected with the emotions and perceptions of several individuals. Although luxury fashion products are not classified under essential consumer goods, they are related to people's desires for premium products and are often purchased by HNWIs.

Market Dynamics

Global Luxury Fashion Market Drivers

Increasing Acceptance by Millennials and Generation Z

Millennials and Generation Z are generational cohorts that include individuals born between 1982-1999 and 2000-2020, respectively. Luxury fashion products are increasingly gaining momentum among these generations. Millennials are one of the market's fastest-growing consumers of luxury fashion goods. Since these generations are tech-savvy as they have grown up in the era of mobile technologies, they are highly exposed to the omnichannel experience.

Additionally, these generations are highly aware of the various luxury fashion brands available in the market and are looking for luxury goods as a part of the experience. These generations also offer long-term potential for luxury brands to expand their revenue. Hence, millennials and Generation Z are increasingly driving the demand for luxury fashion products.

Rise in Travel and Tourism

Travel and tourism are critical in driving the demand for luxury fashion products. More than 45% of luxury purchases are made by tourists, whether in a foreign country or at airports. Hence, the increase in travel and tourism with the re-opening of the economy is leading to the increasing demand for luxury fashion goods. Europe is the highest tourist attraction and receives many international visitors. The region consists of countries like Germany, France, and Italy, which account for the major tourist destinations.

In addition, the concentration of many luxury fashion brands in France and Italy leads to a higher demand for luxury fashion goods due to the lower prices. In 2019, Europe witnessed an increase of nearly 4% in the travel and tourism market. The growing tourism leads to rising demand for luxury fashion goods by travelers, thereby driving market growth.

Global Luxury Fashion Market Restraint

Availability of Second-hand Luxury Products

Luxury fashion goods are highly expensive, and many consumers are often unwilling to give up on these products even if they no longer use them. As a result, reselling such products is gaining momentum, increasing the secondhand market for luxury fashion goods. Re-sale or re-commerce is becoming increasingly popular in the luxury fashion market.

The demand for secondhand luxury goods, which are used luxury goods, is increasingly gaining momentum due to their availability at lower prices. The growth in the sale of used stock of luxury fashion goods is significantly hampering the sales of fresh stock of luxury fashion brands. Hence, the above factors challenge the fresh sales of luxury fashion vendors.

Global Luxury Fashion Market Opportunities

Leveraging Augmented Reality

Various businesses leverage AR to influence customers' purchasing behavior and help them make more informed decisions. Product trials heavily influence the decision to buy a fashion item; as a result, many customers prefer to test out products before committing. Hence, this provides a significant growth opportunity for luxury brands to leverage AR technology over their digital sales platform to provide a better shopping experience to customers.

Brick-and-mortar stores were temporarily closed during the COVID-19 outbreak due to mobility issues, which made it difficult for customers to shop there. Thus, many luxury brands leveraged AR technology to provide customers with a real-world, in-store environment. In addition, several luxury fashion brands and luxury fashion retailers have started using AR technology to boost the sales of their products. For instance, in February 2020, Burberry, a luxury fashion brand, partnered with Google to provide an AR experience to customers with the help of the Google iOS app. Hence, AR technology provides significant growth opportunities to luxury fashion brands available in the market.

Regional Analysis

Based on region, the global luxury fashion market is bifurcated into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.

Asia Pacific Dominates the Global Market

Asia-Pacific is the most significant global luxury fashion market shareholder and is anticipated to exhibit a CAGR of 6.79% during the forecast period. The region is one of the most attractive markets for luxury fashion brands. Therefore, the brands are adopting new strategies to attract luxury shoppers. The continuous surge in the number of billionaires across the region is leading to a surge in demand for luxury fashion products. In addition, the continuous rise in disposable income of the middle-class population is augmenting the regional market's growth. The major regional luxury goods segments are leather goods, fashion apparel, jewelry, cosmetics, and fragrances. Likewise, easy access to international luxury brands is likely to push the consumption of luxury fashion products. Therefore, several brands are expanding their footprint in Asia-Pacific to serve a large customer base. Asia-Pacific saw a growth of new luxury store launches of about 39% between January and October 2020 compared to other regions.

Europe is estimated to exhibit a CAGR of 3.65% over the forecast period. Europe emerged as the second-largest geographical segment in the global market. The high revenue share of the region is attributable to the presence of a significantly large number of luxury fashion brands in countries such as France and Italy. Moreover, the high concentration of people with exceptionally high purchasing power in various European countries supports the region's domestic demand for luxury fashion products. In addition, the demand for luxury fashion products across the country also depends significantly on international tourists' arrival. Asian shoppers prefer to purchase luxury fashion products from European markets to enjoy the cost advantage. A sizable number of tourists visit countries in Western Europe each year, including France, Germany, and others. Hence, tourism is prominent in driving the European luxury fashion market.

In North America, the high-end clothing industry growth is anticipated to benefit from the increasing number of millionaires. The young population belonging to the millennial and Generation Z segments is driving the regional market's growth. Individuals from these generational cohorts gravitate toward branded and luxury products regarded as status symbols in the marketplace. Moreover, young individuals often develop an emotional connection with luxury brands, which supports market growth. The following graph indicates the percentage share of different generational cohorts in the US. Millennials and Generation Z account for almost 50% of the US population and are the greatest consumers of luxury fashion brands. Hence, high numbers will likely drive consumer demand for luxury fashion products like apparel, watches, jewelry, and other accessories.

The Middle East and Africa became the second-lowest global luxury fashion market contributors. Nations like Saudi Arabia and the UAE are generating the highest demand in the region. Although the middle east has an established travel and tourism sector that generates a high demand for luxury fashion products from international visitors, several poor African countries offset the demand for luxury fashion products. Also, the lack of awareness of the availability of various luxury brands and poor affordability in various low-income countries in the region will impede market growth during the forecast period.

Latin America accounted for the lowest share of the global luxury fashion market. The relatively lower share of the regional market is attributable to the economic downturn in several nations and a lack of awareness of various luxury brands available in the market. However, the region is expected to grow substantially during the forecast period. Factors such as significant penetration of travel and tourism activities and gradually increasing brand visibility are expected to drive the market's growth. Several developing economies in the market, including Brazil and Mexico, offer tremendous growth potential to luxury fashion vendors.

Segmental Analysis

The global luxury fashion market is segmented by product type, end-user, generation, and distribution channel.

Based on product type, the global market is segmented into apparel, footwear, and accessories. 

The apparel segment is the largest revenue contributor to the market and is projected to exhibit a CAGR of 4.55% over the forecast period. The apparel segment is expected to exhibit significant year-over-year growth during the forecast period. Luxury apparel is priced higher and carries a unique style quotient. Several luxury brands focus on providing trendy and classy apparel and try to teach cultural trends to attract customers from different parts of the world.

In addition, the rise in consumer awareness about various luxury apparel brands available in the market has increased consumer acceptance of these products. Luxury apparel is increasingly being preferred by High-Net-Worth Individuals (HNWI) due to its extraordinary appearance, high quality, better design, durability, and status symbol. Moreover, the growing number of High-Net-Worth Individuals (HNWI) and the rising purchasing power support the adoption of luxury apparel in the market.

Based on end-user, the global market is bifurcated into men, women, and children. 

The men's segment dominates the global market and is projected to exhibit a CAGR of 4.41% over the forecast period. Traditionally, the share of men in the luxury fashion segment has been low even after possessing a comparatively high income level. The innovations and upgrades in the men's category have been sluggish since a decade ago. However, the men's luxury segment has grown substantially over the past decade owing to increased spending on R&D and new product development.

Additionally, the contribution of the men's segment is expected to grow significantly with the growing adoption of luxury fashion products in the Asian market. China is the largest market for men's luxury fashion products. Moreover, North America has a relatively higher millennial population and better education than other regions, leading to higher employability, income, and purchasing power. This will drive the men's segment's market adoption of luxury fashion products.

Based on generation, the global market is divided into Gen X, millennials and Gen Z, and baby boomers and silent Gen. 

The Gen X segment owns the largest luxury fashion market share and is predicted to exhibit a CAGR of 5.35% over the forecast period. Generation X includes individuals born between 1966–1981. In 2020, the Generation X segment contributed a revenue share of 38.46% to the global luxury fashion market. Since this generation is in their potential earning period, the higher income and spending power are expected to contribute to the higher demand for luxury fashion products. Moreover, this generation shows higher brand loyalty than any other generation. It is ready to pay premium prices for the brands they trust and have an emotional connection, which is expected to support the year-on-year growth of the market.

Based on distribution channels, the global market is bifurcated into online, mono-brand stores, specialty stores, departmental stores, off-price stores, and airports. 

The online channel segment is the highest contributor to the market and is anticipated to exhibit a CAGR of 7.38% over the forecast period. Various vendors begin selling their products online as it costs less than setting up physical stores or partnering with various retailers and has a wider reach than offline channels. Moreover, due to fewer setup costs on online channels, vendors can sell products at a lower price and gain a competitive edge. Hence, this is likely to spur online sales during the forecast period.

The high internet penetration in developed countries like the US, Germany, France, and others is boosting the online sales of luxury fashion products. In the US, more than 75% of people live in homes with broadband. Increased connectivity presents the market with significant growth potential for online product sales. COVID-19 has further boosted online sales, prompting more customers to buy online.

Recent Developments

• July 2023- Aza Fashions (Aza), the premier multi-designer luxury fashion retailer in India, revealed the grand opening of its new store in the center of Kolkata. With an unrivaled selection of designer clothing and accessories, Aza is poised to revolutionize the city's fashion scene.
• February 2023- With the support of its French owner Kering, Gucci proclaimed the launch of what it claims is the first circular hub for luxury fashion in Italy. The circular center will seek to accelerate the circular transformation of the entire value chain of the Italian fashion industry, including raw materials, design, production, and logistics.