Introducing Luxury
In a world where consumer trends shift rapidly and economic uncertainties prevail, the luxury industry stands out for its exclusivity and resilience. Defined not just by price but by superior quality, impeccable craftsmanship and a storied heritage, luxury products can foster a unique emotional connection with consumers. From haute couture fashion houses to iconic watchmakers and luxury automakers, this sector not only captures the imagination of consumers but also provides unique insights into global wealth distribution. The S&P Global Luxury Indices were launched to track the performance of companies engaged in the production, distribution or provision of luxury goods and services, offering a gauge of the sector’s performance.
A defining characteristic of luxury goods is their price inelasticity, which has often facilitated higher operating margins. Over the past decade, the average operating margin for luxury goods companies has been around 18%, compared to 12% for the broader consumer discretionary sector. Against a backdrop of rising inflation-global figures ranged from 3.3% to 8.7% between 2019 and 2023-around 80% of the luxury sector’s growth over this period was driven by price increases rather than volume gains. This reflects not only the high perceived value and exclusivity of luxury products but also the sector’s ability to maintain demand even in the face of price increases.
Market Landscape
The global luxury market has experienced consistent growth over the past several years and is projected to continue its upward trajectory. Between 2019 and 2023, the sector achieved a 5% compound annual growth rate (CAGR). While the industry has faced slowdowns in recent years due to macroeconomic headwinds, it is still expected to expand from USD 344.32 billion in 2026 to USD 516.48 billion by 2035, representing a CAGR of 4.7%.
The market is still expanding, though growth has moderated. This continued growth is driven by rising global wealth and evolving consumer preferences. Wealth is increasing steadily, with total global wealth having increased at a CAGR of 3.4% since 2000. Meanwhile, the global number of high-net-worth individuals (HNWIs) - the primary consumers of luxury goods-surged from 14.65 million in 2014 to 23.42 million in 2024.
Consumer preferences are also evolving beyond products and toward luxury experiences, including luxury tourism, hospitality and fine dining. Digitalization has transformed engagement, with 75% of global luxury transactions influenced by online channels and 20% to 25% of purchases digitally enabled. Brands like Gucci and Burberry are leveraging virtual showrooms and innovative social media campaigns to craft compelling digital narratives, maintaining their mystique while embracing modern engagement strategies. To meet growing consumer demand for transparency and authenticity, luxury companies are also adopting new technologies such as blockchain and authentication for traceability, anti-counterfeiting and digital personalization-helping them stay competitive. Furthermore, younger generations will likely drive growth in the coming years, with Generation Z projected to account for 40% of luxury purchases by 2035, up from 4% today, reinforcing the need for brands to deliver more meaningful, personalized and differentiated customer services.
