Over the last three years, the luxury market has experienced a whirlwind of change. In the lead-up to the pandemic, the personal luxury goods market grew 7 percent in 2019, reaching $300 billion globally. Then in 2020, it suffered a sharp decline, dropping an unprecedented 22 percent to $235 billion, followed by a remarkable rebound in 2021 to $302 billion, according to the Bain-Altagamma Luxury Study.

Throughout 2022, the personal luxury goods market enjoyed a meteoric post-pandemic rise, advancing 24 percent to $376 billion, and the Bain-Altagamma analysts expect the good times to keep rolling in 2023.

“The personal luxury market is projected to see further growth of at least 3-8 percent next year, even given a downturn in global economic conditions,” they predict.

Not So Fast

However, since the past is often the best predictor of the future, a different outlook is suggested based on results from the Great Recession of 2008 and 2009. Global personal goods luxury sales dropped 9 percent from 2007 to 2009, disproving the conventional wisdom that the luxury market is immune to economic downturns.

Whether the economy takes a slight tumble or a big fall in 2023, more economists are warning about a potential economic downfall. “Going into 2023, we have a broad-based slowdown in the global economy,” said International Monetary Fund’s Gita Gopinath at the Wall Street Journal’s CEO Council Summit in December.

“The possibility of avoiding a recession is really narrow for the U.S.,” she continued and added that the outlook is even more challenged in Europe and China.

Heeding advice from motivational writer and speaker William Arthur Ward, “The pessimist complains about the wind; the optimist expects it to change; the realist adjust the sails,” luxury brands should set their sails to strengthening economic headwinds.

To adjust the sails, luxury brands need to get out in front of the consumer, understand what they are looking for today and tomorrow and prepare for changes to come. A new study among 2,000+ affluent consumers – Research The Affluent Luxury Tracker – provides a forward look at how the affluent will adapt their spending and purchase behavior as the economy falters, which they fully expect it will.

Change Is Coming

“Affluent luxury consumers are the most highly-educated and well-informed consumers, and some 69 percent see a recession coming within the next six months, if it isn’t already here,” said Chandler Mount, the study’s lead researcher and founder of Washington, DC-based Affluent Consumer Research Company following ten years heading up YouGov’s Affluent Perspective research practice.

“Anticipating the worst, the affluents aren’t waiting for the other shoe to drop. Nearly half (48 percent) surveyed said, ‘Now is a good time to limit my purchasing,’” he continued, noting that the survey sample was skewed heavily toward high-net-worth-individuals (HNWI) with $1+ million net worth (excluding their primary residence), a notoriously difficult consumer segment to survey. HNWI made up 70 percent of the sample and the remaining 30 percent were high-earners-not-rich-yet (HENRYs) with less than $1 million net worth. All, however, are categorized as affluent.

Not unexpectedly, the HENRYs were more inclined to cut back (52 percent). But even 46 percent of the HNWI are lining up to reduce their purchasing. This will pose significant challenges to luxury brands that depend upon the HNWI’s greater spending power if they do pull back.

In addition, affluent millennials, who represent the largest consumer segment for luxury brands now and in the future, are the most likely to feel that cutting back is a good idea. Some 59 percent of millennials (aged 26-41 years) agreed with that statement.

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