The COVID-19 pandemic was marked by mass unemployment and economic adversity for many Americans. However, as a recent Vox article explored, it was also a period of skyrocketing demand for luxury goods. 2021 and 2022 turned out to be blockbuster years for the luxury industry, experiencing the highest growth ever.
From designer leather handbags and limited-edition sneakers to high-end kitchenware and home goods, the sales of luxury brands rose remarkably during the pandemic. Luxury goods are typically defined by their high price, superior craftsmanship, and an air of exclusivity. Traditional categories of luxury items include clothing, accessories, wines, and cars. However, the current surge in luxury spending has expanded the range of products that could be defined as luxuries. Moreover, the boom cuts across ages and income brackets.
95 percent of luxury brands saw their profits swell in 2022, according to a Bain & Company report. LVMH, Hermès, Richemont, Kering, Chanel and Prada, Burberry, Luxottica, and OTB all recorded significant increases in their profits.
Analysts point to two factors for the boom — economics and psychology. Wealthy individuals, the obvious consumers of luxury goods, were unfazed by the price tags. But interestingly, an appreciable portion of luxury growth came from middle- and low-income consumers. Americans with a household income of less than $50,000 make up about 27 percent of regular luxury consumers, nearly the same size as the luxury consumer group with an income of $150,000 or more.
Simply put, luxury has become part of pop culture. Millennials and Gen Z are now leading the luxury economy, with Gen Z making their first luxury purchases earlier than millennials did. This is further bolstered by a booming resale market that makes purchasing luxury items feel more attainable since some, or most, of the retail value can be recouped later.
Experts believe this trend is likely to continue, as well. The current economic climate is conducive to widening income and wealth inequality. Studies have shown that higher income inequality heightens awareness and anxiety about class, driving more people toward luxury goods.
Thus, even in the face of adversity, consumers are willing to reach into their pockets for a slice of luxury, which will continue to drive growth in this area.