How the luxury sector can boost a country’s economy and employment

Index

1. Introduction
2. Luxury Sector Contribution to GDP and Economic Growth
   2.1 Growth in Advanced and Emerging Economies
   2.2 Impact on Exports
   2.3 Technological Innovation and Sector Development
   2.4 Impact of Luxury Tourism on the Economy
3. Foreign Direct Investment and Infrastructure
   3.1 Investment Attraction in Emerging Markets
   3.2 Infrastructure Expansion and Flagship Stores
4. Impact of the Luxury Sector on Job Creation
   4.1 Creation of Direct Jobs in Production and Distribution
   4.2 Indirect Jobs in the Luxury Value Chain
   4.3 Specialized Talent Development
5. Fiscal Contribution of the Luxury Sector
   5.1 Fiscal Contributions in Advanced Economies
   5.2 Fiscal Impact in Emerging Markets
6. Challenges and Opportunities for the Luxury Sector
   6.1 Sustainability as a Transformation Axis
   6.2 Digitalization and the Customer Experience
7. Reasons Why Governments Should Support the Luxury Sector
   7.1 Economic Boost and Financial Stability
   7.2 Job Creation and Skill Development
   7.3 Strengthening National Brand and Tourism
   7.4 Innovation and Technological Leadership
8. The Importance of the Luxury Sector

1. Introduction

As of September 8, 2024, the luxury sector has continued its upward trajectory, consolidating itself as one of the main economic drivers globally. With a market that reached €1.5 trillion in 2023, luxury has expanded its presence not only in mature markets such as Europe and the United States, but also in emerging regions of Asia and Latin America. This growth has been driven by the revaluation of luxury goods, the increase in the consumption of exclusive experiences, and the role of digitalization in transforming the industry. This report explores how the luxury sector contributes to economic growth, job creation, and infrastructure development, based on recent data and 2024 trends.

2. Luxury Sector Contribution to GDP and Economic Growth

2.1 Growth in Advanced and Emerging Economies

Luxury has a significant impact on the Gross Domestic Product (GDP) of various economies. In France, luxury represents approximately 10% of GDP. This includes sectors such as fashion, wine, and perfume, which have generated billions in revenue. In Italy, luxury fashion and automotive exports contributed more than €25 billion in 2023, reinforcing its position as a global leader in luxury goods production.

On the other hand, China, the largest luxury economy in the world, has seen high-end consumer spending grow to represent 35% of global consumption. This has boosted the local economy and attracted foreign direct investment from luxury brands seeking to expand their presence in this massive market. India, although a developing market, has also seen significant growth, attracting international investments in the luxury sector due to its growing upper-middle class.

2.2 Impact on Exports

Luxury exports are a crucial part of the trade balances of several countries. Switzerland exported CHF 21 billion in luxury watches in 2024, consolidating its position as the global leader in high-end watchmaking. Exports from France and Italy in sectors such as fashion, automotive, and luxury products have been equally significant, driving the economies of the European Union.

In Asian markets, such as China and Vietnam, luxury has also positively impacted exports. International brands have capitalized on local demand by establishing factories and distribution centers in these regions, contributing to infrastructure expansion and economic growth.

2.3 Technological Innovation and Sector Development

Technological innovation is one of the main growth drivers for the luxury sector. As consumers demand more personalized experiences, brands have turned to advanced technologies such as artificial intelligence (AI), the Internet of Things (IoT), and augmented reality. This has improved both production efficiency and the shopping experience, especially in e-commerce.

Leading luxury brands are investing in technologies such as blockchain to verify product authenticity and combat counterfeiting. This is essential in sectors like watchmaking and fashion, where authenticity and exclusivity are paramount. Additionally, the adoption of circular economy models and digital product passports is promoting more sustainable practices in luxury goods production.

2.4 Impact of Luxury Tourism on the Economy

Luxury tourism remains one of the biggest economic growth drivers in various regions. In Paris, luxury tourists generated €12 billion in 2024, reflecting the city's appeal as a destination for luxury shopping, fine dining, and exclusive experiences. London, in turn, saw revenues of around £9 billion from tourists seeking unique experiences and exclusive products.

In Dubai, investment in luxury tourism has led to the construction of new infrastructure such as luxury malls and high-end hotels. This has created thousands of jobs in the region and reinforced Dubai's position as one of the top global luxury destinations.

3. Foreign Direct Investment and Infrastructure

3.1 Investment Attraction in Emerging Markets

The luxury sector has been a magnet for Foreign Direct Investment (FDI), particularly in emerging markets such as China, India, and Brazil. Investments in infrastructure, flagship stores, and distribution centers in Asia surpassed US$2 billion in 2024, highlighting the attractiveness of these economies to global luxury brands looking to expand into new territories.

3.2 Infrastructure Expansion and Flagship Stores

In Europe, key luxury cities such as Milan and Paris have seen significant investment in expanding their commercial infrastructures. In 2024, investments in the renovation of historical buildings and the construction of new flagship luxury stores exceeded €500 million. This investment not only creates jobs during the construction phase but also enhances the tourism and economic appeal of these cities.

4. Impact of the Luxury Sector on Job Creation

4.1 Creation of Direct Jobs in Production and Distribution

The luxury sector generates thousands of direct jobs in the production of high-end goods. In Switzerland, the watchmaking industry employs over 60,000 people, while in France and Italy, fashion and haute couture employ thousands in roles such as design, production, and distribution.

4.2 Indirect Jobs in the Luxury Value Chain

In addition to direct jobs, the luxury sector generates a wide range of indirect jobs in sectors such as logistics, transportation, marketing, and advertising. The complexity of global luxury supply chains requires an extensive network of professionals who manage each stage of the process, from production to final delivery to the consumer.

4.3 Specialized Talent Development

The luxury sector also promotes the development of specialized talent, which is essential to maintain the quality and exclusivity of high-end products. Universities and professional training centers in countries such as France, Italy, and Switzerland have developed programs dedicated to fashion design, haute couture, watchmaking, and leather craftsmanship. These programs train new generations in highly specialized skills, ensuring the quality of labor and providing well-paid jobs in key luxury sectors.

5. Fiscal Contribution of the Luxury Sector

5.1 Fiscal Contributions in Advanced Economies

The luxury sector is a key source of tax revenue for governments. In Japan, luxury product sales generated over US$6 billion in taxes in 2024, while China collected more than US$10 billion through tariffs and taxes on luxury products. In the European Union, taxes derived from luxury product sales totaled €15 billion in 2024, contributing significantly to the financing of public projects and infrastructure.

5.2 Fiscal Impact in Emerging Markets

In Mexico and Brazil, two of the largest emerging markets in Latin America, the tax revenues generated by the luxury sector are also substantial. In Mexico, luxury generated US$1.5 billion in tax revenues in 2024, while in Brazil, this figure exceeded US$2 billion. These revenues are essential for the development of social and infrastructure projects in these countries.

6. Challenges and Opportunities for the Luxury Sector

6.1 Sustainability as a Transformation Axis

The luxury sector faces growing demands from consumers for more sustainable and responsible practices. In 2024, many leading luxury brands adopted circular economy models, reducing waste and promoting the reuse of materials. Brands such as Gucci and Chanel have implemented practices to reduce their environmental impact, improving their reputation and attracting increasingly sustainability-conscious consumers.

Additionally, technologies such as digital product passports allow the entire lifecycle of products to be tracked, ensuring their sustainability and promoting transparency in the supply chain. This not only enhances consumer trust but also reinforces the credibility of brands committed to social and environmental responsibility.

6.2 Digitalization and the Customer Experience

Digitalization is transforming how luxury brands interact with their consumers. In 2023, more than 20% of global luxury sales took place through digital platforms. Artificial intelligence enables brands to offer personalized experiences to customers, with recommendations based on preferences and purchasing behaviors. Additionally, the use of augmented reality and virtual reality in physical stores and online improves the shopping experience by allowing customers to visualize products before purchasing.

This digital approach has allowed luxury brands to remain competitive in a constantly changing global environment, where consumers seek convenience, personalization, and exclusive experiences.

7. Reasons Why Governments Should Support the Luxury Sector

7.1 Economic Boost and Financial Stability

The luxury sector is an economic engine that contributes significantly to the GDP of countries and generates substantial tax revenues. By supporting this sector, governments can ensure a steady flow of income that can be reinvested in social programs, infrastructure, and other public projects. Moreover, the luxury sector is often less sensitive to economic crises, providing financial stability during uncertain times.

7.2 Job Creation and Skill Development

Luxury generates a large number of direct and indirect jobs, from production to distribution and sales. By fostering the growth of this sector, governments can reduce unemployment and promote the development of specialized skills. Training and education programs focused on the needs of the luxury sector can increase employability and create a highly skilled workforce.

7.3 Strengthening National Brand and Tourism

Luxury brands are often associated with national identity and can strengthen a country’s image abroad. By promoting the luxury sector, governments can enhance international perceptions of their country, attracting more tourism and boosting other economic sectors. Cities like Paris, Milan, and London have become top tourist destinations partly due to their reputations as luxury hubs.

7.4 Innovation and Technological Leadership

The luxury sector is at the forefront of adopting advanced technologies and sustainable practices. By supporting this sector, governments can drive innovation and technological development across the broader economy. This can have a multiplier effect, improving the country’s competitiveness and fostering advances in areas such as digitalization, artificial intelligence, and environmental sustainability.

8. The Importance of the Luxury Sector

The luxury sector remains a cornerstone of economic growth, job creation, and technological innovation. Throughout 2024, it has become evident that luxury not only contributes significantly to advanced economies but also drives growth in emerging markets. Governments play a crucial role in this ecosystem, and their support can amplify the economic and social benefits that the luxury sector offers.

By recognizing the importance of luxury and promoting policies that encourage its sustainable development, governments can maximize this sector's potential to boost the economy, create high-quality jobs, and position their countries on the global map of innovation and prestige. With continuous investments in technology, talent, and sustainability, the luxury sector will continue to play a vital role in the development of global economies over the coming decades.