Faced with a global collapse driven by lockdowns and the shutdown of tourism in all key markets, the luxury industry faces a challenge like never before. After falling by an estimated 25 percent in the first quarter of 2020, the slowdown should accelerate in the second quarter and could lead to an estimated contraction of between 20 percent to 35 percent for the full year.
China has begun to lead the way toward recovery and Chinese consumers are set to cement their status as crucial drivers of the industry, accounting for nearly 50 percent of the market by 2025. Luxury purchases made online have increased throughout the crisis and the online channel could represent up to 30 percent of the market by 2025. These are the key findings from Bain & Company, the world’s leading advisor to the global luxury goods industry, in the “Bain & Company Luxury Study 2020 Spring Update” released today in collaboration with Fondazione Altagamma, the Italian luxury goods manufacturers’ industry foundation.
“There will be a recovery for the luxury market but the industry will be profoundly transformed,” said Claudia D’Arpizio, a Bain & Company partner and lead author of the study. “The coronavirus crisis will force the industry to think more creatively and innovate even faster to meet a host of new consumer demands and channel constraints.”
The coronavirus crisis takes a toll on luxury
Bain & Company estimates that the market for personal luxury goods declined by 25 percent in the first quarter of the year, as Covid-19 spread in Asia and then worldwide
A strong start to the year in all key regions (Mainland China, Europe, America) was quickly offset by the imposition of lockdowns and the collapse of tourism, which amplified the decline in Europe. Luxury sales in Japan and the rest of Asia also declined, albeit at a slightly slower pace and the consumer mood globally remains subdued. The luxury market will face a difficult year ahead: Bain & Company expects that for the full year 2020, the market could contract between 20-35 percent, depending on the speed of the recovery.
Looking towards the future: what will the luxury market look like in 2025?
It will take time for the market to recover. Bain & Company anticipates that recovery to 2019 levels will not occur until 2022 or 2023. Market growth will resume gradually from then on, reaching an estimated €320-330 billion by 2025. “The speed of future market growth will depend on luxury players’ strategic responses to the current crisis and their ability to transform the industry on behalf of the customer,” said Ms. Levato.
Chinese consumers are set to confirm their place as the most important buyers of luxury, accounting for nearly half of all purchases worldwide by 2025. As a region, mainland China will account for 28 percent of the luxury market, up from 11 percent in 2019. The online channel, already experiencing double-digit growth in 2019, will continue to gain share and account for up to 30 percent of the market by 2025. This goes hand-in-hand with the younger generations (Gen Y and Gen Z) becoming the majority of the luxury market.
Source:Textile Focus
