Hard times for luxury goods but Chinese consumers to drive recovery
The global personal luxury goods market is expected to contract between 20 to 35 percent this year as a result of store closures and the shutdown of tourism, a study shows.
An acceleration of the decline is projected for the second quarter, according to the “Luxury Study 2020 Spring Update” released by Bain & Company in collaboration with Fondazione Altagamma, the Italian luxury goods manufacturers’ industry group.
All categories have seen falls, with watches declining the most due to a lack of online sales platforms to offset the shutdown of physical channels. Accessories have shown the most resistance.
The study suggests a recovery to 2019 levels will not come till 2022 or 2023.
The overall market size is set to reach an estimated 320 billion to 330 billion euros by 2025.
“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.
China has begun to lead the way towards a recovery, and Chinese consumers are set to cement their status as crucial drivers of the industry.
Chinese consumers' luxury spending is expected to account for nearly half of all purchases worldwide by 2025.
Chinese mainland sales are expected to account for 28 percent of the luxury market as of 2025, up from 11 percent in 2019.
"The luxury industry will have changed, and brands need more agility to market trends, quicker innovation speed and breakthrough in sales channels to cater to new consumption demand," said Bruno Lannes, a Bain & Company partner in Shanghai.
Online channels, which already enjoyed double-digit growth last year will remain robust and continue to gain share, the study found. They are expected to account for up to 30 percent of the total market size by 2025.