Luxury-goods market looking to get up from its knees
The global luxury-goods market, once a barometer of thriving consumerism, is set for its biggest decrease in more than two decades as COVID-19 travel restrictions hinder tourism and the road to general economic recovery remains blurred.
A Bain & Co joint study with Italian industry group Fondazione Altagamma estimates that the worldwide markets for luxury goods will drop to 217 billion euros (US$263 billion) before recovering to 240-260 billion euros in 2021.
The full-year market plunge is estimated at between 21 percent and 25 percent, despite promising signs of recovery in the third quarter where lockdown measures were gradually lifted.
China, however, is not derailed from projections that it will become the biggest luxury-goods market by 2025. It is set to become the only country to end this year on a positive note, with a 45 percent rise to 44 billion euros in current exchange rates.
Hong Kong, Macau and Europe are expected to be the worst performers globally, reflecting the loss of tourist foot traffic.
"The ability of luxury brands to come out ahead is dependent on their capability to foresee customer trends in a timely manner and adjust to them," said Bruno Lannes, a Bain partner in Shanghai.
The return to pre-COVID-19 levels will likely occur sometime in 2022 or 2023, according to the consensus of more than 100 luxury-goods executives interviewed by Bain.
The global consulting firm said it expects items such as fine art, luxury cars, private jets and yachts, fine wines and spirits, and gourmet food to recover at a faster pace than personal goods.
Like other retail industries, growth in online channels has accelerated during the pandemic, with future investment going to overhaul store formats, digital operations and logistics.
A separate report on the luxury market by Boston Consulting Group and Tencent Marketing Solution said online purchases in China increased to 30 percent of sales this year.
In China, consumers aged 30 years and younger accounted for over half of luxury-goods purchases for the first time, up from 42 percent in 2019.
Shoppers, the report said, are interested in the stories behind brands and in value for money. About 70 percent of luxury purchases were influenced by or came directly from brand recognition.
In China, premium handbag, makeup and skincare brands are increasingly relying on online channels to create brand awareness and expand market reach.
For Swiss-based luxury retailer Richemont, China sales in the six months ending on September 30 surged 78 percent at actual exchange rates, and online sales more than doubled, thanks to Tmall flagship stores.
Richemont and Chinese e-commerce giant Alibaba, owner of Tmall, announced last month they would each invest US$550 million in a new online designer-clothing venture with Farfetch.