Coronavirus: Luxury industry faces crisis with demand falling up to 35 pct in 2020
The personal luxury goods industry is facing a crisis due to the coronavirus pandemic, with demand for products falling by up to 35 percent in 2020, according to a new report by management consulting group Bain & Company.
The report also found that while the industry is set to broadly contract, online sales have increased throughout the COVID-19 crisis, and could represent up to 30 percent of the market by 2025.
“There will be a recovery for the luxury market but the industry will be profoundly transformed … 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,” said partner at Bain & Company and lead author of the study Claudia D’Arpizio in a statement.
In the first quarter of 2020, Bain estimates that the personal luxury goods market fell by 25 percent as the coronavirus spread in Asia and then worldwide. China, the origination point of the coronavirus, accounts for more and more of the luxury good industry, with Bain estimating that by 2025 the Asian giant will account for nearly half of all purchases worldwide.
“As consumers slowly emerge from lockdowns, the way they see the world will have changed and luxury brands will need to adapt … Safety in store will be mandatory, paired with the magic of the luxury experience: creative ways to attract customers to store, or to get the product to the customer, will make the difference,” said Federica Levato, a co-author of the report and partner at Bain.
The management consultants noted that in particular the luxury watch segment of the market has suffered the most due to limited online sales channels, while accessories have shown the most resilience.
Three years of recovery
Bain believes that it will take until 2022 or 2023 for the luxury good market to recovery to 2019 levels, with growth gradually resuming from then on, before hitting an estimated 320-330 billion euros ($351.15-362.12 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,” Levato added.