- Don-Alvin Adegeest |
This spring, when then pandemic migrated to Europe and North America, all eyes were on Asia for signs of recovery and positive consumer sentiment. That recovery hasn’t fully happened.
“Covid-19 has forced luxury brands to postpone their fashion shows and cancel promotions events, and has disrupted supply chains,” GlobalData Retail Analyst Suresh Sunkara said. “However, since the start of the second quarter of this year, several countries in the region, including China, Japan and South Korea, have lifted most of their lockdown measures to bring normalcy in their economies, while countries such as India have begun phased relaxation of lockdown measures. This will bring some relief to luxury retailers, as they can now open their stores and resume operations.”
With EU lockdown lifted, recovery is slow
LVMH Chairman Bernard Arnault this week said “we can only hope at this point for a gradual recovery.” This was an echo to Chanel Finance Chief Philippe Blondiaux telling Reuters a strong recovery in countries where the group’s shops have reopened could not make up for the lack of international travel, which fueled sales of luxury goods in the era before the pandemic. The conclusion is the luxury rebound is still some time away.
“There will be a recovery for the luxury market but the industry will be profoundly transformed,” Claudia D’Arpizio, a Bain & Company partner said a report published in May. “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.”
Bain predicted the slowdown in luxury sales could accelerate in the second quarter and lead to an estimated contraction of between 20 percent to 35 percent for the full year.
Bain further anticipates that a 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 euros 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 Federica Levato, a Milan-based management consultant at Bain & Company.
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.
Image via Trendstop; article source: Bain & Company