According to a report by consultancy firm Bain, the global luxury industry is expected to surpass pre-Covid levels this year. This recovery is primarily being fueled by domestic spending in the United States and China, particularly in the high-end shoe, leather goods, and jewelry sectors.
Bain estimates that global sales of personal luxury goods will reach 283 billion euros ($327 billion) in 2021, representing a 4% increase from 2019 at consistent exchange rates. The United States, now the largest luxury market, has benefited from early vaccination campaigns and a rapid rebound in local consumption.
China, often referred to as the growth engine of the luxury industry, has also played a significant role in its recovery. Despite some lockdowns, Chinese consumers have demonstrated strong demand for luxury goods. With travel restrictions in place, the Chinese market has seen an increase in purchases made domestically.
In contrast, European luxury businesses have yet to fully recover to pre-Covid levels and may not do so until 2024. While there has been some increase in tourist activity over the summer, it has not been sufficient to bring sales back to pre-pandemic levels.
However, major industry players such as LVMH, Hermes, and Kering have already experienced a strong recovery since the health crisis. As lockdown measures ease and social activities resume, these companies are witnessing their businesses surpassing 2019 levels.
The luxury sector faced a significant decline in sales in 2020, experiencing a 23% drop, the largest decline and first decrease since 2009. While international travel-related sales are still lagging, brands have successfully redirected their focus towards domestic consumers. This has involved targeting not only top luxury markets but also second and third-tier cities, attracting a new customer base. According to Bain’s estimates, a quarter of global luxury sales this year were made with new consumers.
Federica Levato, a partner at Bain and co-author of the study, pointed out that effective marketing and online campaigns have been instrumental in attracting new customers, while existing customers have also increased their purchases.
Furthermore, it is predicted that shoppers under the age of 40 will account for more than 60% of luxury purchases this year, with this percentage projected to exceed 70% by 2025. This indicates a demographic shift in the luxury market, which brands will need to adapt to in order to sustain their growth.
In conclusion, the luxury goods sector is on course for a strong recovery in 2021, driven by domestic spending in the United States and China. While Europe faces some challenges, major industry players have already surpassed pre-Covid levels. The sector’s ability to adapt to changing consumer behaviors and attract new customers will be crucial for its sustained growth in the coming years.
Useful Links:
1. The State of Fashion 2021 Report by Business of Fashion and McKinsey & Company
2. What Does the Post-Covid Luxury Consumer Look Like? (Vogue Business)
