Recovery In The Global Luxury Goods Market 2021

After a turbulent year, the luxury market has started its road to recovery. The industry grew again in the first quarter of 2021, with an increase of between 0 and 1 percent compared to 2019, considered by the industry as the last comparable year.

China has continued to drive this growth, while the United States has unexpectedly recovered. The acceleration of this key region is one of the new trends that should be highlighted, as is the importance of the human touch along with digital interactions and the growing presence of second-hand brands in the market.

The outlook for 2021 remains uncertain. The market is expected to reach between 250 and 295,000 million euros, depending on which of the two scenarios described in the report unfolds throughout this year.

These are the main conclusions of Bain & Company, the world’s leading strategic consultancy advising the global luxury goods industry, in its latest report: “Luxury Study 2021 Spring Update” published today in collaboration with Fondazione Altagamma, the foundation of the Italian luxury goods manufacturers industry.

“It is clear that consumers still want to buy luxury goods and this, together with the ability of brands to adapt and innovate, is driving a return to growth in the market,” said Claudia D’Arpizio, partner at Bain & Company and main author of the study.

A good start to the year driven by China and the US.
Compared to the first quarter of 2019, the personal luxury goods market grew between 0 and 1 percent at current exchange rates (2-3 percent at constant exchange rates) in the first quarter of 2021.

China is driving the recovery due to the continued repatriation and acceleration of domestic spending in the luxury sector and the improvement of the US market has been the unexpected good news. The renewed consumer confidence, along with the stimuli

economic and rapid development in the vaccination process has meant that luxury consumption has returned at a surprisingly rapid rate. Europe continues to lag behind, hampered by a slower vaccination campaign and a lack of international tourism.

“In Spain the sector has been strongly impacted by the pandemic and the reduction in tourism, and, as in Europe, the prospect of recovery is slower. The trends of digitization and sustainability have also gained importance in our country, where we see companies in the sector investing and putting much more focus on developing these capacities “, comments Cira Cuberes, partner of the practice in the Madrid office.

Two possible scenarios for the market rebound in 2021
Despite signs of green shoots in the market, a high degree of uncertainty persists. There are two possible trajectories for recovery in 2021:

Scenario 1 (30% probability): the recovery path will continue throughout 2021, reaching the market level of 2019 already this year. In this result, the sector could reach 280-295,000 million euros in 2021.

Scenario 2 (70% probability): Despite strong momentum in the first quarter, full-year growth is stifled by the slowdown in domestic luxury purchases and limited intra-regional tourism. In this case, full recovery to 2019 levels would only be expected in 2022 and the market would reach between € 250-265 billion this year.

Three trends to watch out for
As the luxury industry wears through the crisis, some trends have taken hold: the appetite of China and its citizens for luxury remains insatiable; luxury customers of all nationalities are growing or on the road to recovery; The growth of the online channel remains strong, as new customers buy luxury goods in this way for the first time and the price range is expanded, with more basic products but also more high-end items.

Upcoming trends to watch out for
The 2020s could reshape the US luxury market: The rebound in this country has exceeded expectations. Improving macroeconomic conditions, a dynamic stock market, increased consumer confidence, and rapid development in the vaccination process are contributing factors to a strong recovery. Bain & Company has seen a change in the market map, with new urban centers emerging and an increasing emphasis on suburban areas, as well as the rise of subcultural relevance and the mindset of the next generation.

The human touch is still important: The pandemic catapulted luxury brands into the digital age at an unforeseen rate. Bain & Company estimates that more than 85 percent of

luxury purchases have been generated, albeit indirectly, by digital channels in 2021. But the human touch in the luxury sector is still needed and, whether in-store or remotely, these interactions will play a critical role in maintaining customer loyalty.

The second-hand market affects multiple consumer segments: Bain & Company estimates that the second-hand luxury market will be worth € 28 billion in 2020 (up from € 26 billion in 2019). The used luxury goods market encompasses not only younger consumers who primarily shop for aspirational categories and products, but also higher spenders and collectors looking for high-end products or collectibles. Brands are increasingly taking advantage of this market and becoming platforms for interacting with customers throughout the life cycle of an item.

“Brands have been forced to break the strategy manual and innovate quickly due to the crisis,” added Bain & Company partner Cira Cuberes. “As life begins to return to normal, customers expect a human relationship with brands through technology. Leading companies will need to stay in direct contact with the key trends shaping the new normal lifestyle, by at the same time that they remain differentiated and create a narrative faithful to their own culture. “

Leave a Reply

Your email address will not be published. Required fields are marked *