Since the beginning of the pandemic, one-quarter of consumers have delayed purchasing luxury items. By that stage, the industry could have transformed entirely. This assumes a longer period of sales decline.Īlthough there are signs of recovery in China, the industry is not expected to fully return to 2019 levels until 2022 at the earliest. Worst-case scenario: A steep contraction of between 30% and 35%, equating to $92 billion to $108 billion.Intermediate scenario: A moderate market contraction of between 22% and 25%, or $68 to $77 billion.Optimistic scenario: A limited market contraction of 15% to 18%, assuming increased consumer demand for the second and third quarter of the year, roughly equating to a sales decline of $46 billion to $56 billion.They have also modeled three scenarios to predict the performance for the remainder of 2020. In a recent report, Bain & Company estimated a 25% to 30% global luxury market contraction for the first quarter of 2020 based on several economic variables. It should be noted however, that companies who were experiencing distress before the COVID-19 outbreak will be the hardest hit. With iconic luxury retailers such as Neiman Marcus filing for bankruptcy, the pressure on the luxury industry is clear. In fact, more than 80% of fashion and luxury players will experience financial distress as a result of extended store closures. The lethal combination of reduced foot traffic and decreased consumer spending in the first quarter of 2020 has brought the retail industry to its knees. This geographic market accounted for 90% of total sales growth in 2019, followed by the Europe and the Americas.Īnalysts suggest that China’s younger luxury goods consumers in particular have significant spending power, with an average spend of $6,000 (¥41,000) per person in pre-COVID times. Recent years of growth in the personal luxury goods market can be mostly attributed to Chinese consumers.
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The global luxury goods market-which includes beauty, apparel, and accessories-has compounded at a 6% pace since the 1990s. Will the industry bounce back? Or will it return as something noticeably different? A Once Promising Trajectory However, the insatiable desire for consumers to own nice things was suddenly interrupted by the coming of COVID-19, and experts are predicting a brutal contraction of up to one-third of the current luxury good market size this year. Global demand for personal luxury goods has been steadily increasing for decades, resulting in an industry worth $308 billion in 2019. The Rise and Fall of the Global Luxury Goods Market
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