- The luxury goods sector is set to move past the coronavirus crisis this year, fuelled by domestic spending in the United States and China, particularly on high-end shoes, leather goods and jewellery, consultancy Bain.
- Demand in China, the growth engine of the luxury industry, remained strong through October despite lockdowns in some areas, as the Chinese — unable to travel abroad — made purchases in their home market.
- A quarter of global sales this year were made with new consumers, according to Bain estimates.
Domestic spending in the United States and China, particularly on high-end shoes, leather products, and jewellery, is expected to propel the luxury goods market past the coronavirus problem this year, according to consultancy Bain as reported by Reuters.
Global sales of personal luxury items are expected to reach 283 billion euros ($327 billion) this year, up 4% at constant currency rates from the year before the epidemic, according to Bain.
Early immunisation efforts and a swift comeback in local consumption helped businesses in the United States, which this year overtook Europe as the largest market. Despite lockdowns in some places, demand in China, the luxury industry’s growth engine, remained strong through October, as Chinese citizens unable to go abroad made purchases in their own country.
Despite an increase in tourist activity during the summer, the luxury industry has yet to return to pre-COVID levels in Europe, and it may take until 2024 to do so, according to Bain, whose forecasts are highly watched by the luxury industry.
As lockdowns relax and socialising resumes, the industry’s largest companies, including LVMH (LVMH.PA), Hermes (HRMS.PA), and Kering (PRTP.PA), have already recovered significantly from the health crisis, pushing well over 2019 levels of business.
Overall sales for the sector plummeted by 23% in 2020 as a result of the pandemic, the highest reduction ever and the first since 2009.
Although overseas travel-related sales have not recovered, firms have gained new business by focusing on domestic consumers, not only in top luxury destinations but also in second and third-tier cities. According to Bain estimates, new consumers accounted for a quarter of worldwide sales this year.
“Strong marketing and internet campaigns are attracting new customers while existing customers are buying more,” said Bain partner Federica Levato, who co-authored the study.
This year, shoppers under the age of 40 are predicted to account for more than 60% of luxury purchases, rising to more than 70% by 2025.
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