Image credit: Bain & Co.
After Q2, the worst quarter ever for luxury market, and good signs of recovery in Q3, uncertainty is still the keyword for holiday season, say Claudia d'Aprizio and Federica Levato, the authors of the latest update on the global luxury market from Bain and Co.
According to the report update released on November 18,2020, market performance in Q4 is expected at different pace, with China steaming on at full speed, Asia staying in recovery mode, Americas looking sluggish (though on the right track), while Europe is still struggling hit by the COVID-19 pandemic. The forecaster’s outlook for the last quarter fluctuates between a drop in market growth of -5% to -20% versus 2019. Bain’s estimate of full luxury market growth in 2020 is -23% (most likely case) versus last year.
However, Bain says 2021 will be the year of (partial) recovery in the luxury market, which is estimated to regain about 87-98% of what it was in 2019 based on a step-by-step progress. Recovery of the market to the pre-Covid-19 levels will likely happen between 2022 and 2023, depending on real economy trends and consumer confidence in response to the sanitary crisis, recession, sociopolitical turmoil, as well as on tourism flows, the company analysts believe.
“Even though times are troubled, the luxury market will flourish again as companies take a front seat in transforming the industry on behalf of the customer,” the report says, adding that Covid-19, despite hitting the brakes on the market, has fast-forwarded important dynamics which are reshaping this industry.
The luxury market, traditionally tourist-driven, will consolidate its local nature globally in the coming years, according to Bain. The Covid-19 crisis has forced luxury spending to shift from “when travelling” to “at home,” the report notes and says that “by 2025, despite a progressive recovery in tourism, domestic purchases will gain higher relevance vs. precrisis levels.” Repatriation of spending will occur primarily in Asia (China first) vs. more mature countries, increasingly moving the barycenter of the luxury market from West to East, the Bain analysts believe.
