The 20th edition of the “Luxury Goods Worldwide Market Study” conducted by consulting firm Bain & Co in collaboration with Italian luxury goods association Altagamma unveils the most important factors for the future – the Chinese consumers, the online channel and younger generations
In 2021, the personal luxury market is expected to grow 1 percent compared to 2019 and 29 percent compared to 2020. After its darkest moment in history — in the second quarter of 2020, the sector was down 50 percent compared to the same period the previous year — the sector is experiencing a strong rebound, determined also by the shift from experiences to goods, caused by the travel and social restrictions across the globe. And while the experience sector is expected to make a significant comeback, the personal luxury segment is seen continuing to grow, registering in the period 2021-25 annual growth rates of between 6 and 8 percent.
As highlighted by Federica Levato, partner at Bain & Co., where she leads the EMEA fashion luxury goods vertical, the pandemic underscored that the key factors in the sector’s resilience have been the brands’ exposure to China — where in 2021 the demand for luxury goods increased 97 percent compared to 2019; their ability to engage and serve local consumers everywhere; their multifaceted value proposition with an offering covering different price points, as well as the availability of a distribution model based on different touchpoints.
“Brands should think in terms of touchpoint ecosystem, where each channel has a different role in influencing the consumer’s journey,” said Levato, highlighting that online and the mono-brand stores are actually boosting the business of luxury brands. According to the research, in two years the online channel almost doubled in size.
If in 2019 online in the luxury segment accounted for 12 percent of revenues, in 2021, it accounts for 22 percent of the business, totaling 62 billion euros. While the wholesale channel is declining, retail is progressively growing. In 2019, it accounted for 40 percent of the luxury market, but by 2025, it’s expected to account for between 50 and 55 percent.
In this scenario, Levato added that outlets will continue to grow, “especially thanks to the aspirational middle class,” she said, and travel retail, which has been hard hit by the pandemic, will return to 2019 levels by 2025. “In the wholesale arena, we except that the specialty store that will survive will retain a role of opinion leaders dictating fashion trends,” Levato said. “In the department stores’ business, the American ones are going through a reorganization and they are generating strong performances, while the European ones are suffering from the lack of international tourists.”
The research also highlighted the increased importance of the secondhand market in luxury, which is valued at 33 billion euros. “The growth is driven both by an expanding demand from the consumer base, but also by the increased number of operators,” Levato said.
The categories most in demand in the luxury arena are shoes, leather accessories and jewelry are driving the growth, according to the study. In particular, in 2021 sales of luxury shoes, which are valued at 23 billion euros, increased 11 percent compared to 2019; the leather goods category, with total revenues of 62 billion euros, grew 8 percent this year compared to two years ago, and the jewelry sector, with a value of 22 billion euros, posted a 7 percent increase.
In the footwear sector, casual shoes, in particular sneakers and boots, are driving sales, but women’s occasion shoes are accelerating. At the same time, logo leather accessories are making a strong comeback, “seen by consumers less as status symbols, but more as links to the history of a brand that they share common values with.”
In this perspective, the traditional pyramid model is replaced by what the report defines as a “new cycle of desire,” where icons and hero products come before the brands themselves and the logo is not a status symbol to display one’s wealth but is a badge of self expression and values, such as sustainability, diversity and inclusion.
As a result, customer engagement, according to the research, becomes more complicated yet more interesting, making the industry more culture-driven, as Levato highlighted. In this challenging scenario, top brands have a leading role, however there is still room for emerging labels, currently accounting for 2 percent of the global luxury market.
Following the pandemic, the luxury market’s customer base has also evolved. While 25 percent of that is made of totally new consumers, which brands are asked to educate, there is a return of established European and American shoppers. Across the globe, the rebound of the sector was mainly driven by local consumption, with the rise of new emerging cities, suburban areas, as well as new luxury holiday destinations, including Hainan in mainland China.
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