The global luxury market will fall by between 35% and 45% this year as a result of the uncertainty arising from the Covid-19 crisis, and recovery will be gradual, reaching last year’s level by 2022 or 2023, depending on the category. This is the conclusion of the study ‘True-Luxury Global Consumer Insight 2020’, conducted by Boston Consulting Group and Altagamma in January and since June, given the situation recorded with the Covid-19 pandemic, since pre-Covid estimates for the luxury market had a positive trajectory, although the crisis has slowed a decade of growth in all luxury categories. In particular, the report notes that the global luxury market had been on a positive trend prior to Covid-19, with the personal luxury market reaching an annual growth of 3.2% for the period 2020-2022, while the experience luxury market was even higher at 5.8%.
However, after the pandemic even the most optimistic forecasts show a fall of between 35% and 45% this year for the global luxury market. In particular, sales of luxury personal goods are expected to fall by 25-45% in 2020, while estimates for experimental luxury are even more negative, falling by 40-60%.
Against this backdrop, the study notes that in the best case scenario, where a vaccine is available or the economic ramifications of the pandemic are not too severe, people will resume shopping and traveling and give a boost to sales of luxury goods.
Uncertainty is the culprit
In the worst case scenario, in the event of a vaccine taking longer to develop or the recession is more severe, he notes that companies will struggle to regain momentum and people’s ability and willingness to buy luxury goods will be affected. Taking these factors into account, the report predicts that the industry’s recovery will be gradual, reaching the 2019 level only in 2022-2023, depending on categories.
It also notes that even true luxury consumers felt the impact of the crisis on their finances and spending behaviour. In fact, 57% of consumers say that economic uncertainty is preventing them from making the purchases and investments they had planned before, and 43% believe that the recovery from the crisis will not be quick. Only Chinese citizens are more optimistic about the recovery, with 77% agreeing that the recovery will be quick, although the report recalls that the Asian country is now well ahead of the virus cycle, unlike most other countries.
Clothing and cosmetics in two years
Most True-Luxury consumers are cutting back on luxury spending at least in the short term, with some categories suffering more than others, according to the study, which notes that casual wear and cosmetics are expected to rebound in two years, while other categories will suffer from the impact of Covid-19 even in the long term.
For their part, within the experimental luxury mode, consumers are more reluctant to go to hotels, cruises and resorts.
The seventh edition of this study has also focused on the trends that are shaping the new reality of luxury and have been accelerated by recent circumstances, such as experiential tourism characterized by being more isolated and short distance or the increase of second hand and rental, among others.