The Global Luxury market for personal goods and accessories has reached Eur 281 billions in 2019 and was expected to growth 4% in 2020 reaching approximately Eur 320 billions. The 2019 Eur 1.3 billion Global Luxury Market was however severely impacted by the Covid-19 pandemic and should end 2020 with a 20-35% contraction according to the Bain & Company report.
The pandemic in addition to other social, economic and political upheavels, varying from country to country, have generally inhibited the growth of the sector. On top of that, a dramatic change in consumer’s shopping behaviour thought the digital acceleration has forced many companies to restructure their operations in a short period of time, which has not always happened as expected.
Luxury consumers are far more digitally mature than many luxury brands and nowadays 72% of the highest- spending luxury buyers use social media to interact with their favourite Luxury brands.
60% to 70% of the global luxury sales are digitally influenced, according to a study presented by the research company Forrester.
Confinement, discovery of the new local luxury brands and an increase in the ecologic consciousness of the consumers also led to a reconsideration of the discretionary income spending since the beginning of the pandemic.
But not everything is negative and some disruptive brands quickly understood the need of building business models for customers living in a digitalized, connected and omnichannel world. By returning to the basic pillars that support the Luxury market, such as, Creativity, Innovation and Total Quality, some luxury brands were able to capitalized on fidelity, new clients acquisition and online new sales.
Clear examples are respectively Gucci, Louis Vuitton, Hermès and Giorgio Armani.
According to the Bain & Company report however, a recovery to the 2019 results levels won’t happen until 2022 or 2023.
China will play an important role in this recovery once local company were able to quickly adapt to the new digital environment. Some of them have long been operating and selling through e-commerce and mobile devices. Chinese consumer are tech savy and delivery systems in the territory have proven to be extremely efficient.
Chinese consumers are expected to represent by 2025, 50% of the total consumption of personal luxury goods and accessories.
45% of luxury firms are expanding, upgrading or making new investments in devices specifically designed to help store associates better deliver personalized and contextual experiences to customers in stores.
To win these new consumers, luxury brands will need to learn on adequately interpret the spirit of the moment, focusing on the most important values appreciated by consumers nowadays, such as, originality, creativity, desirability, sustentability and most important, a clear purpose for the brand.
A return to the traditional DNA of the brand through a convincing storytelling, enhanced by technological features will be decisive to attract customer’s attention and interest.
Therefore, the strategic responses of the main players of the sector like the LVMH Group, Kering, Richemond, Estée Lauder and others will determine the path and speed of the expected recovery.
Source: Bain & Company
