Luxury industry to contract 20-35% in 2020

Sat, May 09, 2020

Vivienne Tay


THE global luxury industry is set to contract between 20 per cent and 35 per cent in 2020 amid the virus pandemic.

The market for personal luxury goods has also declined by 25 per cent in the first quarter of 2020, according to estimates in a Bain & Company report released on Friday in collaboration with Fondazione Altagamma, an Italian luxury goods manufacturers' industry foundation.

There was a strong start to the year for the industry in all key regions - mainland China, Europe, America - which was quickly offset by virus-related lockdowns and the collapse of tourism amplifying the decline in Europe.

Luxury sales in Japan and the rest of Asia also fell but at a slightly slower pace.

All categories have seen declines, with accessories being the most resilient. Watches fell the most due to a lack of online sales platforms to offset shutdowns of physical channels.

A recovery to 2019 levels is not expected to occur until 2022 or 2023, where market growth will resume gradually to reach an estimated 320 billion to 330 billion euros (S$490.03 billion to S$505.34 billion) by 2025.

That being said, China has started to lead the way for recovery, with Chinese consumers on track to cementing their status as crucial drivers of the industry.

Luxury purchases made online have increased throughout the Covid-19 outbreak period. The online channel could represent up to 30 per cent of the market by 2025.

"As consumers slowly emerge from lockdowns, the way they see the world will have changed and luxury brands will need to adapt," said Paolo Misurale, Bain & Company partner and leader of the firm's Asia-Pacific consumer products practice.