The global luxury market, whose annual growth was forecast at around 3.2% for the period 2020-2022, has been brutally slowed by the coronavirus pandemic. Today the most optimistic forecasts predict a 35-45% drop in sales by 2020 and an even steeper decline (40-60%) in experience-based luxury (hotels, travel, cruises) . These are the estimates published by the Boston Consulting Group (BCG) during a video conference on consumers and retail in the high-end segment, organized by the Italian association of luxury companies Altagamma.
According to the 7th edition of the “True-Luxury Global Consumer Insight” observatory, the luxury industry will gradually recoup its losses with a return to 2019 values from 2022-23. This research, carried out by the BCG in collaboration with Altagamma, focuses in particular on the tip of the iceberg, that is, on large consumers who spend around € 39,000 a year on luxury goods, which have also been impacted by the Covid-19 crisis. Nearly 57% say economic uncertainty prevents them from making previously planned purchases or investments. For 43%, recovery will not be quick. Only the Chinese are more optimistic, with 77% betting on a quick recovery. Opinions vary by product category. Thus, for casual clothing and cosmetics, the impact will be more moderate with a return to normal in two years. On the other hand, recovery will take longer for categories like watches, jewelry, and leather goods.
Among the new major market trends observed by the 12,000 consumers questioned for this study, some relate to the current end of the crisis and others are expected to establish themselves on a lasting basis.
Logically, experience-based luxury and tourism are suffering the full impact of the health crisis. No more cruises and no lively nightlife! Large consumers prefer to travel less and stay at home with an emphasis on high technology and good wines or private and exclusive encounters (yachts). Italy, which was the favorite destination for Chinese and Koreans, is now in third place behind France and Japan. Also due to the current decline in travel, the Chinese consume more and more in their domestic market and no longer worldwide. Finally, the third short-term trend refers to the decrease in purchases of Millennials and Generation Z, which were the most financially affected by the crisis. By 2025, these will represent 55% of total luxury sales. As a result, marketing actions towards this segment remain essential for brands. Almost 60% of younger customers say they have been influenced in their purchase decision during the closure by advertising seen on social networks, while this was the case for only 25% of older consumers. Among the trends expected to continue, the study authors note a significant polarization between the West and China. Most Europeans and Americans plan to move towards discreet and timeless brands, while the Chinese are drawn to more eye-catching brands. Whatever the strategy adopted by the firms, it is essential that they remain true to their identity and tradition, the research said.
The second trend is the trend towards increasing sustainable development. “Consumers will be increasingly selective, favoring 360-degree sustainability. “Brands will not only have to show processes that respect the environment, but also adopt a responsible approach in the social and diversity sphere,” stresses Filippo Bianchi, one from the study authors.
The third trend is the digital personalization of the service that is offered when buying online through “clienteling 2.0”. Accustomed to being pampered in stores, the “real luxury” consumer wants to be treated just as well in virtual mode.
In this context, a lot of effort needs to be put into data, artificial intelligence and advanced analytics. Continuing this trend is the fourth challenge, “a new shopping equation, between online acceleration and in-store experience.” The closure has passed and more and more consumers are considering buying luxury goods on the web, while e-commerce sales will double. Therefore, firms will have to create an online connection that is perceived as exclusive and that goes beyond what retailers can offer.
Finally, the fifth and last phenomenon that is being affirmed is the boom in second-hand and rental items, an activity that will eventually be assumed by the brands themselves.Furthermore, 70% of the people interviewed in the study say they want to buy second-hand products directly from the firms. In this post-Covid-19 era, consumers of high-end products seem to have become more reasonable rather than ultra-specific. As the study points out: “In this new reality, they will buy less, more locally, and more selectively.” “It is no longer about how to sell this or that luxury product, but above all what sense to give to this purchase, which must become a necessary superfluous”, summarized Sabina Belli, general director of Pomellato jewelry, in her speech at The conference.
Source: Fashion Network