The global luxury market has started its path towards recovery, growing by 0-1% in the first quarter of 2021 versus 2019, which is viewed by the industry as the last comparable year, according to Bain & Company, a global consultancy.
While China is driving the recovery thanks to continuous repatriation and acceleration of domestic spending on luxury, the US market has been the unexpected bright spot, stated Bain’s Luxury Study 2021 Spring Update released in collaboration with Fondazione Altagamma, the Italian luxury goods manufacturers’ industry foundation.
In the US, renewed consumer confidence coupled with stimulus and a rapid vaccine rollout has meant that luxury consumption returned at a surprisingly fast pace. Europe still lags behind, hampered by a slower vaccination campaign and the lack of international tourism, the report noted.
Bain cautioned that the outlook for 2021 still remains uncertain. The market is expected to reach between €250-€295 billion, depending on which one of two scenarios outlined in the report plays out over the course of the year.
“It’s clear that consumers still want to buy luxury goods, and this, along with the brands’ ability to adapt and innovate, is driving a return to growth in the market,” said Claudia D’Arpizio, a Bain & Company Partner and Lead Author of the study.
Despite signs of green shoots in the market, a high degree of uncertainty remains. There are two possible trajectories for the recovery in 2021:
Scenario 1 (probability 30%): Recovery path to continue throughout 2021, winning back 2019 market level as early as this year. In this outcome, the market could reach €280-295 billion this year.
Scenario 2 (probability 70%): Despite the strong momentum of the first quarter, full year growth is stifled by slower domestic luxury purchases and limited intra-regional tourism. In this case, the full recovery to 2019 levels would be expected only in 2022 and the market would reach €250-265 billion this year.
Bain estimates that more than 85% of luxury purchases were digitally influenced in 2021. But the human touch in luxury remains needed and whether in-store or remotely, these interactions will play a critical part in maintaining customer loyalty.
The secondhand market touches multiple consumer segments: Bain estimates the secondhand market for luxury to be worth €28 billion euros in 2020 (up from €26 billion in 2019). The market for pre-worn luxury items encompasses not only entry level younger consumers who are mainly buying aspirational categories and products but also top spenders and collectors who are searching for high-end or collectable products. Brands are increasingly tapping into this market and becoming platforms in order to engage with them throughout the lifecycle of an item.