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Global luxury sales could drop 60 percent in the second quarter as the coronavirus pandemic destroyed demand, according to a report by consulting firm Bain & Company, cited by CNBC.
According to the report, global sales of luxury personal items, which include clothing, jewelry, beauty products and accessories, will fall between 50% and 60% in the three months ending June.
The new coronavirus, which appeared in China’s Hubei province in late 2019, has infected 3.8 million people and killed more than 269,500. To control the spread of the disease, governments have practically closed economies and imposed social restraint measures that have kept people in their homes and led to the closing of retail stores. National and international travel has also stopped.
Millions of people have lost their jobs, and the world is in the worst economic crisis since the Great Depression 100 years ago, according to the International Monetary Fund.
Although some of the stricter measures are relaxed in many regions, Bain anticipates that the luxury personal property market will contract 20% -30% year-round. Estimated sales for this year are 180-220 billion euros (195-239 billion dollars).
“There will be a recovery in the luxury market, but the industry will be profoundly transformed,” said Claudia D’Arpizio, a Bain partner and lead author of the report.
The report, carried out in collaboration with the Altagamma Foundation for Luxury Goods Manufacturers, does not consider the impact of a second wave of infections, or the development and marketing of a vaccine.
Consulting firm McKinsey & Company released a report in April stating that global revenue in the luxury goods market will contract 35-39% in 2020 compared to last year. According to this analysis, if stores are closed for two months, approximately 80% of listed fashion companies in Europe and North America will have financial problems.
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The luxury personal property market registered sales estimated at 281 million euros in 2019, before the outbreak of the epidemic, according to data maintained by Bain, who anticipates that sales will return to this level in 2022-2023, depending on economic trends. , the level of consumer confidence, the flow of tourists and the ability of brands to anticipate and respond to consumer needs.
The recovery in luxury shopping will be driven by Chinese consumers. Most of China has been released from quarantine, and the virus appears to be under control in mainland China.
Due to global travel restrictions, Chinese consumers, who often go abroad to places like Paris, London and New York to buy designer products, are likely to shop in their home country, according to the report.
Major brands are already seeing an increase in annual sales in China, according to Bain.
The luxury personal property market will reach 320-330 billion euros by 2025, in part due to the increase in the number of luxury consumers in China. In five years, China will provide half of its spending on luxury goods globally, compared to 35% in 2019, according to the consulting firm’s report.
“China will continue to support the growth of the luxury goods market and around 50% of those purchases will be made in mainland China. The rest of Asia will continue to follow closely, due to a mix between local consumption and intra-regional tourism,” according to Bain. .
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