The luxury goods industry is poised to recover over the next three years after a heavy blow from the Covid-19 crisis, according to consultancy firm Bain & Company.
Lockdowns and travel restrictions essentially changed the way luxury goods are sold and purchased, paving the way for a fundamental shift in the luxury sector, revealed the 19th edition of the Bain & Company Luxury Study.
“The turmoil of Covid-19 has been the catalyst for change for the luxury industry, which is on a path to recovery by 2022 to 2023,” the study said. “Consumer demand for action with purpose and social impact is growing and luxury brands are expected to demonstrate real and sustained commitment to diversity, inclusion and sustainability.
The core personal luxury goods market shrank by 23 per cent – a first since 2009 – and is the steepest ever recorded since Bain started tracking the industry.
In the jewellery sector, demand was steady in Asia while online sales soared, with high jewellery and iconic entry-priced items leading the recovery.
Uncertainty will continue to hound the luxury market for some months, but recovery is in sight. There will be an accelerated shift to local purchasing, driven by China, which is among the first to regain momentum.
Bain & Co likewise said the online platform will play an even bigger role in the luxury business post-pandemic. “Online is set to become the leading channel for luxury purchases by 2025, fuelling the omnichannel transformation,” it stated.
It however expects no growth in the number of brick-and-mortar stores operated directly by brands in 2020 and possible decline in store networks in 2021. As such, brands will need to adapt and adjust their footprints to the new normal, evolve the store role and its ergonomics, and maximise the customer experience.
In addition to sustainability and environmental issues, diversity and inclusion have come to the fore in 2020, Bain added.
“Luxury brands have faced a year of tremendous shifts, but we believe that the industry will come out of the crisis with more purpose and more dynamism than ever before,” said Federica Levato, a Bain & Company partner and co-author of the study. “By 2030, this industry will be drastically transformed. We will not talk about luxury industry anymore, but of the market for insurgent cultural and creative excellence. In this new enlarged space, the winning brands will be those that build on their existing excellence while reimagining the future with an insurgent mindset. Luxury players will need to think boldly to rewrite the rules of the game.”