According to a forecast by consultancy firm Bain, the luxury goods industry is expected to experience a significant drop in sales worldwide this year. Sales are projected to decline by 23%, reaching 217 billion euros. This decline, attributed to the impact of the coronavirus pandemic, marks the largest ever recorded and the first since 2009. However, it falls within the lower end of the 20% to 35% range that was predicted in May. The limited decline can be attributed to a stronger-than-expected recovery in sales during the summer, as lockdown measures were lifted and luxury stores reopened.

Despite the positive recovery in China, the resurgence of COVID-19 cases in Europe and the United States since October has led to new restrictions and store closures. Additionally, the uncertainty surrounding the U.S. elections has negatively affected consumer sentiment. The only positive aspect in the industry is China, where sales have seen a significant surge since the country emerged from the health crisis earlier this year. Sales in mainland China are estimated to grow by 45%, reaching 44 billion euros in 2020.

Federica Levato, a partner at Bain, points out the contrasting situations in different regions, stating, “We have a two-speed world, with Europe and the U.S. strongly hit by the second wave and by social and political uncertainty, while China is relentlessly accelerating day after day.” As the crucial Christmas season approaches, sales in the fourth quarter are expected to decline by 10%, but the potential for a larger decline exists depending on the impact of new shutdown measures.

Luxury brands like LVMH, Hermes, and Prada are anticipated to see a partial recovery in their revenues in 2021. However, Bain predicts that it will take until the end of 2022 or even 2023 for the industry to fully return to the levels observed in 2019.

The COVID-19 crisis has accelerated several trends in the luxury goods market, according to Bain. Online purchases have nearly doubled from 12% in 2019 to 23% in 2020. As a result, e-commerce is set to become the leading channel for luxury purchases by 2025. The restrictions on international travel have also caused an increase in domestic purchases. Furthermore, the younger generation, specifically those born from 1981 onwards, now account for nearly 60% of total luxury purchases.

In conclusion, the luxury goods industry is facing its largest ever decline in sales due to the ongoing COVID-19 pandemic. While China has shown strong sales recovery, Europe and the United States continue to face challenges with new restrictions and uncertainties. The industry is expected to partially recover in 2021, but a return to pre-pandemic levels is anticipated to take until the end of 2022 or even 2023. The crisis has also accelerated trends such as increased online purchases and a greater focus on domestic shopping.

Useful Links:
1. Bain – COVID-19: The End of Single-Brand Retail Fashion
2. Crisis – The Impact of the Covid-19 Crisis on Luxury Markets and Brands