Is the luxury industry entering a new normal?

The latest research report by Bain & Company and the Italian luxury goods industry association Fondazione Altagamma shows that the luxury goods industry will resume growth in the first quarter of 2021. Will this trend continue throughout the year? Or, according to Bain & Company, a full recovery in 2022 is more likely.

The luxury goods industry is recovering, and the latest Swiss watch export data confirms this trend. As far as the export price is higher than 3,000 Swiss francs, the export volume has returned to the April 2019 benchmark. Bain & Company and the Italian luxury goods industry association Fondazione Altagamma recently released the “Spring 2021 Luxury Industry Research Report” that came to the same conclusion: “After a turbulent year, the luxury goods market has begun to recover. In 2021 The industry resumed growth in the first quarter, increasing by 0-1% compared to the same period in 2019.” Bain & Company partner and first author of the research report Claudia D’Arpizio said, “It is clear that consumers still want to buy luxury goods. And this, together with the brand’s ability to adapt and innovate, is driving the market to resume growth.”

The report described the behind-the-scenes reasons for the good performance in the first quarter: “Mainland China is driving industry recovery under the support of continued return and acceleration of domestic luxury goods consumption. The US market has become an unexpected bright spot, coupled with the revival of consumer confidence Fiscal stimulus measures and rapid vaccination have prompted luxury consumption to recover at an alarming rate. Trapped by slow vaccination and sluggish international tourism, Europe’s progress is lagging far behind.” Bain & Company is still facing uncertainty for luxury goods. The industry outlines two possible prospects. The first is that the recovery trend will run through 2021, and it will be able to return to the level of 2019 at the earliest. Based on this calculation, the market size may reach 280 to 295 billion euros in 2021. Second, despite the strong momentum in the first quarter, domestic consumption of luxury goods slowed down, regional tourism was limited, and annual growth would also be suppressed. In this case, it is expected to wait until 2022 to return to the level of 2019. Based on this calculation, the market size in 2021 may reach 2,500 to 265 billion euros. Bain & Company believes that the second possibility is more likely, with a probability as high as 70%, while the first probability is only 30%.

Positive posture

As the luxury goods industry gradually emerges from the crisis, some of the main trends observed during the global pandemic have been confirmed. First, the demand for luxury goods in Mainland China seems to be endless; second, online retail has exploded, and there is no sign of abating, many new customers experience online luxury purchases for the first time; third, the price is polarized, entry-level and high-end products The proportion of is getting bigger and bigger.

Bain & Company pointed out three major trends that need attention in the coming months. First, the “Roaring 20s” generation is helping to reshape the luxury goods market in the United States. Second, despite the accelerated development of digitalization, the contact between people has not been cut off, and this interaction continues to play an important role in cultivating customer loyalty. Finally, the second-hand luxury goods market continues to grow. Bain & Company predicts that the value of the second-hand luxury goods market will reach 28 billion euros in 2020 (up from 26 billion euros in 2019), and cover multiple consumer groups, from “entry-level young consumers who mainly buy the products they dream of”, To “customers and collectors who are looking for high-end or collectible products”. Brands have increasingly penetrated into the second-hand market and built exclusive platforms to maintain interaction with customers throughout the product cycle. “

There are still uncertainties in the environment, but the growth potential is considerable. Does this mean that the luxury goods industry has entered the “new normal”? One thing is certain: luxury brands must contact their target customers, understand their expectations and desires, overcome obstacles, and at the same time cannot ignore their own culture.

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