While the coronavirus pandemic has hit every sector hard, luxury is facing extreme challenges as many cash-strapped consumers demand more casual, value-priced products.
A new report from Bain & Co estimated that luxury sales fell by about 25% in the first quarter, and the slowdown will likely accelerate in the second quarter. Overall, Bain predicts that luxury sales could decline between 20% and 35% for the full year.
There are some glimmers of hope, however. China has begun its recovery — and the massive market is solidifying its position as the main driver of luxury. Bain forecasts that China will account for almost 50% of the market by 2025.
One important factor is the lack of tourism and travel activity across the world. That means that more Chinese shoppers will buy luxury goods within their home market, rather than traveling abroad.
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And with fewer events and experiences — at least in the near-term — high-end shoppers could redirect some spending to luxury goods.
Already, there are some notable examples. Last month, Hermès reportedly brought in $2.7 million in one Saturday at its Guangzhou flagship.
Like other sectors, the high-end market is also seeing increased activity online, and Bain reports that accessories have been particularly resilient in the crisis. While luxury as a whole has been slower to embrace digital, the online channel could represent up to 30% of total sales by 2025, Bain said.
Still, there are big challenges ahead. Today, Neiman Marcus officially declared bankruptcy and other retailers, including Nordstrom, are undergoing significant restructuring.
The findings were released today in collaboration with Fondazione Altagamma, the Italian luxury goods manufacturers’ industry foundation.