According to consultancy firm Bain, a fall of 23 per cent is set to be recorded in the sales of luxury goods worldwide to 217 billion euros ($258 billion) in the current year which be the largest such fall in sales since 2009 because of the economic impact of the novel coronavirus pandemic.
The consultancy firm had predicted back in May about a fall in the range of 20per cent to 35per cent and compared to that estimate, the latest forecast drop is on the lower end of the range despite a strong sales recovery of sales in China.
This slightly better forecast is based on a netter than expected rebound in sales of luxury goods during the summer as countries across the world lifted or eased lockdown measures and with stores starting to sell high end bags, clothes, jewellery and watches after they reopened.
However, new restrictions and shop closures have been forced because of a resurgence of the pandemic in Europe and the United States since October this year which weighed down on consumer sentiments coupled with the uncertainty over the results of the US presidential elections.
The Chinese market remained the only bright spot in the scenario where there has been a surge in sales since the country started to emerge out of the health crisis back in spring of this year. At current exchange rates, estimates are that there will be a 45 per cent growth in sales in mainland China to 44 billion euros for the complete year.
“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,” Federica Levato, a partner at Bain, said.
It is expected that a drop of 10 per cent will hit the sale of luxury goods in the fourth quarter but the drop could be even bigger if the resurgence of the infections results in prolonged lockdowns and restrictions during the crucial Christmas season, which will hit sales.
According to Bain, there will be a partial recovery in the revenues of the brands such as Louis Vuitton owner LVMH, Hermes and Prada in 2021, even though it predicts that for revenues to return to 2019 levels, it would take until the end of 2022 or even 2023.
Bain said that three trends have been accelerated by the coronavirus crisis as purchasing of luxury products from online platforms expected to almost double to 23 per cent in 2020 compared to just 12 per cent in 2019. Another trend as predicted by Bain is of e-commerce set to become the leading sale channel for luxury purchases by 2025.
Consumers of luxury products have also started to make more purchases of luxury products in their home countries because of international travel restrictions while the third trend is that almost 60per cent of total purchases is accounted for by shoppers born from 1981 onwards.
(Adapted from ChannelNewsAsia.com)