Global sales of personal luxury goods are estimated to fall by 23 percent this year to €217 billion, with constant currency sales down by 22 percent. It will be the first drop since the financial meltdown of 2009, according to the Altagamma-Bain Worldwide Luxury Market Monitor 2020.
The survey forecasts that the market will decrease by 10 percent in the fourth quarter of 2020. But, annual sales are due to rebound to €240-260 billion in 2021, €260-290 billion in 2022 and €280-320 billion in 2023. This compares with an estimate of €281 billion for 2019.
It anticipates that global Ebit for the industry will fall to €40-45 billion this year from €100 billion in 2019, before rebounding to €70-75 billion in 2021.
The consultancy Bain & Company expects an strong jump in the market share of Chinese consumers, which are expected to represent 46-48 percent of consumption in 2025, when the overall sales for the industry are calculated at €330-370 billion, compared with a third in 2019. A large of portion of Chinese purchases will be achieved abroad, but domestic Chinese purchases will nevertheless jump to represent 26-28 percent of total global sales from 11 percent in 2019.
The consultancy group foresees further significant growth for e-commerce and a huge generational shift in the medium term. It estimates that digital sales will swell from €33 billion in 2019 to €49 billion in 2020 and €105-115 billion in 2025. The market share of e-commerce will grow from 12 percent in 2019 to 23 percent this year and more than 30 percent in 2025. Mono-brand stores will show resilience, moving from 31 percent of global sales in 2019 to 27-28 percent in 2025, while outlets could increase slightly to 13-15 percent from 13 percent.
In the meantime, Gen Y clients are expected to represent 45-50 percent of purchases in 2025 against 36 percent in 2019 and Gen Z customers more than 20 percent compared with 8 percent over the same period.
Federica Levato, a Bain partner and co-author of the survey, anticipates thorough changes for the luxury industry in the coming decade. “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.”
Separately, Altagamma, which represents 109 Italian luxury brands, issued a forecast for 2021 using the input of 27 international analysts.
The consensus is for a 14 percent rise in revenues for the global personal luxury goods market. But analysts expect operating margins to recover much faster in the year to come, returning close to last year’s levels, as firms have adopted cost-containment measures and as e-commerce sales make up a larger part of overall turnover. The consensus is for a 23 percent rise in Ebitda.
The survey forecast a 15 percent increase in sales of personal luxury goods in the brick-and-mortar stores, a 20 percent rise in digital retail, an 8 percent growth in physical wholesale and an 18 percent growth in digital wholesale.
By region, Europe is expected to rise by 12 percent, as it continues to suffer from a decline in tourists who are responsible for about half the purchases of luxury goods. Meanwhile, Asia, excluding Japan, is anticipated to enjoy a 17 percent growth, driven by China. Sales of luxury goods are predicted to rise by 11 percent in Japan, by 14 percent in the U.S., by 10 percent in Latin America, by 8 percent in the Middle East and by 10 percent in the rest of the world.
When broken down by nationality, purchases by Chinese are expected to rise by 20 percent, with a partial return to foreign travel. Altagamma foresees an influx of new consumers of luxury goods, with women playing a key part. Spending by Europeans and North Americans are expected to rise by 11 percent and 12 percent respectively.
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