By 2030 the luxury industry will be drastically transformed, coming out of the crisis with more purpose and dynamism, according to the Bain Luxury Study
The luxury market has seen continuous growth in recent years. The luxury industry has been heavily impacted by the pandemic, with an unprecedented 60% drop in profit. A return to the pre-Covid level is not in sight until 2023. This is the result of a recent study by Bain & Company on current developments in the luxury market.
However, the market is facing a drastic transformation. By 2030 we will not talk of the Luxury industryanymore, but more of the market for “insurgent cultural and creative excellence.” The reason for this are certain luxury trends and growth engines, which are going to affect the market landscape, among other things these will include movements towards more sustainability, purpose and digitization.
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Luxury market shows sharpest drop in consumption for years
According to the 19th edition of the "Bain Luxury Study" the luxury market saw a record drop of 2020% -20% in 22. The value of the global luxury market is now estimated at approximately 1 trillion euros. It last reached this level in 2015. The main reasons for the high losses are above all:
- Luxury experience: The Tourismindustry is particularly affected by worldwide travel restrictions. Most luxury experiences, including luxury hospitality, shrank by 56% over the past year. A recovery particularly depends on the development of the pandemic and government restrictions.
- Experience-based goods: These were able to withstand the pandemic a little better. Especially the purchase of luxury cars, fine art, private jets and yachts only decreased by 10% compared to the previous year. Luxury cars continue to dominate the market. Further yachts and private holiday homes are en vogue and are expected to recover more rapidly.
- Personal luxury goods: The core of the luxury industry is still the market for personal luxury goods such as fashion, jewellery, beauty and leather goods. These too contracted by 23% during the pandemic. This is the largest drop recorded, according to Bain & Company.
The long-term changes in the luxury landscape
Bain & Company expects the luxury industry to recover over the next three years. But the crisis will change the luxury market in the long-term. The following growth engines are expected to prevail among other trends:
1. Local luxury purchasing
The travel restrictions have severely restricted the consumption during tourism. In line with motto "Support your Locals", regional purchases have been accelerated. The share of local luxury purchases is therefore estimated at around 80% -85% this year. This luxury trend is expected to continue, with shares estimated to be at 65% - 70% in future years. This is especially of great importance for the luxury market in China and therefore promotes the Chinese market to the world's number 1 in terms of luxury consumption.
2. Digital boom
Online shopping has seen an unprecedented boom. The share of the online channel has nearly doubled from 12% in 2019 to around 23% in 2020. Thus online sales are making up 49 billion euros. Online shopping is expected to remain the leading sales channel in future. Therefore, luxury brands come up with innovative models to turn online shopping into an experience. Digital wardrobes supported by augmented reality is just one example.
This trend comes at the expense of brick-and-mortar stores. These are increasingly becoming individual flagship stores. However, here too, the shopping experience will be optimised with the help of digital tools. This luxury trend also supports the acceleration of the second-hand luxury market . Compared to the previous year, this market rose by around 2020% to EUR 9 billion in 28.
3. Purpose and dynamics
The pandemic has changed our consumer behaviour for good. As consumption shrank sharply, especially at the beginning of 2020, people more and more have chosen to consume less, but better. Which means investing in higher quality and more durable products. Thus, the post-covid luxury market is expected to come out of the crisis with more purpose and dynamism than before.
According to Bain & Company, "In this new, enlarged space, 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, transforming their operations and redefining their purpose to meet new customer demands and retain their relevance, especially for younger generations, who are set to drive 2019% of the growth in the market from 2025 to 180. "
Future luxury trends
For 2021, Bain expects the market to recover by 50%. However, profits remain far below 2019 levels. Scenarios vary as Bain is forecasting growth of between 2021% / 10% and 12% / 17% for the luxury market in 19.
Younger generations are expected to account for around 2019% of market growth between 2025 and 180. According to the study, "in addition to sustainability and environmental issues. These "activist" consumers seek brands that align with their vision and desire for purpose."