The “Bain & Company Luxury Study 2021 Spring Update” was released on May 17 in collaboration with Fondazione Altagamma, the Italian luxury goods manufacturers’ industry foundation.
According to the report, while China is driving the recovery thanks to continuous repatriation and acceleration of domestic spending on luxury, the U.S. market has been the unexpected bright spot. Renewed consumer confidence coupled with stimulus and a rapid vaccine rollout has meant that luxury consumption returned at surprisingly fast pace. Europe still lags behind, hampered by a slower vaccination campaign and the lack of international tourism.
“It’s clear that consumers still want to buy luxury goods, and this, along with the brands’ ability to adapt and innovate, is driving a return to growth in the market,” said Claudia D’Arpizio, a Bain & Company partner and lead author of the study.
TWO RECOVERY SCENARIOS OFFERED
But, states, the report, the outlook for 2021 still remains uncertain. The market is expected to reach between €250 and €295 billion, depending on which of two scenarios plays out over the course of the year.
Scenario 1, the probability of which Bain places at 30 percent, predicts that the recovery path will continue throughout 2021, winning back 2019 market levels as early as this year. In this outcome, the market could reach a height of €280 billion to €295 billion this year.
Scenario 2, which Bain says has a probability of 70 percent, suggest that despite the strong momentum of the first quarter, full year growth will stifled by slower domestic luxury purchases and limited intra-regional tourism.
In the case of the second scenario, the full recovery to 2019 levels would be expected only in 2022 and the market would reach €250 billion to €265 billion by the end of 2021.
More than 85 percent of luxury purchases were digitally influenced in 2021, the Bain report stated.
Bain estimates the secondhand market for luxury to have been worth €28 billion in 2020, up from €26 billion in 2019.
DIGITAL TRANSFORMATION AND SECONDHAND GOODS
As the luxury industry navigated through the crisis, some trends have solidified, the report states. The appetite of China and Chinese nationals for luxury remains insatiable and all customer nationalities are positively growing or on a recovery path. But the rebound in the United States has exceeded expectations, with improved macroeconomic conditions, a buoyant stock market, increasing consumer confidence and a fast vaccine rollout contributing factors to the strong recovery.
Bain has seen a change in the United States’ market map with new city hubs and a growing emphasis on suburban areas, as well as the rise of subcultural relevance and next-generation mindset.
The pandemic catapulted luxury brands into the age of digital at an unforeseen pace. Bain estimates that more than 85 percent of luxury purchases were digitally influenced in 2021.
But the human touch in luxury remains needed and whether in-store or remotely, these interactions will play a critical part in maintaining customer loyalty.
Bain estimates the secondhand market for luxury to have been worth €28 billion in 2020, up from €26 billion in 2019. The market for pre-worn luxury items encompasses not only entry level younger consumers who are mainly buying aspirational categories and products but also top spenders and collectors who are searching for high-end or collectable products. Brands are increasingly tapping into this market and becoming platforms in order to engage with them throughout the lifecycle of an item.
“Brands have been forced to rip up the playbook and innovate rapidly in light of the crisis,” said Bain & Company partner and report co-author Federica Levato. “As life hopefully begins to return to normal, customers are expecting a tech-enabled human relationship with brands. Winners will need to stay closely in touch with the key trends shaping the new normal lifestyle – all while remaining differentiated and creating a narrative that is true to their own culture.”
Alrosa has also increased the amount of recycled water in their technological processes by 41 percent in the last three years, and in Zimbabwe RZM Murowa has constructed and rehabilitated boreholes and provided water to schools, clinics and other amenities. Under the community micro-irrigation program, RZM Murowa has also been able to create additional water sources with systems designed to minimize water waste.