Focus on

the luxury markets


Since the start of the worldwide coronavirus crisis in February, luxury market analysts have been struggling to forecast how the fast moving and often unpredictable pandemic is likely to impact on an industry that was worth more than $300 billion at the end of 2019.

The global personal luxury goods market, which includes beauty, apparel and accessories, including jewelry, has grown at an annually compounded rate of about 6 percent pace since the 1990s, with recent growth mainly attributed to Chinese consumers, who accounted for 90 percent of the rise in total sales, followed by consumers in Europe and the Americas.

But the lockdown that were instituted a result of the COVID-19 pandemic, starting in China and other parts of Southeast Asia, followed by Europe, the Arabian Gulf region, the United States and now Latin  America, led to a dramatic decrease in foot traffic during the first and second quarters, with more than 80 percent of luxury companies reporting a degree of financial stress as a result of the situation.

Even though markets are starting to open, there remain as a great deal of uncertainty about the personal luxury is headed, in part because the trajectory of the pandemic is unknown, raising the possibility that the initial lockdown may be followed by others, and also because the economic fallout is likely to affect decisions made by both the luxury brands and their customers.


In an analysis of how the personal luxury goods market will cope with the COVID-19 crisis released by the Milan-based branch of  Bain & Company, in collaboration with the Italian luxury brand association Altagamma, it was reported that the first quarter of 2020 has already generated 25 percent less value than the first quarter of last year, amounting to a cut of about $22 billion.

“A strong start to the year in all key regions was quickly offset by the imposition of lockdowns and the collapse of tourism, which amplified the decline in Europe. 

Luxury sales in Japan and the rest of Asia also declined, albeit at a slightly slower pace and the consumer mood globally remains subdued,” the report stated.

Bain expected the downward trajectory continue through the second quarter, with a fall in sales of between $39 billion and $50 billion.

The third and fourth quarters of the years are also expected to be slower than 2019, but then there is a modicum of optimism, depending on the economic outlook.

Claudia D’Arpizio (above) and Federica Levato, authors of the Bain & Company/ Altagamma report.

Two possible scenarios are provided for the third quarter. In the first scenario, the Asian market will improve with China as the primary growth engine, and a rise “intra-regional” tourism will resume to some extent. In this scenario, the quarter-on-quarter fall for the personal luxury goods sector will limited to below 10 percent, or $5.5 billion to $17 billion.

In second scenario two, all globe will remain, while tourism failing to recover. Here revenues could fall between 20 percent and 25 percent, providing for an annual decline in revenues as much as $112 billion.

A Bain & Company table indicating recovery to 2019 levels arriving in 2022.


Whatever the case, Bain expects it will be at least two years for the personal luxury good market to properly recover to pre-Covid-19 levels.

And even then, stated Claudia D’Arpizio, a Bain & Company partner and lead author of the study, “There will be a recovery for the luxury market, but the industry will be profoundly transformed.”

“The coronavirus crisis will force the industry to think more creatively and innovate even faster to meet a host of new consumer demands and channel constraints,” she stated. 

Online retail, for example, is expected to grow from its current share of 12 percent of the global personal luxury goods market to as much as 30 percent by 2025.

“The speed of future market growth will depend on luxury players’ strategic responses to the current crisis and their ability to transform the industry on behalf of the customer,” said Federica Levato, Bain & Company partner and the report’s co-author.

“As consumers slowly emerge from lockdowns, the way they see the world will have changed and luxury brands will need to adapt,” she continued. “Safety in store will be mandatory, paired with the magic of the luxury experience: creative ways to attract customers to store, or to get the product to the customer, will make the difference.”