Following a turbulent year, the global personal luxury market has started to recover. The industry returned to growth in the first quarter (Q1) of 2021, growing by 0-1 per cent versus 2019, which is viewed by the industry as the last comparable year, as per a report by Bain & Company. China continues to drive the recovery while the US unexpectedly rebounded.
The outlook for 2021 is uncertain, but the market is expected to reach between €250-€295 billion, as per the Bain & Company report titled Luxury Study 2021 Spring Update released in collaboration with Fondazione Altagamma, the Italian luxury goods manufacturers’ industry foundation.
The acceleration in the US, the importance of a human touch alongside digital interactions and the increasing presence of brands in the second-hand market are some of the new trends identified by the report.
While China is driving the recovery thanks to continuous repatriation and acceleration of domestic spending on luxury, the US 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, the report said.
The report has also identified two possible trajectories for the recovery in 2021. In the first scenario (probability 30 per cent), a recovery path may continue throughout 2021, winning back 2019 market level as early as this year. In this outcome, the market could reach €280-295 billion this year.
In the second scenario (probability 70 per cent), despite the strong momentum of the first quarter, full year growth may be stifled by slower domestic luxury purchases and limited intra-regional tourism. In this case, the full recovery to 2019 levels would be expected only in 2022 and the market would reach €250-265 billion this year.
As the luxury industry navigated through the crisis, some trends have solidified. The appetite of China and Chinese nationals for luxury remains insatiable and all customer nationalities are positively growing or on a recovery path. Growth of the online channel remains robust as new clients buy luxury online for the first time, and the range of prices is widening, with more entry-level products but also more high-end items.