It’s hard to remember what it was like pre-Covid-19, when we could walk around without wearing a face mask, go to the pub (and sit inside!), visit the shops on a mission to buy something beautiful and excessive, or jump on an aeroplane to a far-away tropical place. Whatever the future holds, and however we emerge out of this pandemic, what we do know, is the luxury landscape has changed.
What’s happened? Throughout 2020, the luxury industry shrank on a scale not seen before, around 22% (Bain&Co. 2021), and now sits at €1 trillion (2015 levels).
Pre Covid-19. We talked about luxury experiences. Everything was centred on hospitality and travel, along with experienced based goods, such as luxury cars, private jets and yachts. All of these have been devastated by the pandemic, with luxury travel declining by 80% (McKinsey 2020). Globally, China has been the only region to fare well and grew at 45%, while Europe slumped by 36% due to the collapse in tourism. However, by the end of 2021 the luxury goods market is expected to recover 50% of the profit lost during 2020, and will recover to 2019 levels by 2023 (Bain&Co. 2021).
So, where do we see the future of luxury?
Online. In the luxury market, online sales made up €49 billion in 2020, up from €33 billion in 2019. The share of purchases made online nearly doubled from 12% in 2019 to 23% in 2020. By 2025 online will take over the main channel for luxury consumption.
Omnichannel. The distribution of physical luxury stores is going to change. Luxury brands will need to streamline their distribution of physical stores, and develop ways of maximising customer experience, consistently, across online and instore.
Second hand. In luxury, we speak of timelessness, and quality, and this is the reason why – luxury has to last. With the Millennial mindset comes sustainability and ethics. In line with this, is recycling, upcycling and repurposing. In 2020, second hand luxury goods sales rose by 9% to €28 billion. Luxury brands will need to consider how they control resale of their luxury goods in-house. Can luxury brands consider renting out their best sellers as an extension of their core business?
Sustainable, ethical, transparency. Luxury brands will need to re-evaluate and redefine the purpose of its brand, instigated by the impact of the pandemic. Luxury brands will move to producing more durable and higher-quality products, commit to valuing employees, make its supply chain fully transparent and traceable, maximize its environmental and social commitments, and create economic value from sustainability.
Younger generations. Generations Y and Z will continue to take over as the key consumers of luxury, and will represent around 65% of global purchases by 2025.
China. Chinese consumers are expected to dominate global luxury consumption, growing to represent over 45% of global purchases by 2025. Consideration will be required over how to enter into the China mainland market, and sustain interest from local consumers.
Coney Luxury 