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What Prospects for Luxury in 2021?

PUBLISHED ON TUESDAY, MAY 25, 2021, BY JOURNAL DU LUXE

In its new study “Luxury Study 2021 Spring Update,” published in collaboration with the Altagamma Foundation, Bain & Company deciphers the major trajectories the luxury sector could take by the end of the current year.

Two Evolution Hypotheses

In the first quarter of 2021, the luxury personal goods sector showed growth oscillating between 0 and 1% compared to the same period in 2019, at current exchange rates. However, while the trend could be favorable for the future, it could also be seen as a mere bubble effect.

According to experts, two scenarios could unfold in the coming quarters. The most optimistic predictions—estimated at a 30% probability—anticipate a gradual market recovery. In this context, the sector could reach 280-295 billion euros by the end of the year, returning to levels similar to those of 2019.

Given the uncertainties related to the pandemic’s evolution, more nuanced perspectives could also emerge. The report indicates a 70% probability that these early signs of growth could gradually diminish, hindered by a slowdown in local purchases and limited intra-regional tourism. With a potential sector result of 250 to 265 billion euros by the end of the year, a return to 2019 figures would not be expected until 2022.

US Boom, Digital Surge, and the Rise of Second-hand Markets

Regardless of the scenario, the first quarter results have provided significant insights that could shape the future of luxury consumption. Leading the way? Chinese resilience, certainly, but also the surprising rebound of the American luxury market. “The improvement in macroeconomic conditions, a dynamic stock market, increased consumer confidence, and rapid vaccine deployment are contributing to a strong recovery,” the report indicates, also highlighting a re-mapped American landscape around new urban centers and dynamic suburban areas.

Another phenomenon to consider is the expansion of the second-hand market. Valued at around 28 billion euros in 2020—compared to 26 billion in 2019—second-hand is gaining ground among increasingly varied targets, including first-time young buyers, seasoned consumers, and collectors.

Among other trends, the study also points to the acceleration of digital: in 2020, 85% of luxury purchases were influenced by digital. A dynamic that does not, however, overshadow the necessity of human input, as “interactions will play an essential role in customer loyalty,” the report indicates.

“Brands have been forced to tear up the playbook and innovate quickly in light of the crisis, “says Federica Levato, co-author of the study. “As life begins, hopefully, to return to normal, customers expect to establish a human relationship with brands based on technology. To stand out, brands will need to stay in touch with the key trends shaping this new normal while differentiating themselves and creating a narrative true to their own culture.”