The luxury goods sector could shrug off the hit from the coronavirus crisis as early as this year as Chinese and US shoppers help sales recover to pre-pandemic levels, consultancy Bain said on Monday.
Bain now sees a 30 percent probability that sales of high-end handbags, clothes and jewelry will return to or exceed their 2019 level of US$340 billion this year, depending on how quickly vaccines are rolled out and tourism picks up.
Its more likely scenario is for a full rebound in 2022, which would still imply a faster convalescence than Bain predicted in November, when it said the sector may have to wait until 2023 to put the crisis squarely behind it.
Luxury goods sales fell by 23 percent to $264 billion last year, the largest-ever drop and the first decline since 2009, as the pandemic forced shop closures and brought international tourism to a virtual halt.
But the crisis does not seem to have had a lasting impact on consumers’ appetite and spending power for high-end wares.
Soaring sales in China, the biggest market for luxury goods, and a stronger-than-expected US rebound thanks to a big stimulus program have helped revenues bounce back sharply in the first quarter of 2021.
“The US market has been the unexpected bright spot,” Bain said. By contrast, Europe is lagging behind, hampered by a slower vaccination campaign and restrictions on tourism.
The speed of the recovery has been uneven. The industry’s biggest groups such as LVMH, Hermes, and Kering are already above their 2019 levels, while smaller labels like Ferragamo and Tod’s still have to catch up.
The crisis has forced brands traditionally more reluctant to sell online to fully embrace e-commerce, which is set to become the leading channel for luxury purchases in the next few years.
Bain said that as people moved to countryside homes and worked remotely, sales in second-tier cities often went better than in big luxury capitals like New York or Milan – a factor brand will have to consider as they review their footprint.
And while handbags, leather goods and jewelry have been driving the recovery, spending on clothes, makeup and perfumes is expected to pick up too as lockdowns ease and people resume going out.