2020 has been a reckoning for the fashion and luxury industries, recording one of the worst years with sales down 23 percent over 2019. A new report by Bain shows the drop is the largest recorded fall since it began tracking the luxury industry. The overall market, it says, shrunk for the first time since 2009.
Other findings show e-commerce luxury has doubled its share from last year to 23 percent and consumers demanding the luxury sector to demonstrate real and sustained commitment to diversity, inclusion and sustainability.
The findings were released by Bain in association with Italy’s Fondazione Altagamma for the 19th edition of the Bain & Company Luxury Study. “We have all experienced a difficult year of rapid, unexpected changes and luxury has not emerged unscathed,” said Claudia D’Arpizio, a Bain & Company partner and lead author of the study. “While the industry has suffered from a pause in global travel and ongoing lockdowns, we believe it has the necessary resilience to manage through the crisis. We have faith in its ability to transform its operations and redefine its purpose to meet new customer demands and retain its relevance, especially for younger generations.”
The outlook for 2021 remains invariably subdued, with Bain forecasting growth somewhere between 10 and 19 percent depending on macroeconomic conditions, the evolution of Covid-19 and the speed of return to travel globally as well as the resilience and confidence of local customers.
The changes brought by Covid-19 increased the presence of online in every aspect of life. In the luxury market, online sales made up EUR49 billion in 2020, up from EUR33 billion in 2019, the report said. The share of purchases made online nearly doubled from 12 percent in 2019 to 23 percent in 2020.
Online is set to become the leading channel for luxury purchases by 2025. This dramatic increase comes at the expense of bricks-and-mortar. Bain expects no growth in the number of stores operated directly by brands in 2020 and possible decline in store networks in 2021. Brands will need to adjust their footprints to the new map of luxury buying, evolve the store role and its ergonomics, and maximize the customer experience.
“Luxury brands have faced a year of tremendous shifts but we believe that the industry will come out of the crisis with more purpose and more dynamism than ever before,” said Federica Levato, a Bain & Company partner and co-author of the study. “By 2030, this industry will be drastically transformed. We will not talk about luxury industry anymore, but of the market for insurgent cultural and creative excellence. In this new enlarged space, the winning brands will be those that build on their existing excellence while reimagining the future with an insurgent mindset. Luxury players will need to think boldly to rewrite the rules of the game.”
Article source Bain & Company; Image Louis Vuitton travel campaign via Louis Vuitton website