Business of luxury goods hit hard by Covid-19 crisis

The luxury goods industry has been heavily impacted by the Covid-19 crisis in 2020. The core personal luxury goods market contracted for the first time since 2009, falling by 23 per cent at current exchange rates to hit euros 217 billion. The drop is the largest recorded since we have been tracking the industry. The overall luxury market - encompassing both luxury goods and experiences - shrunk at a similar pace and now is estimated at approximately euros 1 trillion.

It has been a year of profound global change in the way we live, the way we shop and what we value. Tourists have remained at home, changing how, when and why they purchase luxury products. Online shopping for luxury goods has soared, doubling its share of the market to 23 per cent in 2020 from 12 percent in 2019. The turmoil of Covid-19 has been the catalyst for change for the luxury industry, which is on a path to recovery by 2022-2023. Consumer demand for action with purpose and social impact is growing and luxury brands are expected to demonstrate real and sustained commitment to diversity, inclusion and sustainability.

According to the study, in 2021 the market is expected to recover 50 per cent of the profit loss of 2020 - still below 2019 levels. Europe however has borne the brunt of a collapse in global tourism. While local consumption remains, regional consumption fell by 36 per cent at current exchange rates to euros 57 billion.

The Americas experienced less impact and the market fell by 27 per cent at current exchange rates to euros 62 billion. In the US, department stores face an uncertain future and the map of luxury consumption has been redrawn to move away from city centres.

Japan shrunk by 24 per cent at current exchange rates to euros 18 billion in 2020. The rest of Asia also struggled, with Hong Kong and Macau among the worst performers globally. The region contracted by 35 percent at current exchange rates to reach euros 27 billion.

The impact in the Middle East was mitigated by shorter lockdowns and repatriation of spending previously made abroad, though with different nuances among countries within the region. In Australia, a slowdown from the wildfires was amplified by the halt of tourism. As per a report by Statista, revenue in the luxury goods market amounts to $9.09 billion in 2020. The market is expected to grow annually by 5.8 per cent (CAGR 2020-2023).