China Increases its Influence
The luxury market rebound in Q1 of 2021 was driven largely by China and America. Mainland China accelerated the growth that was already happening in 2020. The key luxury hubs of Shanghai and Beijing have spearheaded that recovery and show the highest growth rates however we are also seeing positive figures from Tier 2 and 3 cities. The Middle East also showed positive performance in the first months of the year however Europe is the only region still in strong contraction.
The Roaring Twenties #2
In America, the market rebound has been faster than expected. Together with a dynamic stock market (the Dow Jones and S&P 500 hit record-highs in August), approval for Biden’s multi-billion investment plan, sound consumer confidence, and the deployment of the vaccine, the bounce back is very strong, especially when benchmarked against some European markets.
The US luxury market is also evolving fast. Tier 2 cities (Austin, Denver) are becoming bigger in terms of consumption of luxury goods, as more people choose to migrate from the biggest cities.
One unexpected trend is the new role of department stores as a platform for innovation and connecting brands with new generations of customers. Digital continues to increase its influence, but human-led touch points maintain a critical role in keeping customers’ loyalty.
Luxury Continues to Deliver Results
Throughout the pandemic, there has been a 10 percent increase of Net Promoter Score (NPS) ratings for the luxury industry, but that doesn’t tell the whole story. Only 30% noticeably increased their score, while 20% were relatively stable and half saw a decrease. Brands that performed well had really strong advocacy.
A Strong End to the Year
Bain’s Autumn update (published mid-November) has two scenarios. Scenario 1 sees a full rebound of the market happening this year however its more likely that the recovery will be more like Scenario 2 – a full recovery of the market in 2022, while not quite reaching the levels that we saw in 2019. In both cases, the market has exceeded their expectations so we can expect a strong autumn and fourth quarter as well.
A World post-Covid
Uncertainty is the new normal but the human spirit has kicked in with people adopting a positive, YOLO attitude, and making the most out of life. This will contribute to the resurgence of luxury shopping. Bain believe this will extend from luxury shopping into sectors such as travel and restaurants. But that also impacts to where people choose to live, the shift to working from home and a migration from big cities. The new normal will affect the global luxury map. Brands will require new retail and distribution strategies to keep up with this significant lifestyle shift.
bain.com
The 2021 Future of British Luxury Summit, held in association with Facebook, ESW & TONG, featured an illustrious line-up of speakers – from Anya Hindmarch to Gareth Dunsmore, Chief Marketing Officer, McLaren Automotive. We were joined by over 300 attendees from across the luxury sector, and the Summit report – authored by Lysanne Currie; event films – created by Ciaran Lee at Allied Content; photography – shot by Adam Duke; and presentation slides are now available for non-attendees to purchase.
