Luxury & Spirits Market Landscape
Five insights and trends into how the global consumer luxury goods market is impacted by the Coronavirus pandemic have been provided in the following brief. In addition, two insights into how the Coronavirus pandemic has impacted the luxury buying habits of millennials have been provided below.
Insights and Trends on How the Global Luxury Goods Market is Impacted By the Coronavirus Pandemic
Increased Local Shopping
- The luxury sector is primarily driven by the global consumer. Approximately 20 to 30% of revenue in the industry is generated by consumers who make purchases outside their home countries. For instance, Asian shoppers purchase luxury goods abroad due to their low prices and because shopping has become an important part of their traveling experience.
- Due to the travel restrictions as a result of the pandemic, global consumers of luxury products are unable to travel and purchase luxury goods as they did before. Also, it is anticipated that there will be only a gradual increase in international travel once the restrictions are lifted. Consequently, many luxury goods consumers are shopping locally.
- As it stands, “Chinese consumers remain the biggest growth opportunity for the luxury sector.” Companies will need to find a new way of attracting luxury shoppers. For Asian luxury consumers, brands can look at ways of creating tailored local experiences by strengthening their omnichannel and digital offerings.
Increased Online Presence
- The COVID-19 pandemic has resulted in the traditional luxury market migrating to the digital age. Traditionally, luxury products have been sold in physical stores since they are a “high touch” category of goods that require a close relationship between consumers and retailers. “Globally, 77% of luxury buyers agree that they would buy a product or service simply for the experience of being part of the community built around it.”
- The closure of brick-and-mortar stores has forced luxury retailers to opt for e-commerce solutions. In addition, travel restrictions have seen digital channels becoming pivotal for brands that aim to recapture their lost business.
- The online presence of the luxury sector is expected to grow even after the pandemic ends. Out of the global consumers who have delayed purchasing luxury goods because of the pandemic, over 50% will purchase more items online after the outbreak.
Growth of Affordable Luxury Products
- Affordable luxury is popular among consumers who want their status associated with luxury but at a cheaper price. In 2019, affordable luxury was increasingly being used as the go-to-market strategy by luxury brands. The trend has been accelerated due to the financial impacts of the coronavirus pandemic.
- Consumers who look for status are affected by the financial implications of the pandemic and are consequently opting for more affordable luxury products and payment plans.
- “Globally 3 in 10 consumers who have delayed buying luxury items because of COVID-19 say they’ll look for flexible financial payment options in the aftermath of the outbreak.” Moreover, 15% say they will purchase the goods they initially wanted at full price, while 40% are going to wait for promotions and 23% will search for cheaper alternatives from other brands.
Younger Generations in China Emerging as Key Spenders
- China is the largest luxury market globally. In 2019, 90% of the luxury industry’s market growth was attributed to Chinese citizens. As it stands, millennials and Generation Z “make up 500 million of China’s 1.4 billion inhabitants.” In 2018, the group accounted for 60% of growth in total spending in the region.
- Millennials and Generation Z are expected to continue spending after the pandemic. Approximately 60% of millennials and Generation Z who have delayed buying luxury products intend to make the purchases after the pandemic is over. In addition, 40% of millennials and Generation Z have noted that they will return to shops once they reopen.
Revamping Fashion Events
- Trade shows and fashion weeks have been an important way for luxury brands to communicate and create vibrant relationships with trade partners and consumers. However, these events, such as the fashion weeks for Paris and Milan, have been canceled due to the COVID-19 pandemic.
- Due to the crisis, luxury brands will have to reduce spending, which will have an impact on event budgets. Also, industry players might look into revamping the fashion calendar as brands try to streamline and simplify their presentation calendars.
How the Coronavirus Pandemic has Impacted the Luxury Buying Habits of Millennials
- Millennial shoppers not only care about how luxury goods are made, but are also concerned about the environmental impact of the products they purchase. The resale sector has a strong online presence and the shift to digital sales during the pandemic has led to millennials purchasing secondhand clothing more than before.
- According to Jill Standish, a senior managing director at Accenture, millennials “want to own high-end brands, and the ability to get them for a fraction of the price in the secondhand market is especially appealing to them.”
- According to a 2020 report by TheRealReal, Louis Vuitton and Gucci are the most popular brands within the luxury resale segment for millennials.
Millennials are Cautious About Luxury Spending
- According to Bain & Company, millennials are putting more emphasis on shopping experiences and brand values. The shift to this mindset start before COVID-19, however, the outbreak amplified the shift.
- According to First Insight, 54% of US millennials have noted that the COVID-19 pandemic has affected their purchasing more than all the other generations. Approximately 40% reduced their spending as they prepared for the pandemic.
- Despite millennials being cautious about their spending, it is noteworthy that other adult age groups have reduced their spending the most.