The coronavirus pandemic could lead to a 60 per cent drop in global sales of personal luxury goods in the second quarter of the current year, predicted a new report from Bain & Company.
Many countries across the world have imposed strict lockdowns, asked people to stay indoors as much as possible and closed down most non-essential businesses in order to curb the spread of the novel coronavirus pandemic.
The expected total volume of sale in personal luxury goods segment is between 180 billion euros to 220 billion euros (around $195 billion – $239 billion) for the entire of 2020, Bain said, compared to a pre pandemic estimate of 281 billion euros in 2019.
More than 3.8 million people have been infected by the novel virus coronavirus globally so far, killing over 269,500, after spreading throughout the world since it first emerged from China’s Hubei province late last year. A large number of countries have virtually shut down their economies in order to delay the spread of the pandemic, along with strict restrictions on movement of people. Countries have also enforced strict social distancing norms. These have forced the closure of most retail stores to close. There has also been a virtual stoppage for domestic and international travel.
The situation has resulted in millions across the globe losing their jobs and the world is in the “worst economic downturn since the Great Depression,” according to the International Monetary Fund.
Despite some countries easing some of the stringent restrictions imposed previously, the report from Bain predicted a contraction of between 20 per cent and 35 per cent for the personal luxury market for the full year of 2020. The report estimated that the total sale for the current year will be between 180 billion euros to 220 billion euros which is about $195 billion – $239 billion.
“There will be a recovery for the luxury market but the industry will be profoundly transformed,” said Claudia D’Arpizio, a partner at Bain and the main author of the report.
The report called the Bain & Company Luxury Study 2020 Spring Update was conducted jointly with the Italian luxury goods manufacturers’ foundation Altagamma. The predictions made in the report were exclusive of any second wave of coronavirus attacks – which could lead to further closures and loss of business. It also sis not account any positive impact ot the global economy because of the development of a vaccine against the virus.
According to a separate report in April published by consultancy firm McKinsey & Company, there will be a year on year contraction of between 35 per cent and 39 per cent in 2020 in global revenue for the personal luxury goods market. In the eventuality of retail stores remaining closed for two months, approximately 80% of “publicly listed fashion companies in Europe and North America will be in financial distress”, found the analysis in the report.
According to Bain, in 2019, an estimated sales of 281 billion euros was made by the personal luxury market globally. The report estimated that the sale to that level will be again achieved sometime between 2022 and 2023, depending on economic trends, consumer confidence levels at that time, tourism flows, and brands’ ability to anticipate and fulfill consumer needs.
(Adapted from CNBC.com)