Bad news for fans of Chanel bags: they are suddenly a lot more expensive. In 2020 you paid 6,050 euros for one of their most popular models (the one with a diamond pattern and gold chain), now you pay 7,800 euros for it – an increase of 30 percent. The price hike, which came out earlier this month, shows that luxury houses such as the French LVMH, which Chanel falls under, have regained confidence in the future.
Because the international market for luxury goods is growing again, writes consultancy Bain & Company in their annual authoritative report on the luxury industry, published in November. Bain estimates sales of personal luxury goods – including clothing, shoes, watches, cosmetics, jewelry and leather goods such as bags – at 283 billion euros this year. That is a 29 percent increase compared to the ‘disaster year’ 2020, and a 1 percent increase compared to 2019. With this ‘V-shaped’ recovery, the market is growing faster than expected. Earlier forecasts assumed that the luxury goods market would not return to 2019 levels until 2022.
Bain thinks that growth will continue until at least 2025 and expects a turnover of between 360 and 380 billion euros in that year.
This report, in collaboration with the Italian luxury brand Altagamma (from Gucci, Prada and Versace) consortium, looked at the worldwide sales figures of three hundred companies.
The growth in the luxury market is due to three factors, Bain writes in the report. Namely: the sales figures in the United States, which overtook Europe as the largest sales market; sales in China, due to travel restrictions, the Chinese now more often spent money in their own country; and finally by increasing online sales.
Paris and New York
While the top 10 luxury cities, such as London, Paris and New York, were still responsible for 35 percent of luxury goods sales in 2019, this number will fall to 25 to 30 percent in 2021, the consultancy estimates. With fewer luxury tourists, many brands are betting on local consumers this year, Bain writes. In America, more sales were made in smaller ‘B-cities’, Chinese consumers exchanged their shopping trips in Europe for local shopping destinations such as Hainan Island.
While the recovery sounds like good news after a year of people sitting at home in jogging suits and luxury products seeming less relevant, there are some caveats to the report’s enthusiastic title: Luxury is back.
Because of the three hundred brands included in the study, only 40 percent have recovered to the turnover level of 2019. This mainly concerns the big, well-known names, which bring out the average turnover. A quarter of the brands are still slightly behind in comparison with 2019, with 35 percent even having “significantly” less turnover. “The [luxe]market is more polarized than ever,” writes business site Business of Fashion.
This also applies to what exactly is being sold. For example, sales of leather goods grew by 8 percent compared to 2019, but sales of cosmetics fell by 1 percent and clothing by 10 percent. Shoes, on the other hand, did well this year, with sales up 11 percent, as did jewelry (7 percent).
The uneven growth also applies when you look at geography. China and the United States, for example, have recovered earlier thanks to travel restrictions and a vigorous vaccination campaign, respectively. For Europe, it will take at least until 2024, Bain estimates.
Consumers are getting younger
Also striking: consumers of luxury products are getting younger, the report shows. Today’s twenties and thirties (generation Z and millennials) were responsible for 63 percent of luxury products. By 2025, that will grow to 70 percent, Bain estimates. That trend keeps pace with the popularity of second-hand luxury products. That branch grew by 7 percent this year to 33 billion euros. Bain sees a relationship between this increase and the committed attitude of these generations, for whom sustainability is important.
Bain’s report came out just before the Omikron variant of the coronavirus emerged, causing some countries to close their borders again. Other countries are in lockdown. That could threaten the recovery of the luxury industry: why buy another expensive bag if you don’t know whether that one Christmas dinner will go ahead?
“I have a nagging feeling that the changes in the luxury industry sparked by the pandemic are not yet over,” he wrote. Forbesjournalist Pamela Danziger in an analysis.
Jewelery and branded bags: after a ‘disaster year’ the luxury market is recovering
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