Luxury Goods Recovery: Optimism for Luxury Goods in a Post-pandemic World

November 2021

In this half-year (H1-2021) update briefing, we investigate the latest developments in the global luxury goods industry, with a focus on the macro-economic and demographic changes and what these mean for our view of a likely outlook in the short to medium term. Whilst the luxury goods industry is not immune to the effects of the COVID-19 pandemic our research for H1-2021 shows that the industry overall is bucking the slowing global macroeconomic trend, albeit with some categories being impacted.

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Key Findings

COVID-19 continues to threaten recovery in sales of luxury goods

The global pandemic remains a significant constraint on luxury goods for the remainder of 2021 and into 2022. Ongoing lockdowns and social distancing measures are still in place in some key markets. However, more targeted lockdowns and greater consumer adaptation have reduced the impact of recent lockdowns on industry sales.

Global economic outlook improved since the start of 2021

The global economic outlook has improved somewhat since the start of 2021. Global real GDP growth in 2021 is now expected to be the fastest in more than 40 years. This will go some way to help to improve consumer confidence. Nevertheless sales are still suffering from being at the mercy of a disparate mess. Some 20 months on, frustration levels continue to rise especially in high growth potential regions such as Asia Pacific.

Revival in health of global wealth to benefit demand

As we move into the second of 2021, we expect all regions to record much healthier growth in the top three wealth segments. While the contraction during the COVID-19 outbreak was greatest in the ultra-wealthy segment overall, this segment will record the most significant rebound in growth in 2021.

Experiential luxury lags behind in returning to pre-pandemic levels

Dark clouds continue to hang over the fate of luxury travel and hospitality. Despite a sharp up-tick in sales, the experiential luxury category is beset by factors such as government health, travel and transport policies.

Luxury car manufacturers remain optimistic

Luxury cars continue to navigate a period of change, as consumer attitudes towards car ownership and mobility shift into a new era. However, H1 2021 saw some hugely positive growth stories, driven by the segment’s premium positioning and electrification in an effort to meet sustainability goals and initiatives.

Value-creation propositions drive personal luxury and alcoholic drinks

Personal luxury goods are bouncing back strongly with over half of the revenues lost to the pandemic expected to be recovered by the end of 2021, This has been driven by pent-up demand but also due to the segment’s value-creation propositions. This is a trend that we are also seeing in luxury drinks as aspirational consumption boosts sales.

Introduction

Scope
Key findings

Key Global Drivers Shaping Luxury Outlook

COVID-19 continues to threaten the recovery for H2 2021
Luxury shows relatively optimistic income elasticity but took a huge hit
Global uncertainty continues to slow down but risk remain across luxury
Sales in Western Europe still impacted by low consumer confidence
Revival in health of global wealth to benefit outlook for overall demand
Top 10 players clear determinants for H2 2021 and 2022 outlook
Consolidation varies across the key luxury categories
A tale of disruption across all luxury goods categories
Top 10 luxury players continue to dominate the competitive landscape

Focus on Luxury Cars

High focus on premium and electrification helps support luxury car sales
Leading luxury car manufacturers all show healthy recovery in H1 2021
Luxury car manufacturers remain optimistic for a better 2022
Higher EV registrations in more affluent markets, but competition rises

Focus on Personal Luxury

Personal luxury category expected to see a vast improvements
Outlook for personal luxury stable as key players show impressive growth
LVMH H1 2021 results further cement Asia-led recovery trend
Chinese “ glocals ” drove strong momentum for Kering’s H1 2021 sales
Richemont celebrates double-digit H1 2021 growth in all regions
Iconic luxury retailer Harrods bets on Suburbia for its stand-alone stores
China’s recovery drives sales but risk of new variants poses huge threat

Focus on Experiential Luxury

Experiential luxury sits at a disappointing 28% below pre-pandemic levels
Post-pandemic recovery in luxury hospitality continues to be constrained
Luxury travel decimated by the pandemic and frustration levels rise
Global travel shutdown leads to dearth of inbound tourist spending
All eyes look East as repatriated spending and revenge travel sets in
Will China's return to travel help save luxury hospitality?
LVMH hopes to welcome tourists back to its landmark Paris department store

Focus on Luxury Drinks

Luxury drinks outpace global GDP as demand for prestige rises
Recent developments illustrate value over volume focus
LVMH results shows strength of premium positioning and diversification
Polarisation will gain momentum as aspirational consumption boost sales

Conclusion

Global luxury goods expected to return to pre-pandemic levels by 2021
Faster recovery in key regions expected to drive sales into next fiscal period
Evolving consumer behavior will shape strategies over forecast period
Conclusion

Definitions

Definitions

Luxury Goods

This is an aggregation of: Personal Luxury, Fine Wines/Champagne and Spirits, Luxury Cars and Experiential Luxury.

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