How will the industry ever bounce back to its former glory?
The Highs of Luxury Goods Business:
The luxury goods industry was thriving at its peak before the pandemic. Consumer goods such as beauty, apparel, and accessories were steadily increasing since the 1990s.
However, within a few years, the industry bloomed into a very profitable market bringing in billions of dollars. The growth and the speed which it grew is mostly credited to China and its consumers. Geographically, the market in China accounted for 90% of the global sales growth in 2019, followed by Europe and America.
According to the analysts, the Chinese consumers, especially the young ones, had very hefty spending habits. On average, a single consumer in China spent $6000 before COVID-19.
The industry already started to show signs of decline after one month of closure. The decline rate went to almost double after just one month. The decline occurred due to the fewer consumers spending money on luxury goods as well as the lockdown initiated around the globe. With the lockdown, the international shipments were interrupted to a substantial amount, and the domestic shipping procedures were slowed down during the first quarter of 2020.
Due to the closures of stores, more than 80% of the luxury item stores are suffering business-wise as there are fewer consumers now more than ever. One of the many victims of this pandemic is a luxury goods retailer, Neiman Marcus, that filed for bankruptcy because of declining sales. The companies that were already in a bad shape pre-COVID have been mostly shut down if not in a severe crisis.
Changing Shopping Habits:
The consumer market is at an all-time low compared to the past few years, as many people are withdrawing from purchasing luxury goods. Few of the people who are still enthusiastic about shopping are looking for cheaper alternatives for luxury items. This may spark some life into the used luxury items market.
There are a lot of economic as well as other key elements that come into play while predicting the future for the luxury market. The shift of paradigm to an eCommerce platform seems to be the only viable option remaining for the retailers. However, we can only judge its future state by the analytics, but only time will tell.