MILAN -- Sales of luxury apparel, jewelry and beauty products are set to slide by nearly a quarter this year as the pandemic wipes out more than six years of growth, according to a study released recently by the consultancy Bain.
Still, the drop is narrower than the 35% collapse forecast in the spring, thanks largely to a market recovery in China, which is generating nearly a third of all sales.
For 2020, the sector is expected to generate $256 billion in revenue, which is $2.4 billion below 2014 levels and down $76 billion from 2019, Bain said in the semiannual study prepared for Italy's Altagamma association of high-end producers.
It is the first decrease since the 2009 financial crisis, when the industry suffered a 9% drop but quickly recovered the next year.
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The timing of any bounce-back from the pandemic remains uncertain as a resurgence in the virus is leading countries to once again shut down nonessential retail and travel around the globe. It will largely depend on the timing of a vaccine, Bain partner Claudia D'Arpizio said.
D'Arpizio expects the outlook to become clearer in the second quarter, when it will be easier to understand how strong spending is in China, the impact of any stimulus measures in the U.S. and Europe and any new tax policies by President-elect Joe Biden, which are likely to affect high-earners.
"I see a lot of uncertainty for next year, with less uncertainty for the longer term," D'Arpizio said.
Forecasts for 2021 growth fall in an unusually large range of 10% to 19%. Brands' profits are expected to drop 60% this year and recover only half of that next year.
China, where the market is already improving, is expected to lead the trend. Bain foresees a full global recovery between 2022 and 2023, with Chinese customers responsible for nearly half of all sales by 2025.
As more people around the globe were forced to stay home, apparel sales fell 30% to $53.4 billion. Footwear slid 12% to $22.5 billion, thanks to the sneaker trend that drove a second-half rebound, while Asian consumers helped cushion a 15% decline in jewelry sales to $21.4 billion.
The pandemic is accelerating transitions that were already underway in the sector, including a shift to online buying, a focus on sustainability and diversity, the growing role of younger generations and experimentation with digital platforms to replace or enhance the runway experience.
"The pandemic has eliminated the excuses for brands that didn't understand the trends, to give a sense of urgency to the right investments," D'Arpizio said.
She cautioned that the longer the crisis endures, some brands will run out of cash, forcing some out of business and others to restructure.
"The more the situation is sustained, the more we risk the crisis will be permanent," she said.
