The outbreak of the novel coronavirus is forcing companies to rethink almost every aspect of their businesses as it becomes increasingly difficult to keep up with the effects of Covid-19.
Fflur Roberts, head of Luxury Goods Research at Euromonitor International, London said uncertainty is here to stay as consumer confidence has been hit by the pandemic outbreak.
Speaking at the webinar session of the France Macau Chamber of Commerce yesterday, she noted that due to the prolonged global lockdown, luxury hotels and tourism will continue to be disrupted, and that consumers are looking to trade down their luxury items.
According to the group’s study, 68% of luxury goods, in value terms, is set to experience an immediate drop followed by a long-term shift. Due to the forced closure of hotels, restaurants and minimization of travel flows, experiential luxury will feel the biggest blow, the study suggested. Personal luxury will see a faster recovery, supported by demand from the Chinese middle class, millennials, Gen Z and the continued adoption of digital channels.
Last year, the Asia Pacific region led in global sales of luxury goods spending with over $400 billion spent on the goods, with China alone making up of 68% of the region’s sales.
Roberts said that China is set to experience a loss in its sales to the tune of $67 billion with severe economic damage experienced as expectations for spending in Asia remain low. However, this may lead to increase in the domestic spending of Chinese consumers.
She noted that when the lockdown and social distancing measures are lifted in many countries, they will still experience deep recessions. However, she expects that luxury sales are likely to bounce back in the medium-term, especially for personal luxury.
“I think luxury brands will be investing a lot more in their digital presence. So while consumers from mainland China will be traveling less, they may do ‘revenge shopping’ [in their regions],” said the expert.
“This will have huge implications in markets like France, Italy and the U.K. because they rely a lot on spending from tourism,” she added.
The research head suggested that brands should focus on their online channels and on the digital services they offer.
“Brands need to focus their assets on ensuring that they can communicate well with consumers through digital but also that the digital platform in terms of selling is very strong and secure and in place,” said Roberts.
Meanwhile, Hong Kong‘s luxury goods market was already suffering the impact of widespread protests, even before the pandemic outbreak.
According to the research, 90% of spending from tourists in Hong Kong is on personal luxury goods originating from mainland China.
Therefore, it may take a while for the market to get back to normal. However, “there will always be that element of luxury and experiential elements of going luxury shopping in Hong Kong, similarly for Macau.”
“Once the market opens, more travelers from mainland China will start to at least move around in Asia,” said Roberts.
“We may see a recovery and it would actually benefit Hong Kong because they won’t be traveling to further destinations. Similarly, they may have more money to spend because they are not spending on travel,” she added.
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