Bain Luxury Study: Covid ravages luxury retail
According to the report – which encompasses luxury goods and experiences – the market shrank by 20% to 22% and is now estimated at €1 trillion, which is back to 2015 levels.
Sales of luxury cars dominated the market but still declined by 8% to 10% to €503 billion. Most luxury experiences (including luxury hospitality, cruises and fine dining) were significantly impacted (–56%) and should take the longest time to recover given dependence on global tourism.
Experience-based goods (including fine art, luxury cars, private jets and yachts, fine wines and spirits, and gourmet food) resisted better, declining by only 10%. They should recover rapidly from the 2020 shock given positive consumption dynamics across most segments.
The market for personal luxury goods contracted for the first time since 2009, falling by 23% to €217 billion. This drop is the largest recorded since Bain has been tracking the industry. Uncertainty will hover over the industry for some months to come.
China drives shift to luxury shop local
According to the report, Mainland China has been the only region globally to end the year on a positive note, growing by an impressive 45% at current exchange rates to reach €44 billion. Local consumption has soared across all channels, categories, generations and price points.
Europe consumption fell by 36% to €57 billion, while the Americas fell by 27% to €62 billion. In the US, department stores face an uncertain future, and the map of luxury consumption has been redrawn to move away from city centres.
Japan shrank by 24% to €18 billion while Hong Kong and Macau were among the worst performers globally, contracting by 35% to reach €27 billion.
The impact in the Middle East was mitigated by shorter lockdowns and repatriation of spending previously made overseas.
The lockdowns naturally forced a rebalancing of where luxury purchases are made, with local purchases reaching 80-85% this year. Bain says it expects this figure to settle between 65-70% in years ahead as China and the wider Asian region drive this change in behaviour.
Luxury retail heads online
The Bain report shows online sales accounted for €49 billion in 2020, up from €33 billion in 2019. The share of purchases made online nearly doubled from 12% in 2019 to 23% in 2020.
It also predicts that online will become the leading channel for luxury purchases by 2025, fueling the omnichannel transformation.
This comes at the expense of brick-and-mortar stores as brands adjust their networks to the new map of luxury buying, maximising the customer experience.
It has been a year of profound change in the way global luxury consumers live and shop, and in what they value. Scenarios for 2021 are varied, and Bain forecasts growth that ranges from +10%/12% to +17%/19% depending on macroeconomic conditions, the evolution of Covid-19 and the speed of return to travel globally, as well as the resilience and confidence of local customers.
According to Bain’s analysis, in 2021 the market is expected to recover 50% of the profit loss of 2020 but still remain below 2019 levels.
Bain believes that by 2030, the industry should be drastically transformed. Luxury players will need to think boldly to rewrite the rules of the game, transforming their operations and redefining their purpose to meet new customer demands and retain their relevance, especially for younger generations, who are set to drive 180% of the growth in the market to 2025.
Timeline: India takes unicorn leap with six in five days
We chart an historic week in India’s tech industry, where in just five days, between 5-9 April 2021, the country achieved six new unicorns, bringing India’s total to 10 in 2021 to date, an immense unicorn leap from just seven in 2020 and six in 2019.
April 5: Meesho
India’s first social commerce unicorn, Meesho raised US$300m from SoftBank, Facebook and Shunwei Capital, giving the Bangalore-based startup a US$2.1bn valuation, a threefold jump from its previous funding round in 2019. Founded in 2015 by two IIT-Delhi graduates, Meesho connects producers and resellers, helping small businesses sell through social media. It has 45m customers and has enabled 13m entrepreneurs to start their online businesses with no investment.
April 6: CRED
Founded just over two years ago, Bangalore-based credit card repayment app CRED raised US$215m from Falcon Edge Capital and Coatue, nearly trebling its valuation to US$2.2bn from its January US$80m round. Allowing customers to pay off their credit card debt while earning CRED coins which they cash in for rewards, CRED has grown rapidly during COVID-19, doubling its customer base to nearly 6 million in a year.
April 7: API Holdings / Groww
The first epharmacy startup to gain unicorn status, PharmEasy (API Holdings), which has digitised 60,000 brick and mortar pharmacies and 400 doctors across India, raised US$350m in a round led by Prosus Ventures. Founded by four former Flipkart employees as a way of making investing simple, investment platform Groww became India’s second-youngest fintech unicorn, raising US$83m in Series D funding led by Tiger Global, quadrupling its previous round in September.
April 8: ShareChat
New Delhi-grown social media startup ShareChat, founded in 2016 by Mohalla Tech raised US$502m from Lightspeed Ventures, Tiger Global, Twitter and Snap taking its raised total over six rounds to US$766m and pushing its valuation to US$2.1bn. The funding will be used to grow its user base and short video platform Moj, which launched in 2020 following TikTok’s ban in India. The regional language startup claims 280m users.
April 9: Gupshup
AI-led conversational message startup joined the unicorn club after raising US$100m from Tiger Global giving it a ten-fold valuation of US$1.4bn. The smart messaging platform, which has seen accelerated growth during the pandemic, was founded in Bangalore in 2005 by serial entrepreneur Beerud Sheth, whose online freelancing platform Elance is now listed. Gupshup’s API enables 100,000+ businesses to build messaging and conversation experiences across 30+ communication channels.