SHOPSMART AUTOS – CUSTOMER INFORMATION – JANUARY 11, 2021
Luxury after Covid-19: Changed for (the) Good? (PT.2) Tallying the cost of the early stages of the outbreak Our forecast of a 25% to 30% market contraction in the first quarter of 2020 is based on information available on March 25, such as data on the spread of Covid-19, macroeconomic data, the trading of leading industry players and expert interviews conducted by Bain & Company. Given the rapid evolution of the situation—and the likely pace of future developments—there is a high degree of uncertainty about the forecast and our related modeling for 2020. That said, there’s no doubt that luxury is highly exposed to Covid-19. Chinese consumers represent 35% of the global personal luxury goods market. And that’s to say nothing of the travel restrictions that are choking off tourism and travel retail, or the deteriorating economic outlook and its probable impact on spending power. With all these factors and more at play, the next few weeks are going to be critical for the sector. The luxury brand executives we interviewed indicated that, after an exceptionally positive start in January, the performance of the global market in the early part of 2020 has closely mirrored the spread of the virus (see Figure 1). Asia suffered a significant sales decline, with China at the forefront of the negative trend. Almost every luxury brand in China had to temporarily close stores or reduce working hours, creating deep double-digit year-over-year sales declines; however, at luxury stores that have since reopened, consumers are returning faster than expected. The virus has had a double impact on luxury consumption in other Asian countries such as Japan and South Korea, discouraging free-spending Chinese tourists from visiting and harming local consumer confidence. The luxury market is expected to decline by 25% to 30% in the first quarter of 2020 The luxury market in Europe had been stable in the first two-and-a-half months of the year, although with substantial variation between countries. The Italian market suffered worst, as quarantines caused double-digit sales declines across the country. Sales rose overall in France, Spain, Germany and the UK, thanks to tourism (especially from Russia and the Middle East) and stable local demand during the early stages of the outbreak. Unsurprisingly, consumer confidence had begun to weaken in those territories even before governments put restrictions in place to stop the virus’s advance across the continent. At the time of writing, the trend has quickly turned deeply negative, with general store closures in multiple countries. The luxury market in the Americas is also starting to feel the full impact of coronavirus disruption. A decline in (predominantly Chinese) tourist spending did not appear to have had much of an impact in the first two-and-a-half months of the year. But the positive trend we saw for the majority of the quarter is already coming under intense pressure as most players shut their American stores. The trend was negative in the airport channel, as the drop in air traffic from Asia was only partly balanced by continued tourism within Europe and the Americas. Off-price sales of luxury goods grew, partly because full-price sales are still dominant in hard-hit Asian economies. Online sales experienced double-digit growth in Europe and the Americas, and only a limited slowdown in Asia. END OF PART TWO Make it a champion day!Tags: 2019 Subaru Forester Touring, 2020 BMW iX3, 2020 Chevrolet Suburban, 2020 dodge charger, 2020 EQC, 2020 Ford Super Duty, 2020 Honda Pilot, 2020 Kia Optima, 2020 Mercedes Benz, 2020 Nissan Versa, 2020 Subaru WRX STI, Audi SUV, BMW, Brandon K. Hardison, Chevrolet Car, Chevrolet Sonic, Dodge charger, electric vehicles, honda, Honda Pilot, Hyundai SUV, Mercedes Benz, Nissan Rogue, SUV, upcoming car, Volkswagen, Volkswagen Tiguan SEL Premium R-Line, Volvo Car
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