{"id":3380,"date":"2022-07-25T13:00:01","date_gmt":"2022-07-25T11:00:01","guid":{"rendered":"https:\/\/magazine.lineapelle-fair.it\/?p=3380"},"modified":"2022-07-25T15:26:16","modified_gmt":"2022-07-25T13:26:16","slug":"the-endless-growth-of-luxury-and-the-reasons-for-its-power","status":"publish","type":"post","link":"https:\/\/magazine.lineapelle-fair.it\/en\/focus-en\/the-endless-growth-of-luxury-and-the-reasons-for-its-power\/","title":{"rendered":"The endless growth of luxury and the reasons for its power"},"content":{"rendered":"

Brand turnovers are skyrocketing, and the luxury goods industry doesn’t give a damn about any emergencies. While analysts rack their brains to figure out the reasons for its power and how long this relentless growth will last, the industry finds antidotes to the uncertainty that will retain even more of its customers<\/strong><\/em><\/p>\n

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The growth of luxury<\/strong> shows no signs of slowing down. Many had long expected a slowdown<\/strong> given the challenging global economic environment. Instead, the high-end always finds the right booster<\/strong> to climb steadily up the ladder. In pandemic<\/strong> times, it was China<\/strong> that drove sales. Now that Beijing has lowered the pace, the US<\/strong> and Europe<\/strong> are taking over. Some customers are never<\/strong> satiated<\/strong> with designer handbags everywhere, spending ever higher, almost oblivious to what is happening around them. How long will this continue? How long will the current reasons for its power remain valid and determine the sector’s proven resilience?<\/p>\n

The endless growth of luxury<\/strong><\/h3>\n

Analysts believe that the growth of luxury is set to continue for at least another four to five years<\/strong>. Among the growth drivers, they point to sustainability<\/strong> (luxury is considered ‘green’ due to the durability of products), the second hand<\/strong>, and certain emerging markets<\/strong>. For example India<\/strong>, Vietnam, Thailand, the Middle East, and Korea<\/strong>. The financial market, however, is waiting in the wings for luxury: speculating on the possible deflation of its golden bubble. Can the high-end overcome all the obstacles one by one<\/strong>? For example, lockdowns, inflation, economic slowdown, and the war in Ukraine?<\/p>\n

The reasons for its power<\/strong><\/h3>\n

HSBC<\/strong><\/a> does not throw it into philosophy and arms itself with concreteness and simplicity. Luxury is resilient:<\/p>\n

1)<\/strong> because it feeds on a prosperous clientele, which does not despair if inflation is skyrocketing. A clientele that has a portfolio that can withstand risks and uncertainties;<\/p>\n

2)<\/strong> The financial performance of safe havens (think Herm\u00e8s and Chanel handbags) also attracted middle-class consumers.<\/p>\n

For Bain & Company<\/strong><\/a>, on the other hand, the ‘resilience of the industry’ has come from consumers’ desire to return to their pre-Covid lifestyles. The waning of the pandemic ‘is acting as a huge booster, creating a wave of outsized luxury demand<\/strong> that has yet to normalise,’ say the Bernstein<\/strong> analysts. But it is unclear how long this incredible euphoria will last. So unbelievable that it brought (they say) $4.45 million<\/strong> into the till of the new Herm\u00e8s boutique in Wuhan<\/strong> on its first day of opening<\/strong>. Is it possible that luxury customers are never afraid of economic recession and inflation? The question has no answer. In fact, since the advent of the pandemic, financial analyses are lasting like a story on Instagram<\/strong>. In other words: they are exposed to crazy volatility, capable of disrupting the plans of the world economy and the brands.<\/p>\n

Luxury goes crazy<\/strong><\/h3>\n

According to the Luxury Outlook 2022<\/strong>: Advancing as a Responsible Pioneer<\/strong> by the Boston Consulting Group and Comit\u00e9 Colbert<\/a>, luxury is expected to grow from EUR 388 billion in 2022 to EUR 494 billion in 2026<\/strong>, a growth rate of 6% each year<\/strong>. More cautious is Bain, which calculates the total takings in 2021 at 2800 billion euros. In the optimistic scenario, a value will grow by 10-15% this year; in the more conservative one, it will only be between 5 and 10%. While in the 2025 scenario, the sector should reach a revenue level of between EUR 360 and 380 billion.<\/p>\n

Boosters<\/strong><\/h3>\n

Among the boosters of luxury is the second hand<\/strong>, which the sector could and should begin to exploit better.<\/strong> And there is sustainability<\/strong>. Indeed, luxury is emerging as a ‘sustainable sector’ because its products<\/strong> last a long time<\/strong>, are repairable,<\/strong> and are made with respect<\/strong> for people<\/strong> and resources<\/strong>. Another not insignificant aspect is that the pandemic has forced brands to re-evaluate little or untapped opportunities to reach their consumers. A good resource for the coming years. Then there is the whole issue of the Metaverse, which could represent another source of income. As well as the revival of travel.<\/p>\n

The real star is leather goods<\/strong><\/h3>\n

However, there is one certainty in the many factors and innumerable hypotheses. The real luxury star is leather goods<\/strong>: the handbag, in particular. But footwear is also proving to be a driving force, as Bain & Company confirms. In the future, then, there will be a full recovery in China as soon as it recovers from the pandemic. And the takeover of the Hermes boutique in Wuhan could be just a<\/strong> foretaste<\/strong> of the potential of the Great Wall market.<\/p>\n

Possible brakes<\/strong><\/h3>\n

The list <\/strong>is quite long: the pandemic, rising inflation, the GDP slowdown, and the war in Ukraine. But what does luxury fear most<\/strong>? The lack of workers<\/strong>. And, in the short term, China. So much so that some see it as a risk<\/strong> that designer labels would do well to diversify their markets so as not to be too dependent on Beijing and its ‘common prosperity’. (mv)<\/p>\n

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