In its latest report titled ‘Fashion and Luxury: Winning Recovery Strategies in a Post-COVID-19 World’, Euromonitor International provides a positive outlook of the sector in times to come, adding that it is set for a strong rebound driven by pent-up demand and domestic consumption. Players in the sector thus need to be well-equipped to make the most of the upcoming demand.
With key shopping destinations opening up again, vaccination programmes being rolled out further and life returning to normalcy, the luxury and fashion industry is poised for a strong rebound post the COVID-19 pandemic, predicts the latest report by Euromonitor International. Pent-up demand and domestic consumption are going to fuel this growth, it adds.
Luxury goods and fashion were amongst the hardest hit consumer markets by the global pandemic. With international shopping destinations, the major driver for luxury goods, recording poor tourism flows in both 2020 and 2021, the total global tourist spending on personal luxury goods fell by 54% in 2020, and is still down by 50% of pre-pandemic levels. The top 10 source markets saw sharp contractions is sales that fell from anywhere between 12% and 88%. And while COVID-19 continues to threaten both fashion and luxury goods market as global travel remains down by 72% and there are new risks on the horizon, luxury goods, apparel and footwear are expected to see a sharper rebound in sales than the wider fashion industry.
Top 10 Consumer Industries by Market Growth 2021
Travel +49%, Luxury Goods (incl. Hotels) +20%, Apparel and Footwear +10%, Personal Accessories +4%, Toys and Games +3%, Pet Care +4%, Eyewear +4%, Beauty and Personal Care +3%, Consumer Health +3%, Consumer Appliances +3%
Source: Euromonitor International, Multiple Industries, November 2021
What is accelerating consumer shift?
Digitalisation: The COVID-19 pandemic has accelerated working from home and encouraged more people to move away from large cities in favour of suburban areas. The digital transformation has changed the rule book and the rise in e-commerce and new lifestyle habits is challenging long-held ideas. Such changes in consumer behaviour will shape future retail strategies. Luxury and fashion retailers must rethink their distribution strategies and explore new business models, the report states.
Digitalisation is also completely changing the nature of the traditional supply chain model across retail. Increased digitalisation and investment in products, manufacturing and retail operations are set to rise. The report highlights that while this can not only help strengthen and personalise customer engagement but also speed up production and lower overall costs.
Top Corporate Objectives for 2021-2022
Source: Voice of the Industry: Lifestyles fielded in April 2021
World: Luxury Goods Distribution by Type (USD billion)
Source: Euromonitor International Luxury Goods Ed. 2022
World: Apparel and Footwear Distribution by Type (USD billion)
Source: Euromonitor International, Apparel & Footwear Ed.2021
Top 10 technologies expected to impact fashion and luxury the most in next five years (2021-2025)
AI & Big Data Analytics 56%
AR & VR 40%
Internet of Things 40%
5G Networks 39%
QR Codes 38%
Geospatial Data 36%
Wellness: Physical and emotional well-being have come to the fore. The number of anxiety-related health issues has surged on the back of the COVID-19 pandemic, the report states, adding that a greater focus on staying mentally and physically fit has become increasingly apparent across all demographics. Gen Z and millennials have been most vulnerable to increased psychological distress caused by the pandemic, partly due to their strong need for social interactions. In fact, 35% of global respondents to Euromonitor International’s Lifestyle Survey 2021 expect to increase spending on health and wellness in the next year.
According to the report, there has been a clear increase in consumer uptake of physical exercise to improve health and wellness for both the body and mind to help fight against the effects of COVID-19. Lockdowns led to an uptake in more outdoor activities and increased spending on related products such as clothing, footwear and services, especially those close to home. With hybrid working arrangements firmly in place, sports and loungewear are set to continue growing as new lifestyles and fitness regimes are here to stay. Mixing and matching comfort pieces with business attire will increasingly become the norm.
Social Purpose and Sustainability: The impact of the pandemic has led to other shifts in behaviours with a clear drive to resist a return to the volume-driven model witnessed pre COVID-19. Instead, more companies are looking at ways to recover in a more sustainable way. Above all, consumers increasingly want luxury and fashion companies to care beyond revenue and to build back better.
Tomorrow’s winning strategies
Become omnipresent: Consumers expect seamless experience across all digital touchpoints while their activities further shift to the home. Brands must be more agile to better serve consumers, who want to conduct commerce anywhere and at any time.
Embrace new ways of selling: The digital transformation has changed the rule book. The wholesale model is under threat and the rise in e-commerce is challenging long-held principles, including the role of the retailer. It is time to explore new business models now as an imperative, before it is too late.
Investigate new technologies: Luxury brands are increasingly turning to technology to help them stay competitive in the digital era. COVID-19 has only highlighted the role that technology will play in the future. Investing in new technology requires a cost-benefit analysis as these are highly individualised.
Put the customer first: Customers increasingly expect personalisation from the brands they buy, especially in the luxury and high-end segments. Brands should leverage new technology to develop a customer-centric approach at the core of their business model.