At the end of 2019, worldwide sales of luxury goods exceeded €910bn, surpassing the US$1 trillion mark, according to Euromonitor International. Within this, super premium beauty and personal care represented €44.1bn (US$48.3bn), with super premium fragrances holding the lion’s share at €17.6bn (US$19.3bn). Super premium skin care and super premium colour cosmetics totted up €11.7bn (US$12.9bn) and €7.8bn (US$8.6bn), respectively.
The total global luxury goods market had been forecast to grow by around 3% in 2020, but with the ongoing disruption caused by COVID-19, Euromonitor International now forecasted a decline of 18%.
Luxury goods already facing headwinds pre-COVID
Fflur Roberts, head of luxury goods research at Euromonitor International, said sales had been hit hard by worldwide coronavirus lockdowns, exacerbating what had already been a challenging environment for luxury.
“In recent years, we’ve had looming threats of a trade war, increased global economic uncertainty and shifts in consumer behaviour and values – this has all led significant shifts across the luxury goods landscape which was essentially already tackling unprecedented headwinds,” Roberts told CosmeticsDesign-Europe.
“However, nothing in the modern evolution of the industry – and that includes the global financial crisis – compares to the global disruption that we are now seeing caused by the COVID-19 pandemic,” she said.
The beauty industry, both luxury and non-luxury, she said, was set to “fare somewhat better” than luxury, with a value decline of 2% expected for 2020. Whilst luxury beauty had been immediately impacted by COVID-19, Roberts said there would be a quicker bounce back to normality compared to other categories like luxury cars and hotels.
Significant luxury declines in Switzerland, Germany, Italy and France
Considering the global picture, Roberts said there were ten countries contributing most significantly to the downgrade in luxury goods; four of which were in Western Europe: Switzerland, Germany, Italy and France.
Switzerland was set to see the value of its luxury goods market decline by more than 25% – the largest decline globally – closely followed by the USA and Canada. Germany, Europe’s largest beauty market, was set to see luxury goods contract in value by 23%.
France and Italy, two more of Europe’s biggest beauty markets, would see their luxury goods markets decline 20% in value for 2020.
“While some luxury goods categories and retail channels may be less negatively affected than others, for example pure online luxury retailers will likely see less declines in sales than store-based luxury retailers, the pandemic represents an unprecedented shock to all global demand and categories,” Roberts said.
Consumer confidence hit, luxury wellbeing an opportunity
Roberts said consumer confidence had “undoubtably been hit” during this global pandemic.
“Many fear contagion in the retail space whilst others see little or even no point in buying luxury goods as they see no opportunity to use them in the foreseeable future,” she said.
And whilst wealthy consumers would likely not feel as squeezed as those in lower-income groups during this crisis, she said the prolonged global lockdown meant “big spends on all discretionary items might not be in keeping with the current customer sentiment”.
Speaking in a recent webinar, Roberts pinpointed wellbeing and mental health as two key areas of importance that luxury goods brands must consider and noted it would be vital brands were empathic and relevant.
According to Euromonitor International, 40% of high-income consumers were taking measures to manage stress, anxiety and mental health. Roberts said mental wellbeing had clearly risen in importance during the current pandemic.
In Euromonitor International’s latest health and nutrition survey, 64% of consumers identified mental wellbeing the most important aspect of ‘being healthy’ in 2020. Emotional wellbeing was also identified among 56% of respondents.
