Bye-bye growth: we will be talking again of it in 2021. That’s the summary of what said by Bain & Co with regards to the Coronavirus pandemic’s effect on luxury. No more “single digit growth”, as previously forecasted in the Fall, but a decrease of turnover that could be equal to -25% on yearly base, with even greater damages on profits. The Luxury after Covid-19: changed for the good? Report showcases forecasts that, goes without saying, are now unpredictable and will depend on the pandemic. Best case scenario says the loss will be contained between -15% and -18%, while worst case analysis says between -30% and -35%.
Bain & Co’s verdict
“According to the latest data as of March 25th, we can do nothing but revise our forecasts – explain Claudia d’Arpizio and Federica Levato to IlSole24Ore -. 2018’s revenue was of 281 billion euro (+4% at constant rates on 2018) and we had foreseen growth of between +2% and +5% form here till 2025”. What’s the current status? “The first quarter will close with a decrease of sales between 25% and 30% – answer Bain’s consultants – and the losses for the entire fiscal year will be of between -22% and -25%, equal to 60-70 billion euro less”. The shock will be such that brands will revise their whole businesses. Product cycle and stock management will be completely changed.
“We believe businesses will begin growing again in 2021, fuelled by trends we had identified in 2019, which would have been applied to 2020 – continue the authors -. The push will come from China, digitalization and Generations X and Y”. The report though, doesn’t exclude that the pandemic’s effects will perpetuate in 2021 as well. While some countries will experience a quick recovery, some will see gradual decreases and a stable continuation. China and other Asian countries will be part of the first group, while Japan will be in between categories. Europe and Americas are expected to have a slower recovery time.
The challenges businesses face
Not everyone will go back to normal, Bain’s consultants believe. The industry must re-think itself, as quickly as possible. Operators must be put in safe conditions, but there must also be a strategic recovery plan in place. This experience will be a strong accelerator for the segment’s players. The main direction will be digital. “The luxury segment is complex, and big players are giant in size – they conclude – but they must make all decisional process more agile. The industry’s supply chain must follow with two guiding principles: flexibility and sustainability”.
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