Descent of Luxury Shopping

Luxury brands have meticulously spent decades turning style, ambition and high quality products into a multinational behemoth worth $380 billion. However, within a very short span of a few months, the coronavirus pandemic has changed the entire landscape of luxury brands. Sales have plunged, leading to predictions of a precipitous fall in the sales in 2020 and significant doubt over many brands’ ability to recover. The long-term effect of the crisis on brands will be equally dramatic, which will disrupt the current balance of customer expectations and consumption.

Brands are dealing with a paradigm shift in what “luxury” means, as consumers have become more environmentally and socially conscious alongside digital platforms becoming sources of inspiration and sales. Companies that have responded by streamlining processes, redefining luxury to be less conspicuous and more inclusive, investing in new ways of doing business, so to say,  are more likely to not only gain power through these volatile, evolving times but to emerge stronger for the future.


The crisis has stalled a decade of growth across luxury brand categories spurred by a robust global economy and the relative affluence of Chinese buyers, who accounted for 35% of worldwide luxury purchases in recent years. Growth was further fueled by the democratization of luxury products with lower opening price points, enthusiasm about new categories such as high-end footwear and casual wear, and brand partnerships.

Now, even the most ambitious projections analysed luxury goods sales dropping by 25% to 45% in 2020, which is still in a best-case scenario where a vaccine is available or the pandemic’s economic effects aren’t too serious, people can start shopping and traveling and raise the sales of luxury products. Complying to that, if we consider the worst-case scenario where a vaccine takes longer to grow or the recession is more serious, businesses may fail to recover traction and lack the capacity and desire of the people to purchase luxury products.

Bearing these factors in mind, the recovery of the industry should be gradual. While results would vary across categories, the worst-case scenario could lead to a 30% lower overall sales in 2021 than in 2019, followed by a slightly lower decline in 2022. By 2023 and revenues to return to pre-crisis rates in most categories.


For now, the new reality is upending the status quo in several ways.

  • COVID-19 crisis has made current social inequities even more apparent and stopped the near future travel and travel-related shopping. More people are now being pushed to shop online, even those who have in the past resisted it. Slowly, luxury had started to become more diverse and inclusive. The change is now non-negotiable in light of the current state of the world.
  • Although customers spend less on luxury goods during and immediately after shutdown times, brands whose products are considered to be timeless have not been and will not be affected as much as those more reliant on trends and fads in fashion. Therefore, groups that are further along in integrating new platforms and technology into channels of sales and distribution will do better.

Skin care, makeup, footwear, and leather goods are in the best position to rebound. Sales in these categories are less tied to seasons, holidays, or other key moments than are others, and online sales are already relatively strong. Sales in these categories will decline in 2020 but recover faster than others, potentially reaching pre- crisis levels in 2021 or 2022.

By comparison, watches and jewelry, due to their continued heavy dependence on sales through physical and wholesale channels, and the extreme fall in international travel, will face more challenges on average. E-commerce currently accounts for only 10% of watch sales and 5% of jewelry and eyewear sales. Ready-to – wear companies would also struggle; any revenue they gain from a seasonal turnaround may be balanced by the need to provide discounts to sell off surplus stock. Revenue will decline by 35% to 50% this year in these categories and not to hit pre-crisis rates until at least 2023.

  • China faced the worst of the crisis ahead of most other countries and the Chinese economy has now improved to the point that GDP growth is expected to exceed and continue to increase in 2019. Sales of luxury goods in China are expected to bounce back and end the year as much as 10 per cent above the 2019 mark, as more Chinese who normally shop for luxury goods while traveling home and spending in the nation.

In comparison, European countries such as France, Italy and the United Kingdom could suffer far after 2020 from the consequences of the crisis. Less international travel and low local demand in those countries will continue to affect sales of luxury products in the midst of prolonged economic fallout from the crisis. Consumers in the US and Japan anticipate a recession from the crisis, and hence plan to spend less on luxury goods. The closing of some department stores and high-end retailers, as well as the current social and political climate, would further damage the luxury market in the US.

  • Several luxury brands have been wary about venturing into e-commerce because a high-end retail experience doesn’t suit the customer standards. But as more consumers abandon personal shopping for the ease and relative safety of purchasing online things, luxury brands need to boost sales across online channels.

The crisis hit department stores especially hard, and continue to be impacted unless they embrace more customized selling practices called “clienteling 2.0” and broaden digital distribution platforms.


Shifting economic, consumer, and societal trends present challenges and opportunities for luxury brands and retailers.

  • The industry now has tabled stakes in resolving customer interest in sustainability. Brands need to reconsider their whole value chain and make sure it’s environment friendly and ethical. Such a reassessment could lead them to make a number of changes, including local sourcing of more products, reducing their carbon footprint, providing more support to local communities and supporting animal rights.


  • The year 2020 is going to be recognized as one of chaos but potentially one of transition as well. Like in other sectors, the luxury industry must take the opportunity to make diversity and inclusiveness a priority for its employees and clients.


  • The next decade will be one of unbearable affluence, with shoppers reverting to less conspicuous types of luxury in many parts of the world, Chinese consumers continue to prefer luxury items with embellishments, logos and other visible ornaments, a difference that could polarize the East-West luxury values.


  • Because travel is on hold in most parts of the world, brands have to find a way to compensate for the revenue lost from a decline in sales to tourists, especially sales to ultra-high net worth individuals. To make up for the difference, several brands would need to consider replacing Chinese tourist revenue lost with sales to local markets.


  • E-commerce accounted for 10 to 12 per cent of luxury transactions worldwide before the crisis. Lockdown times created a surge in online shopping including higher sales to novices in e-commerce. There is an expectation to experience new shopping habits after the crisis, similar to how the Asian SARS crisis has become the turning point for digital and online platforms there. Online shopping behaviours will continue to include not only transactions but also the purchase journey’s inspiration stage, which now accounts for a large portion of the online shopping-related activity of consumers. Generation Z shoppers — those aged 5 to 25—specifically spend half the time making a purchase either finding inspiration or inspiring others. Over 70% of the age group worldwide and 82% in the US determine what to buy during the buying journey’s inspiration level.


  • It remains to be seen the full extent of the effect of COVID-19 on the market, and the impending recession. To overcome the complexities, brands need to build the capacity to monitor, evaluate, and respond on signs of demand patterns. In such intelligence collection, data analysis can play a greater role, enabling marketers to build and produce the best products at the right location at the right time.

Undoubtedly COVID-19 has had a major negative effect on the luxury industry. Nonetheless, during this difficult time fascinating patterns arose. Even if the pandemic has disrupted consumer spending, this is a good opportunity for companies to focus on and re-examine their overall strategy and approach to customers. In addition to employing activations to keep consumers at the top of their minds during the outbreak, brands should be inventive on how they reach consumers, such as implementing online channels, while assessing potential ways to bring more affordable luxury & sustainability to consumers while remaining authentic to their brand values.