Signs of recovery from China

  • by

According to the study of Bain & Company, published with the Altagamma Foundation, at the end of 2020 the sector will record a loss of 25%-35%, with a turnover of 180-220 billion euros. Interestingly, estimates for February indicated a loss of around 10% but the progressive spread of the Covid-19 pandemic within a few weeks forced all countries to lock down: from Europe to China, to the United States.

The closure of the business has stalled production and foreign buyers have begun to cancel orders for products with an impact on the entire supply chain. The system has stopped globally and it is estimated that to return to 2019 levels with 281billion will have to wait until 2022-2023 with 275-285 billion. Even longer the time for growth, in 2025 alone an increase of between 2% and 3% to 320-330 billion.

From China the first signs of recovery are beginning to arrive and the data are encouraging with increases in sales in the luxury sector. Tracking consumer behaviour, the Chinese increased spending on handbags, clothing and jewelry in May. Not being able to go on holiday and go shopping as usual abroad, the Chinese continue to buy luxury goods from the comfort of home. The signals coming from China are significant for the entire sector globally as the Chinese account for 35% of global sales and, according to some forecasts, will reach 50% in the coming years.

In Europe it will take longer to re-establish substantial growth also because sales of luxury brands are mainly linked to the presence of foreign tourists. The luxury industry of the Old Continent therefore needs a recovery in tourism and tourists from China and other foreign countries. A store in Milan or Paris now focuses on local customers but it is a radical change for European stores that will be forced to deal with a change of strategy.