Luxury Market Recovery in Asia Pacific
Mar 5, 2021
This month’s Fashion Friday podcast series by Euromonitor International analyses the drivers of the recovery of the Asian luxury market, with examples of brands putting extra effort into expansion in the Asia Pacific region.
Under COVID-19, the global luxury market shrunk by 15%. However, in the Asia Pacific, stronger resilience, where the industry has only registered a 7% decrease in 2020 is expected. While for other major regions, such as North America and Europe, the market declined by nearly 20%.
This resilience in APAC has been shaped by three key drivers: 1) consumer confidence in terms of future expenditure and investment has appeared much more positive in APAC, 2) robust luxury consumption among Chinese luxury shoppers has been shifted from overseas markets to the domestic market due to widespread travel restrictions in 2020, and 3) digitalisation of luxury brands catalysed by the COVID-19 pandemic has compensated the loss from physical retail much better in APAC. Digitalisation was already in motion pre-COVID-19, but the pandemic accelerated this progress. Proactive interaction and engagement with the younger generations continue to play a key role in regaining consumers’ trust and loyalty as we move into a post-COVID-19 world, especially in China. Technology conglomerates have been playing an increasingly influential role in China’s luxury Industry. Prime examples are Chanel bringing its fashion show online for the first time with Tencent and Tmall launching luxury Soho in early 2020 as an online outlet.
Personalisation and sustainability are the other two essential trends. Specifically, in sustainability, circularity is another key trend influencing the market and future brand strategies. For example, in Hong Kong, pre-loved brands and consignment sites have been transitioning from being niche to more mass orientated. At the global level, Gucci is taking steps towards circular luxury by joining forces with the second-hand platform, The RealReal. Personalisation plays an important role in the luxury goods market now and in the future. In Japan, personalisation was implemented in both goods and services. After the Japanese government announced the state of the emergency, Tiffany started to offer a free engraving service that the brand usually charges for at USD20 or more. The promotion aimed to target the ceremony season in Japan and emotionally support consumers. Luxury cosmetics brands including Clé de Peau Beauté launched an online consultation service where customers can book a slot to have a one-to-one consultation with a beauty adviser.
Between 2020 and 2025, the luxury goods market is expected to expand at 7% constant value CAGR to add a further USD87 billion. To grow in this attractive market, it is essential for companies to understand the key trends and successfully engage with consumers in this unique region.
Image: Andrea Piacquadio / Pexels