The worst case scenario takes into account a softening in China demand and wind down of U.S. Covid relief programs. Under the best case scenario, China will continue to grow, the U.S. and EU will have a strong holiday season and Japan continues its fast-paced vaccination program.
Millennials and GenZ consumers will account for nearly two-thirds of personal luxury goods sales in 2021, up from 44% in 2019. By 2025, they will make up over 70% of the total market as GenX and Baby Boomers’ influence and spending lessens. Their primary mission in the past was focused on creating economic value. In the future, they must expand to building social value around environmental sustainability and diversity equity and inclusion and, most importantly, cultural value that reflects brand meaning.It’s on the cultural front that luxury brands may find challenges. Luxury brands’ growing global footprint requires adapting to the very specific and often conflicting interests of different cultures.
Right now, Bain remains bullish on prospects for the Chinese consumer population. But for the luxury market to reach its projected €360 to €380 billion by 2025, the Chinese consumers must more than double their current consumption levels. What Bain defines as “rising stars” – brands with <€200 in sales but are growing at double the market’s CAGR – represent only about 2% of the luxury market. Bain calls out scale as a competitive advantage for the major players, while it also stresses “insurgency” as a “fundamental success factor for players of any size.”