Luxury has been one of the most affected industries in the retail sector due to the COVID-19 pandemic. The crisis led to the closure of several luxury stores across the Asia-Pacific (APAC) region, bringing their revenue stream to a standstill during the first half (H1) of 2020. Against this back drop, brands are turning to affordable luxury to stay afloat and survive in the market, says GlobalData, a leading data and analytics company.
According to GlobalData’s Retail Intelligence Center, APAC luxury sales are forecast to register a negative growth of 3.4% to reach US$60.3bn in 2020, compared to US$62.4bn in 2019.
Suresh Sunkara, Retail Analyst at GlobalData, comments: “COVID-19 has forced luxury brands to postpone their fashion shows, cancel promotions events, and disrupted supply chains. However, since the start of the second quarter (Q2) of 2020, several countries in the region including China, Japan and South Korea have lifted most of their lockdown measures to bring normalcy in their economies while countries such as India have begun phased relaxation of lockdown measures. This will bring some relief to luxury retailers as they can now open their stores and resume operations.”
However, due to low consumer confidence in APAC which is currently at an all-time low, luxury retailers are not expected to regain their sales growth anytime soon. In addition, the threat of an extended COVID-19 crisis and an impending global recession will force consumers in the region to cut back on big-ticket items, especially luxury products.
Sunkara concludes: “International travel restrictions are still in place, resulting in continued closure of duty free stores in airports, a major contributing channel for luxury sales. As a result, store closures and sales decline are bound to force luxury retailers to re-evaluate their price positioning and launch affordable luxury product lines to revive volume sales in these testing times.”