Nearly 59 per cent of respondents to a survey by the Global Expert Network members of the Luxury Institute believe, current economic slowdown will lead to a downturn in the global luxury goods and services sector. Around 41 per cent predict, current situation will lead to a recession in the global luxury sector with aggressive interest hikes from central banks to result in mass scale unemployment, especially in the technology sector. The survey predicts, consumer spending across all income levels will tighten with persistent fluctuations in the stock market to influence the budgets and psyches of rich consumers.
Recession to impact growth in Asia-Pacific
Respondents believe, sales of luxury brands will be affected to a certain extent. Consumers in the Asia Pacific region, led mainly by China, will remain resilient to the COVID-led disruptions, says a report by Bain & Co. Expecting a recession, the survey shows its impact will be particularly strong in the Asia/Pacific region as China continues to remain vulnerable due to its unstable real estate market, a slowing economy, and continuing supply chain issues. Experts say, the impact of recession on the North American market will be relatively less due to America’s stronger economy, including higher energy self-sufficiency and its distance from the Russia-Ukraine war
Luxury sales in Europe to fall
Experts predicting a downturn in Europe believe sales of luxury goods in the region will fall in the medium range, though those expecting a recession expect a stronger impact. They believe, the Russia-Ukraine war will lead to a rise in local energy prices. It will also increase the prices of consumer staples in the middle of Europe and impact the economic drivers of Europe: Germany, France, and UK.
Consumer technology to ride over recession
The category most likely to survive this downturn is consumer technology, say experts. While consumers’ expenditure on many things is expected to decline, they will continue to spend on food, housing, energy and technology goods and services. The travel and leisure categories will be more heavily impacted despite showing strong growth post pandemic.
The fashion and leather goods category will be more impacted by the downturn than necessity categories. Luxury watches and jewelry category will witness medium level impact due to supply shortages and high investment value.
Department stores to remain worst affected
According to the Luxury Institute survey, department stores will remain the most vulnerable category due to historically high overheads, high inventories, and low margins with digital multi-brand luxury retailers failing to make any profits.
