Except for a small dip in 2003 and a larger decline during the recession of 2008-09, the global luxury goods market grew steadily from 1996 to 2019. Over the 24-year period, sales of personal luxury goods increased by 6% CAGR (compound annual growth rate), nearly quadrupling from $83 billion to $308 billion, as shown in the chart below from Visual Capitalist.

The COVID-19 pandemic prompted lockdowns around the world, forcing consumers to stay home and businesses to close, triggering a global recession. Consumers quickly shifted their spending habits, stocking up on essentials like food and cleaning products and avoiding discretionary purchases such as luxury/fashion, automobiles and home decor.
With countries easing lockdowns and economies reopening, what does the future hold for the luxury market? Who will be the winners and losers? And what changes are taking place in the luxury market to adapt to current conditions and prepare for the future?
Effect of the Pandemic on the Luxury Market
Nearly every sector of the global economy experienced a sudden and severe shock earlier this year as COVID-19 spread around the world. Because luxury purchases are, by definition, discretionary, spending on high-end goods were especially susceptible to declining sales. When Global Web Index surveyed internet users in different countries in mid-April, it found that a sizable share of respondents had delayed purchasing luxury goods because of the pandemic. The global average was 25%, but the pullback in spending was above average in South Africa (39%) and China (31%) but below average in Canada (14%) and the U.S. (13%). Delayed luxury spending in China was of particular concern because China single handedly accounted for 90% of the growth in the luxury market in 2019.
Nearly every sector of the global economy experienced a sudden and severe shock earlier this year as COVID-19 spread around the world. Because luxury purchases are, by definition, discretionary, spending on high-end goods were especially susceptible to declining sales. When Global Web Index surveyed internet users in different countries in mid-April, it found that a sizable share of respondents had delayed purchasing luxury goods because of the pandemic. The global average was 25%, but the pullback in spending was above average in South Africa (39%) and China (31%) but below average in Canada (14%) and the U.S. (13%). Delayed luxury spending in China was of particular concern because China single handedly accounted for 90% of the growth in the luxury market in 2019.
Bain & Company predicts a contraction in the global luxury market of 20% to 35% for 2020. The magnitude of the contraction will depend upon how the pandemic evolves in the coming months and whether economies rebound quickly or slowly. Estimates of the contraction range from optimistic (15% to 18% contraction, or a sales decline of $46 billion to $56 billion) to worst-case (30% to 35% contraction, or a loss of $92 billion to $108 billion).

Two countries that play a central role in the luxury market — Italy, which is home to the largest number of luxury brands in the world, and China, which is home to the world’s fastest growing market of luxury consumers — were among the first to impose lockdowns due to COVID-19. Both have begun opening back up, and China is poised to lead the way in terms of economic recovery.
The Bain report indicates that all luxury categories have seen declines, with accessories showing the most resilience and watches declining the most due to a lack of online sales channels to offset the shutdown of stores. Luxury purchases often involve a higher level of customer service and person-to-person engagement, motivating many brands to avoid e-commerce sales. Nonetheless, with consumers under stay-at-home orders and businesses forced to close, online sales became the only option for many weeks. Luxury purchases made online increased throughout the crisis and could represent up to 30% of the market by 2025.
Luxury Travel
The travel industry has been among the hardest hit by the COVID-19 pandemic. Countries have closed borders, some international flights have been prohibited and few people are interested in sealing themselves inside an airplane for several hours unless they absolutely have to. In fact, the travel industry has pulled back so much on advertising that it will likely result in the first-ever decline in Google’s U.S. ad revenue.
But according to ResearchandMarket.com’s analysis of historic and future trends, the luxury travel segment is expected to grow by 5.3% CAGR for the period 2020-2027, which takes the effect of the pandemic into account. Although the growth rate was revised downward from an earlier estimate of 6% CAGR for the period 2020-2025, overall the analysis expects that the impact of the pandemic will be short-lived.
In the luxury travel segment in particular, many travelers have the resources to travel privately, pay for custom travel packages or afford premium services. Some airlines offer first-class cabins that are fully enclosed with sliding doors, allowing passengers to socially distance themselves in an environment where space is at a premium. Every major hotel brand, including luxury resorts, has instituted rigorous health, safety and cleaning protocols to protect guests and employees. And hotel brands like Hyatt are providing unique services, such as rooftop yoga, outdoor picnics, hybrid weddings and Zoom mixology classes.

When COAST Big Sur, a destination for fine art, gifts and elevated casual cuisine located on California’s scenic Highway 1, was forced to close due to the lockdowns, it launched the Curbside Pick-Up Program to provide the local community with take-home meals. All of the program’s proceeds were donated to Big Sur non-profit organizations. And once the gallery and restaurant was allowed to open earlier this month, it rigorously followed protocols to protect the health and safety of employees and guests.
Luxury Vehicles & Collector Cars
With factories and dealerships forced to close, automobile manufacturers were hit hard by the pandemic. In the case of premium sports car manufacturer McLaren, which also runs a big-budget Formula One race team, the decline in car sales and loss of motorsports revenue due to canceled F1 races forced the company to lay off 1,200 employees.
The Geneva Motor Show, which regularly attracts half a million visitors, was canceled in February by order of the Swiss government, just days before it was scheduled to begin. The event was postponed to March 2021, but it was announced this week that, due to weak demand from automobile manufacturers and other exhibitors, the postponed event may not take place and the show is up for sale. The news follows an earlier announcement by supercar manufacturer Lamborghini that it will no longer participate in car shows. Speaking to Autocar, Lamborghini’s chief marketing and communications officer Katia Bassi said: “We decided to abandon the motor shows because we increasingly believe that to have an intimate relationship with the customer is key and motor shows are no longer aligned with our philosophy.”

Other luxury car brands like Mercedes-Benz have pivoted to virtual events, while boutique brand RUF Automobile decided to share its story with customers and fans through a short documentary called “RUF: Love at the Red Line.”
Some luxury automotive brands have weathered the storm rather well. Even though its factory was shuttered, Ferrari reported better than expected earnings for March and a surge in its share price pushed the company’s valuation above that of mass-market manufacturers like General Motors and Ford. Tesla reported its highest monthly sales ever in China for the month of March. Some luxury car brands experienced unanticipated recoveries thanks to pent-up demand among affluent buyers during the lockdowns.

Another luxury automotive brand, small British outfit Lotus Cars, has seen a major uptick in its share of voice in the news cycle and reviews of its Evora GT (the only Lotus car currently available in the U.S.) have been overwhelmingly positive, bringing Lotus into the same conversation with much larger brands like Porsche. With major financial backing from Geely, Lotus has made major progress on renovations and new construction at its facility in Hethel, England, including a new factory for it’s $2.5 million all-electric hypercar, the Evija.
The pandemic may have a short-term impact on luxury car sales, but it’s likely to have long-term impact on automotive design. With cars offering self-contained privacy, safety and mobility, manufacturers are looking to add features that put drivers at ease, everything from air purifiers and mental health technology to an invisibility cloak (you read that right). “People want to feel protected, and now with the pandemic, even more so,” said Adam Hatton, the creative director for exterior design at Jaguar Land Rover, in the story published by Bloomberg. “We are working on the idea of Jaguars being a big, beautiful sanctuary—like a spa. It’s even more relevant now than ever.”
In the collector car market, the lockdowns helped drive a huge increase in online traffic for sites like Bring A Trailer and ClassicCars.com. Bring A Trailer received 27 million page views in March, an increase of 45% over the previous year, and during the first two weeks in April, the value of lots sold increased by 35% compared to 2019.

ClassicCars.com, the world’s largest online marketplace for classic and collector vehicles, surveyed more than 2,500 of its users in May. The results showed a high level of consumer confidence, with 65% of respondents spending more or about the same on non-essential purchases in 2020 as they did last year. And many see collector cars as viable means of investment, with 43% favoring them over other investment options.
“The numbers are telling us that the collector car market is healthy and thriving,” said ClassicCars.com Founder and CEO Roger Falcione. “With such a volatile stock market and plenty of free time on their hands, the allure of owning a physical and usable asset like a collector car has only grown for our customers.”
Luxury Goods
As mentioned above, at the height of the pandemic, consumers spent more on essentials and less on luxuries, often delaying luxury purchases due to economic uncertainty. The impact of the pandemic on luxury goods became readily apparent in early May when luxury retailer Neiman Marcus filed for bankruptcy.
But affluent buyers still have money. After the initial shock of the pandemic wore off, many of them started spending again. Instead of premium travel, they bought home decor to make sheltering in place more enjoyable. Instead of buying stocks or bonds, they bought investment-grade cars or jewelry.
GEARYS Beverly Hills, one of the most respected jewelry, timepiece and home goods retailers in Los Angeles, has been around for over 90 years, so it has survived more than its fair share of downturns and challenges. During the pandemic it continued to serve and care for its customers, many of whom have shopped at the boutique for generations.

According to Tom Blumenthal, President and CEO of GEARYS, customers continued to acquire Rolex watches during the pandemic and there has been higher demand for prestige homeware because customers are doing more at-home entertaining. The luxury retailer offers curbside pickup and other contactless purchase options, and since its store reopened it has followed rigorous health and safety protocols.
For the first time since 1939, Rolex will not attend the Baselworld watch industry exhibition next year. After Baselworld cancelled its 2020 event without consulting major brand stakeholders, Rolex announced it will not return and instead has partnered with Patek Philippe to pursue its own smaller, more focused exhibition starting in 2021.

On July 1, Tudor, a sub-brand of Rolex, launched its newest watch, the Black Bay 58 Blue, entirely online. The event was announced on social media with a teaser, embargoed product samples and press materials were sent in advance to key influencers and media, and within minutes of the official launch, brand ambassador David Beckham posted on his channels about the new watch. The virtual product launch was a success, with the new watch announced on Tudor’s social channels and generating lots of buzz. With Rolex and other brands pulling out of Baselword, just as some car manufacturers are pulling out of auto shows, virtual events may become a mainstay in the future, and they could be coordinated with smaller, more intimate events where brand representatives go to select cities and meet one-on-one with collectors, media, authorized dealers and high-profile customers.
The Future of the Luxury Market
Even if, as Bain & Company’s forecasts suggest, sales in the global luxury market contract this year, the steady increase in the total value of the luxury market since the mid-1990s suggests that demand will continue to grow and the market will expand over time. Consumers want what they want, and as standards of living continue to rise around the world, more of them will want the finer things in life.
Nonetheless, there is evidence to suggest that the luxury market is changing. Some of these shifts were already happening and the pandemic merely accelerated the pace of change. Others are new and reflect a reshuffling of priorities.
10 Trends Affecting the Future of the Luxury Market
- Luxury is expanding its online presence. Although luxury goods have traditionally been sold in brick-and-mortar stores, COVID-19 has demonstrated the limitation of an in-person-only sales model. When travel is restricted or reduced and stores are forced to close, in-store sales grind to a halt. McKinsey recommends that luxury brands enhance digital engagement and put digital at the center of their operating model. Only by having a direct-to-consumer (D2C) sales strategy to complement in-store sales can brands adapt to unexpected changes to normal business operations.
- Live events are being replaced with virtual events. Although virtual events cannot replace the personal interaction and energy of a live event, they can have much broader reach. Shanghai Fashion Week, which took place online in late March, drew 11 million viewers and sold $2.75 million worth of clothes and accessories direct to consumers during live streams. Sotheby’s hosted a series of live-streamed, online auctions on June 29, and an anonymous telephone bidder paid $85 million for a Francis Bacon triptych. And Tudor’s virtual product launch for its new watch on July 1 was a success.
- The luxury market will continue to grow over time. Although the Bain & Company forecasts anticipate a contraction in the luxury market in 2020 even under the most optimistic scenario, the momentum of growth in luxury sales sustained over the past several decades is expected to increase. More forward-looking estimates anticipate 3% to 5% annual growth in the luxury market through 2025. The short-term might be bumpy, but the long-term outlook is favorable.
- Asia will continue to drive growth in the luxury market. China accounted for 90% of the growth in the luxury market in 2019, and by 2025 Chinese consumers will account for 46% of the global market (up from 35% in 2019). China and India are the world’s most populous countries, and as their younger consumers earn more money and enjoy a higher standard of living, they will be major drivers of future growth in luxury purchases.
- Younger buyers aspire to own luxury brands. According to a survey published by Optimum, 25% of U.S. adults aged 18 to 34 plan to increase their spending on fashion items in the wake of coronavirus. Gen Z and Millennials make up 500 million of China’s 1.4 billion inhabitants, and in 2018, this group — flush with disposable income and optimistic about their futures — was responsible for about 60% of growth in total spending. To stay relevant, luxury brands need to engage with younger consumers on platforms like Instagram and YouTube.
- There will be growth in the second-hand luxury market. Many luxury buyers see physical assets — collector cars, jewelry, artwork — as safe, tangible investments during recessions and times of uncertainty. In times of need, some affluent consumers sell luxury items to free up cash. For less affluent buyers, second-hand luxury goods are a more affordable path to an aspirational lifestyle, and by owning such goods they may develop an affinity for particular luxury brands.
- Consumer demand for responsible luxury will increase. With a widening gap between rich and poor, many consumers are now scrutinizing companies’ social values. By balancing the triple bottom line of profit, people and planet, corporate social responsibility (CSR) provides a way for companies to demonstrate their values, improve their brand image, attract and retain customers and employees, and provide support for the community and the environment.
- There will be more consolidation in the luxury market. The strongest luxury brands have the resources to weather economic downturns and crises like the COVID-19 pandemic. They also have the cash resources to buy up distressed competitors.
- The luxury market will be increasingly diverse. According to Bain & Company, by 2025 the global luxury customer base will be more diverse in terms of spending power and purchasing drivers. There is a growing base of emerging luxury customers, primarily drawn from the Asian middle class, who want innovative “entry-to-luxury” products.
- Luxury brands that master omnichannel retail and digital marketing will rise to the top. Brands, luxury and non-luxury alike, face mounting pressure to become more customer-centric, digital and agile. Omnichannel retail creates a single customer experience across all sales channels, and digital marketing (DM) is an efficient and cost-effective way to move customers through the sales funnel. Luxury brands that balance brick-and-mortar sales and online sales and employ a comprehensive direct-to-consumer (D2C) sales strategy will retain existing customers and attract new ones.
Resilience
Many luxury brands have been around for more than a century. They’ve weathered recessions, depressions, world wars and even the influenza pandemic of 1918. Luxury brands have learned to be resilient to not only survive but thrive.
Patek Philipe, a Swiss luxury watch manufacturer founded in 1839, had never sold a watch online before the COVID-19 pandemic. It prefers retailers to cultivate a bond with clients when they purchase watches in-person. But on April 1, it relaxed its prohibition of online sales “for a temporary period to help Patek Philippe authorized retailers that are closed due to the COVID-19 situation.”
Luxury brands will continue to nurture and protect their image and they will always place a high priority on customer service. Humans are social creatures, and developing relationships with customers is a human way of doing business. The luxury brands that will succeed in the years ahead are those that learn how to strike the right balance between the convenient and the personal.