Luxury has been one of the most hit industries in the retail sector due to the COVID-19 pandemic, which has 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 of 2020, according to data analytics company GlobalData, which said brands are now turning to affordable luxury to stay afloat.
According to GlobalData’s Retail Intelligence Centre, APAC luxury sales are projected to register a negative growth of 3.4 per cent to reach $60.3 billion in 2020, compared to $62.4 billion in 2019.
“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,” said Suresh Sunkara, retail analyst at GlobalData, in a company statement.
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.
“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,” Sunkara concluded.