Luxury: the trends that are shaping up for the summer of 2022

According to the latest Bain & Company report "Rerouting the future" in collaboration with Fondazione Altagamma in its latest update, the luxury sector has rebounded strongly in 2021 totalling €288 billion in sales, up 7% on 2019. The momentum would appear to continue in 2022 with a 13-15% increase at constant exchange rates in the first quarter compared to the same period in 2021. The main reasons for this faster than expected recovery are said to be the increase in domestic spending and tourism in Europe, the impact of the Russian-Ukrainian conflict on sales which is limited to its region, increased momentum in the US and South Korean markets and a Chinese market which has recorded very good sales figures during the Chinese New Year and into March 2022. In its most pessimistic estimate, Bain forecasts a 5-10% increase in sales for 2022 compared to 2021, and total revenues of around €305-320 billion.

But is the scenario as romantic as described and will it persist in its upward curve? In China, the picture is not so rosy. After two months of confinement in the main cities, the end of the health crisis looks less glorious than the first. If the famous "revenge buying" of 2020 had delighted the luxury brands, the first signs of reopening show little commitment from the Chinese to spend on goods that are not basic necessities. In the article published on the Reuters website on 1 June, the fear of uncertainty marked by the government's zero-Covid policy prevents consumers from spending recklessly. Fear of tomorrow dominates. Even the much-anticipated 618 Shopping Festival on the 20th of June was disappointing. The national event that promotes online sales did not reproduce the expected post-containment rush that took place in 2020 with a 40% increase. And the Watch Federation's export figures for May, published on 21 June, do not yet reflect the reopening of shops.

There remains the United States to raise hopes. And in this case, the FH watchmaking figures for May confirm the trend, since the market recorded a strong increase of 34.8% to 327 million Swiss francs. But will the Fed's interest rate hike have a beneficial effect on inflation without dampening consumption? The 20% drop in S&P 500 stocks since the beginning of the year shows a feverish mood, linked to inflation and soaring prices.
In other sectors, such as the automotive industry, it is said off the record that sales of new mid-range cars have been at a standstill for two months, unrelated to the delivery shortage. Stellantis' share price, like other automotive stocks, has fallen by 20% since the beginning of June. Only the top end of the market is said to be doing well.

In conclusion, the slowdown in sales that is also looming for the luxury sector will consequently see the most desirable brands increase their pricing power, which is already very marked at the end of 2021 with increases of 5-10%, and hope to compensate for the drop in revenues.
Luxury will have to increase its desirability if it hopes to regain the "feel good factor"…