|Our work with premium brands across categories in global markets as well as our own TrendLens™ and wealth data points towards a cautiously optimistic outlook in 2021.|
The HNWIs and UHNWIs have been more resilient and some have even made more money this year and we expect a strong recovery in Asia, led by a V-shaped recovery of the economy in China and other markets, like Korea, Taiwan and even Japan, where the virus has been brought under control and luxury brands can leverage large domestic markets.
The data show some tentative recovery in select categories in the U.S. market, but the economy is still fragile and brands need to monitor the situation closely for pockets of recovery. Europe has been heavily impacted by lack of tourism, a second Covid-19 wave and the need to develop local consumers to help tide the crisis, since most overseas tourism has dried up due to International travel restrictions.
Categories that have done well include electronics and consumer tech, luxury auto, skincare and jewelry.
Paradoxically, these categories may have benefited by the current crisis, since travel budgets, which pre-Covid accounted for 20% to 30% of HNWIs luxury spending, have been diverted to luxury goods purchase and domestic sales.
The recovery in Asia is led by well-known, iconic and trusted brands and boosted by loyal customers. Consumers have had less time to shop and explore new trends and brands, so they resort to familiar luxury brands as a sort of “comfort luxury”, looking for reassurance in times of uncertainty.
Our data clearly shows that the Covid-19 has taken an emotional toll even on HNW consumers, since their wealth can only get that far to protect them. As a result, many have focused on their wellness and health, rather than on more hedonistic pursuits. We see in the data more attention to social issues that have come to the forefront during the pandemic and increased concern about the community and the world around them.
This new mindset has translated in increased loyalty towards brands that have connected with them in meaningful ways during the pandemic, brands that have reached out and showed empathy.
One of the categories most impacted by the Covid-19 pandemic has been travel. While it is difficult to predict when the sector will fully recover, our data clearly show that there is strong pent up demand for International travel. Even with the pandemic and its effects, majority of the HNW consumers across Asia plan to take some form of international leisure travel within the next 12 months. The same is true for the US. HNW consumers from Indonesia, India and Hong Kong are particularly optimistic about international travel.
1. LESS (BUT BETTER) IS MORE
We all have learnt to live more frugally during the Covid-19 pandemic. This is also true for HNW consumers, who have had time to slow down and realize that luxury shopping is not as essential as they were inclined to believe. We believe that this will translate in some cases into less frequent luxury purchases but of a higher quality, bringing back luxury to its original definition of quality, timelessness and long-lasting essence.
2. LIVING FOR THE MOMENT
The Covid-19 has brought back attention to the present. While the prevailing sentiment at the beginning of the pandemic was one of dread and uncertainty, people have adapted and found new ways to enjoy the moments that are often taken for granted in their lives. Brands, particularly in wellness, hospitality and leisure, will do well if they are able to capitalize on everyday relevant experiences, rather than “lifetime” ones, which was the norm pre – Covid.
3. FOCUS ON YOUR MOST LOYAL CUSTOMERS
This is the right opportunity for luxury brands to focus and pamper the most loyal consumers. Gone are the long queues of aspiring customers who only buy low-priced accessories. Customers who visit luxury stores now are the ones that are truly loyal to the brand. Make sure that your service is of the highest level and offers clients quality time at the store or the convenience of shopping from their homes.
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Last week we had a successful webinar session on the 2021 Luxury Consumer Outlook with senior executives from more than 70 luxury brands joining online from across Asia and Europe! Our managing director Amrita Banta discussed what lies ahead for the luxury industry in 2021 and how to recapture Asian and U.S. affluent and HNWIs spend, sharing invaluable insights based on work done across over 100 premium projects globally in 2020 and data gathered from interviews with over 4,000 affluent and HNW consumers across key Asian markets and the U.S.
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