|Insights gathered from our work with premium brands across many luxury categories in global markets, as well as our own TrendLens™ and Wealth Report data, point towards a cautiously optimistic outlook for 2021.
Global HNWIs and UHNWIs have been more resilient and some have even become wealthier this year; 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 selected 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 from the current crisis, since travel budgets, which pre-Covid accounted for 20% to 30% of HNWIs luxury spending, have been diverted to luxury goods purchases 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 show that the Covid-19 has taken an emotional toll even on HNW consumers, since their wealth can only get so far in protecting 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 into 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, the 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 in the US. HNW consumers in Indonesia, India and Hong Kong are particularly optimistic about international travel.