Who doesn’t love nice things? While many aspects of the pandemic remain uncertain (ie: are we still in one?) one takeaway is crystal clear: Americans have a serious love for luxury, and they’re not afraid to act on it.
Rebounding after a most difficult year
Almost every retail category was forced to contend with major declines in sales and profits as a result of the COVID-19 pandemic, and the luxury industry was no different. Luxury sales in the United States decreased by 14.3% in 2020, right in line with the worldwide luxury market which contracted by 15.2%. According to Deloitte’s Global Powers of Luxury Goods 2021 report, sales across the top 100 luxury companies were down 12.2% in 2020.
US Luxury Goods Revenue (billions)
Despite this, the loosening of government restrictions in 2021 resulted in an uptick in foot traffic to luxury retail locations, which helped the industry to bounce back and record over $64 billion in sales. This brought the industry within 7% of pre-pandemic levels, and forecasts indicate that we are on track to eclipse 2019 levels by the end of 2022.
Placer.ai reported that visits to luxury stores in the US were back to pre-pandemic levels by July 2021. This rebound was aided by the stability of the luxury consumer base: office-using employment never dipped below 10% of its pre-pandemic levels and has recovered since to within 3%. These high-earning individuals experienced relatively little turbulence due to COVID and were eager to use their discretionary income on luxury goods. As a consequence, the United States accounted for an estimated 31% of worldwide luxury activity in 2021, up from 22% in 2019, beating Chinese luxury shoppers for the first time since 2015.
Share of Worldwide Luxury Activity
Physical stores: The cornerstone of the luxury business model
Now that we’re on the other side of the pandemic (according to President Biden, at least) and luxury sales and foot traffic have recovered, luxury retailers have set out ambitious growth plans centered around their bread and butter: physical storefronts. While the retail industry overall continues to heighten its emphasis on in-store experience, luxury retailers benefit from having long been innovators in this space. Their locations are known for curating an elevated experience and capturing the intangible quality of “luxury” that consumers look to these brands for.
These retailers are setting their sights in tandem on the urban corridors that they already know, as well as new markets in the sunbelt that have grown in residential population since the onset of the pandemic. Hermès is one retailer that has committed to this two-pronged growth strategy, having announced two new stores in the past year in New York City, as well as a new location in Austin, where it will be the first luxury retailer on South Congress Street . Gucci is taking a similar approach to expansion: the retailer recently announced a new 10,000-square-foot location in the Meatpacking District in New York, while also building its first standalone retail location in San Antonio at the Shops at La Cantera. Chanel has also been particularly active of late, opening 15 new locations in the US since 2020, in places like Nashville and Las Vegas.