The recession in 2008 was a global one. Hitting all countries and all facets of the economy. With the recession, many areas that had seen growth began to see trouble. For the American luxury market, the years of the recession and just after are some of the most interesting. With each year presenting new challenges and new results.
2008: In 2008, the first year of the recession, the American luxury market, as well as the global market stayed relatively stable. Though price tags in the luxury market increased, the overall price did not increase however. The year saw growth in retail more than in wholesale, as well as an uptick in online shopping, especially from Americans. In 2008, America saw the first year of stagnation after post-Sept 11, along with a reduction in local consumption. The effects of the Recession did not diminish 2008 with the rate that one could expect, as it was just the beginning (Bain & Company Global Luxury Goods Study 2008).
2009: With the recession already lasting a year, the luxury market saw a significant downturn. In 2008, the luxury market fell 8%, with 4% of luxury brands in a huge financial crisis or defaulted. Even with the stability in 2008, there was a strong consumption decline, especially in the U.S. market. Despite this drop however, US Department stores were recovering and re-stocking, as retail continued to outperform wholesale. While the stores stayed optimistic, 2009 was the worst year yet for the American luxury market, dropping 18% – the worst performance was by far hard luxury (generally considered as watches and jewelry) with its market dropping 23%. Menswear was hit hardest during the crisis as well as Women’s shoes with a slight decrease (3%). Leather goods also suffered in the US, shrinking 7%, as well as jewelry in the American market. The hardest hit sector in America was Fragrance, with a 10% decline. Overall, the American market saw a sharp decline from its stability in 2008, a byproduct of the recession with consumers opting out of luxury purchases due to lack of income, and when shopping, turning to the emerging online market. (Bain & Company – Global Luxury Goods Worldwide Market Study – 9thEdition)
2010-2011: The recovery period of the global and American market, 2010 was the rebound, with the first signs of the luxury market recovery becoming clear. The global market from 2009 to 2010 grew at double digits rates, a trend that continued from 2010 to 2011. In the years following the recession, online shopping grew to account for up to 3% of total sales. The growth of the American market, its recovery was driven by women’s categories and full recovery of jewelry and watches. A true sign that the recession was ending included new openings in 2nd and 3rd tier cities. For the U.S., the growth of the personal luxury market from 2009-2010 was 15%, a jump from the decline during the deepest points of the recession. Even though hard luxury was hit the hardest during the recession, its growth contributed to the luxury market rebound, as it gained 2% in 2010 and 3% in 2011. In 2011, 80% of brands grew, a drastic change from the brands in trouble in 2010. (Bain & Company Luxury Goods Worldwide Market Study, 2011 10th Edition, October 2011)
2013-2014: A couple years after the recession, the luxury goods market – and American market-were much different. America made a strong recovery from the crisis, with a compound annual growth rate (CAGR) of 9% from 2009 through 2014. The overall luxury market grew 7% overall, driven by luxury cars (10%) and luxury hospitality (9%). The American luxury market saw a new trend emerge, with tourists their luxury market. America had 6% growth in 2013. America also remained the largest market in 2013, and entering 2014 as well. A key indicator of growth and recovery post-recession is the fact that since 2009, the US has contributed three times as much absolute-value growth as China, a country that performed exceptionally well during recession. Though America showed growth, the cause was not domestic spending – i.e. by Americans – rather tourists. In 2013, online shopping grew 5%, with America providing most of that growth. In terms of categories, accessories became the largest category within luxury goods (at 29% of total sales in 2014), followed by apparel at 25%, hard luxury at 22% and beauty at 20%. Accessories grew the fastest with a CAGR of 12% from 2009 through 2014. In 2013 and 2014, America proved it was recovered from the recession, and ready to take back its spot as one of the biggest players in the luxury market. (Bain & Company Luxury Goods Worldwide Market Study Fall-Winter 2014)
2015: Growth in the worldwide luxury car market was 8% up from 2014, driven in part by the US. Boosted by a strong dollar, the Americas emerged as the biggest global region for personal luxury goods purchases. The US alone accounted for more than 90% of the regional market, and remains the largest global market, with New York City remaining the biggest market. Since 2009, the US market has contributed 1.7 times as much growth in absolute value as the largest contributors in Asia. The tourism trend continued. Though consumers in the US purchased locally, growth was driven by tourism. Americans made up 24% of luxury purchases worldwide. Online shopping grew by 7%, with Americans leading the growth through their tastes in accessories and fashion. Accessories should come as no surprise as they remained the fastest growing sector of the luxury market. (Bain & Company Luxury Goods Worldwide Market Study Fall−Winter 2015)
In the years following the recession, America has recovered, growing tremendously from the dip in 2009, and even leading the way in new channels for luxury goods such as online shopping. American domestic preference has helped their market recover, while tourism has helped the market to grow. Though the market may be fickle, American luxury managed to ride out the storm, and come back stronger and a key player in the worldwide luxury market.
