Why Paris attack will have a further negative impact on luxury industry

It’s not a secret that recent global social and economic turmoil are heavily affecting luxury. After China and Russia, the recent terrorist attack in Paris might have a further severe impact on the industry.

Luxury in China has been affected both by Chinese economy slowdown and reckless brands expansion. Fast China development, contributed to brands over-representation and, consequently, to the loss of the aura of exclusivity that the new Chinese luxury consumer is looking for.

The political and economical situation in Eastern Europe involving Russia has decreased the flow of wealthy Russian customers towards luxury western European luxury destinations, with the consequent detriment of top brands sales.

If Bain & Co. had earlier foreseen the lowest increase in sales of Personal Luxury goods since 2009, +1% versus 2014, (215 Billion €), the recent terrorist attacks of Paris could further impact the figures.

Italy, France and UK, three of the top six luxury markets (with Japan and China), heavily rely on tourists to achieve sales targets.

The phenomenon touches today also luxury number one market: USA.

According to Bain & Co. Claudia D’Arpizio, if in the past the impact of tourist sales in the USA was only between 10 and 15%, in the past couple of years it grew up to 40% thank to a strong flow of Chinese customers.

Today Chinese customers represent over 30% of the global luxury sales according to Bain & Co.

Fear that might be generated by the recent Paris dreadful events will most probably have a strong impact of tourist flow towards fashion destinations like Paris, London, New York and Milan.

If we consider that for most of the brands Christmas seasonal gifts represent a very important portion of the yearly sales, we can easily expect a further negative impact on the overall figures.

After recessions, brands over exposures and socio-political issues, luxury brands will face probably the biggest challenge: fighting with fear.

Picture Kin Cheung/AP