The Rise and Fall of the Global Luxury Goods Market
Global demand for personal luxury goods has been steadily increasing for decades, resulting in an industry worth $308 billion in 2019.
However, the insatiable desire for consumers to own nice things was suddenly interrupted by the coming of COVID-19, and experts are predicting a brutal contraction of up to one-third of the current luxury good market size this year.
Will the industry bounce back? Or will it return as something noticeably different?
A Once Promising Trajectory
The global luxury goods market—which includes beauty, apparel, and accessories—has compounded at a 6% pace since the 1990s.
Recent years of growth in the personal luxury goods market can be mostly attributed to Chinese consumers. This geographic market accounted for 90% of total sales growth in 2019, followed by the Europe and the Americas.
Analysts suggest that China’s younger luxury goods consumers in particular have significant spending power, with an average spend of $6,000 (¥41,000) per person in pre-COVID times.
An Industry Now in Distress
The lethal combination of reduced foot traffic and decreased consumer spending in the first quarter of 2020 has brought the retail industry to its knees.
In fact, more than 80% of fashion and luxury players will experience financial distress as a result of extended store closures.
With iconic luxury retailers such as Neiman Marcus filing for bankruptcy, the pressure on the luxury industry is clear. It should be noted however, that companies who were experiencing distress before the COVID-19 outbreak will be the hardest hit.
Predicting the Collapse
In a recent report, Bain & Company estimated a 25% to 30% global luxury market contraction for the first quarter of 2020 based on several economic variables. They have also modeled three scenarios to predict the performance for the remainder of 2020.
- Optimistic scenario: A limited market contraction of 15% to 18%, assuming increased consumer demand for the second and third quarter of the year, roughly equating to a sales decline of $46 billion to $56 billion.
- Intermediate scenario: A moderate market contraction of between 22% and 25%, or $68 to $77 billion.
- Worst-case scenario: A steep contraction of between 30% and 35%, equating to $92 billion to $108 billion. This assumes a longer period of sales decline.
Although there are signs of recovery in China, the industry is not expected to fully return to 2019 levels until 2022 at the earliest. By that stage, the industry could have transformed entirely.
Changing Consumer Mindsets
Since the beginning of the pandemic, one-quarter of consumers have delayed purchasing luxury items. In fact, a portion of those who have delayed purchasing luxury goods are now considering entirely new avenues, such as seeking out cheaper alternatives.
However, most people surveyed claim that they will postpone buying luxury items until they can get a better deal on price.
This frugal mindset could spark an interesting behavioral shift, and set the stage for a new category to emerge from the ashes—the second-hand luxury market.
Numerous sources claim that pre-owned luxury could in fact overtake the traditional luxury market, and the pandemic economy could very well be a tipping point.
The Future of Luxury
Medium-term market growth could be driven by a number of factors, from a global growing middle class and their demand for luxury products, as well as retailers’ sudden shift to e-commerce.
While analysts can only rely on predictions to determine the future of personal luxury, it is clear that the industry is at a crossroads.
Mapped: Corruption in Countries Around the World
Which countries are the most (and least) corrupt? This map shows corruption around the world, and the movers and shakers over the last decade.
Mapped: Corruption in Countries Around the World
How bad is public sector corruption around the world, and how do different countries compare?
No matter your system of government, the public sector plays a vital role in establishing your economic mobility and political freedoms. Measuring corruption—the abuse of power for private gain—reveals how equal a system truly is.
For more than a decade, the Corruption Perceptions Index (CPI) by Transparency International has been the world’s most widely-used metric for scoring corruption. This infographic uses the 2021 CPI to visualize corruption in countries around the world, and the biggest 10-year changes.
Which Countries are Most (and Least) Corrupt?
How do you measure corruption, which includes behind-the-scenes deals, nepotism, corrupt prosecution, and bribery?
Over the last few decades, the CPI has found success doing so indirectly through perceptions.
By aggregating multiple analyses from country and business experts, the index assigns each country a score on a scale of 0 to 100, where 0 is highly corrupt and 100 is very clean.
Here are the results of the 2021 CPI, with the least corrupt countries at the top:
|Corruption Perception by Country||Score (2021)|
|Saint Vincent and the Grenadines||59|
|Sao Tome and Principe||45|
|Trinidad and Tobago||41|
|Bosnia and Herzegovina||35|
|Papua New Guinea||31|
|Central African Republic||24|
|Democratic Republic of the Congo||19|
Ranking at the top of the index with scores of 88 are Nordic countries Denmark and Finland, as well as New Zealand.
They’ve consistently topped the CPI over the last decade, and Europe in general had 14 of the top 20 least corrupt countries. Asia also had many notable entrants, including Singapore (tied for #4), Hong Kong (#12), and Japan (tied for #18).
Comparatively, the Americas only had two countries score in the top 20 least corrupt: Canada (tied for #13) and Uruguay (tied for #18). With a score of 67, the U.S. scored at #28 just behind Bhutan, the UAE, and France.
Scoring towards the bottom of the index were many countries currently and historically going through conflict, primarily located in the Middle East and Africa. They include Afghanistan, Venezuela, Somalia, and South Sudan. The latter country finishes at the very bottom of the list, with a score of just 11.
How Corruption in Countries Has Changed (2012–2021)
Corruption is a constant and moving global problem, so it’s also important to measure which countries have had their images improved (or worsened).
By using CPI scores dating back to 2012, we can examine how country scores have changed over the last decade:
|Change in Corruption by Country||10-Year Trend (2012-2021)|
|Papua New Guinea||+6|
|Sao Tome and Principe||+3|
|Trinidad and Tobago||+2|
|United Arab Emirates||+1|
|Central African Republic||-2|
|Democratic Republic of the Congo||-2|
|Saint Vincent and the Grenadines||-3|
|United States of America||-6|
|Bosnia and Herzegovina||-7|
The biggest climber with +18 was Seychelles, Africa’s smallest country and also its least corrupt with a score of 70. Other notable improvements include neighboring countries Estonia, Latvia, and Belarus, with Estonia rising into the top 15 least corrupt countries.
On the opposite side, both Australia (-12) and Canada (-10) have actually fallen out of the top 10 least corrupt countries over the last decade. They’re joined by decreases in Hungary (-12) and Syria (-13), which is now ranked as the world’s second-most corrupt country.
Which countries will rise and fall in corruption perceptions over the next 10 years, and how do your perceptions compare with this list?
How the Top Cryptocurrencies Performed in 2021
Cryptocurrencies had a breakout year in 2021, providing plenty of volatility and strong returns across crypto’s various sectors.
The Returns of Top Cryptocurrencies in 2021
2021 saw the crypto markets boom and mature, with different sectors flourishing and largely outperforming the market leader, bitcoin.
While bitcoin only managed to return 59.8% last year, the crypto sector’s total market cap grew by 187.5%, with many of the top coins offering four and even five-digit percentage returns.
2021 Crypto Market Roundup
Last year wasn’t just a breakout year for crypto in terms of returns, but also the growing infrastructure’s maturity and resulting decorrelation of individual crypto industries and coins.
Crypto’s infrastructure has developed significantly, and there are now many more onramps for people to buy altcoins that don’t require purchasing and using bitcoin in the process. As a result, many cryptocurrency prices were more dictated by the value and functionality of their protocol and applications rather than their correlation to bitcoin.
|Ethereum||Smart Contract Platform||399.2%|
|Binance Coin||Exchange Token||1,268.9%|
|Solana||Smart Contract Platform||11,177.8%|
|Cardano||Smart Contract Platform||621.3%|
|Terra||Smart Contract Platform||12,967.3%|
|Avalanche||Smart Contract Platform||3,334.8%|
|Polkadot||Smart Contract Platform||187.9%|
Sources: TradingView, Binance, Uniswap, FTX, Bittrex
Bitcoin wasn’t the only cryptocurrency that didn’t manage to reach triple-digit returns in 2021. Litecoin and Bitcoin Cash also provided meagre double-digit percentage returns, as payment-focused cryptocurrencies were largely ignored for projects with smart contract capabilities.
Other older projects like Stellar Lumens (109%) and XRP (278%) provided triple-digit returns, with Cardano (621%) being the best performer of the old guard despite not managing to ship its smart contract functionality last year.
The Rise of the Ethereum Competitors
Ethereum greatly outpaced bitcoin in 2021, returning 399.2% as the popularity boom of NFTs and creation of DeFi 2.0 protocols like Olympus (OHM) expanded possible use-cases.
But with the rise of network activity, a 50% increase in transfers in 2021, Ethereum gas fees surged. From minimums of $20 for a single transaction, to NFT mint prices starting around $40 and going into the hundreds on congested network days, crypto’s retail crowd migrated to other smart contract platforms with lower fees.
Alternative budding smart contract platforms like Solana (11,178%), Avalanche (3,335%), and Fantom (13,207%) all had 4-5 digit percentage returns, as these protocols built out their own decentralized finance ecosystems and NFT markets.
With Ethereum set to merge onto the beacon chain this year, which uses proof of stake instead of proof of work, we’ll see if 2022 brings lower gas fees and retail’s return to Ethereum if the merge is successful.
Dog Coins Meme their Way to the Top
While many new cryptocurrencies with strong functionality and unique use-cases were rewarded with strong returns, it was memes that powered the greatest returns in cryptocurrencies this past year.
Dogecoin’s surge after Elon Musk’s “adoption” saw many other dog coins follow, with SHIB benefitting the most and returning an astounding 19.85 million percent.
But ever since Dogecoin’s run from $0.07 to a high of $0.74 in Q2 of last year, the original meme coin’s price has slowly bled -77% down to $0.17 at the time of writing. After the roller coaster ride of last year, 2022 started with a positive catalyst for Dogecoin holders as Elon Musk announced DOGE can be used to purchase Tesla merchandise.
Gamifying the Crypto Industry
The intersection between crypto, games, and the metaverse became more than just a pipe dream in 2021. Axie Infinity was the first crypto native game to successfully establish a play to earn structure that combines its native token (AXS) and in-game NFTs, becoming a sensation and source of income for many in the Philippines.
Other crypto gaming projects like Defi Kingdoms are putting recognizable game interfaces on decentralized finance applications, with the decentralized exchange becoming the town’s “marketplace” and yield farms being the “gardens” where yield is harvested. This fantasy aesthetic is more than just a new coat of paint, as the project with $1.04B of total value locked is developing an underlying play-to-earn game.
Along with gamification, 2021 saw crypto native and non-crypto developers put a big emphasis on the digital worlds or metaverses users will inhabit. Facebook’s name change to Meta resulted in the two prominent metaverse projects The Sandbox (SAND) and Decentraland (MANA) surge another few hundred percent to finish off the year at 16,261% and 4,104% returns respectively.
With so many eyes on the crypto sector after the 2021’s breakout year, we’ll see how developing U.S. regulation and changing macro conditions affect cryptocurrencies in 2022.
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