Ever since the pandemic started, every brand’s first priority is to protect the health and safety of employees as well as consumers. Indeed, luxury companies have pivoted to address urgent public-health needs: factories that produced scarves and perfume now manufacture face masks and hand sanitiser, and many luxury groups have made monetary donations to hospitals and other not-for-profit organizations. At the same time, with millions of people relying on the luxury goods industry to make a living—from factory workers and retail store employees to small-town artisans and craftsmen—industry leaders are planning ahead and wrestling with longer-term strategic questions to ensure the survival of their businesses.
While it’s too early to quantify COVID-19’s total financial toll on the sector, the pandemic has certainly shaken some of the foundational aspects of the luxury industry and some of these changes could be permanent.
The damage caused by covid-19 could extend to brands that have not yet fully transitioned to a vertically integrated distribution model and upstart brands that need wholesale channels to reach new customers and finance the development of their full collections. To survive, wholesalers are likely to adopt aggressive commercial and discount policies which, at least in the medium term, could hurt the luxury positioning of brands that don’t have a concession model.
From global traveller to the local shopper. The luxury sector appeals to a global consumer: 20 to 30 per cent of industry revenues are generated by consumers making luxury purchases outside their home countries. With the recent travel restrictions, an important driver of luxury spending has come to a halt, Only a gradual ramp-up in international travel, even after the restrictions are lifted. Brands, clearly, will need a new approach to attracting luxury shoppers. To reactivate Asian luxury consumers in their home countries, brands can focus on creating tailored local experiences, strengthening their digital and omnichannel offerings, and engaging more deeply with consumers in tier-two and -three cities. The latter will be challenging, given the limitations in both retail infrastructure and customer-service capabilities in those cities.
Industry players might also consider pushing for a coordinated revamping of the fashion calendar, with brands simplifying and streamlining their presentation calendars.
Luxury Brands Social Responsibilities
Consumers want to see greater social responsibility from brands; they are looking for shared brand values and altruism, or charitable actions.
- 61% of consumers want to hear more from brands fulfilling their social responsibilities
- 57% of consumers would buy from brands because of their similar values
Consumers expect brands to get involved, have a voice, and act responsibly. Without sharing a true passion or following up with genuine action or thought, consumers will see past the bogus attempt to join a movement for the movement’s sake.
Brands that succeed here are remembered. In a recent survey, 57% of consumers say they can recall those brands that supported the fight against COVID-19.
Over the past decade, European luxury conglomerates, private-equity firms, and, more recently, US fashion groups and Middle Eastern investors eagerly snapped up attractive acquisition targets. As a result of the current crisis, some of these acquirers—particularly those that aren’t luxury companies themselves—could find that they have neither the core competencies nor the patience to nurture these high-potential brands, and thus might be willing to put them back on the market. Acquisitions that were once forbiddingly expensive could become viable in the post-crisis period. Such developments could result in further industry consolidation or even the formation of new luxury conglomerates.
The Present: Immediate priorities of the luxury brands
Many luxury brands are prioritizing the safety of employees and customers and proactively communicating with all stakeholders about their new health and safety protocols. Here are short-term actions that company leaders should consider taking.
- Review 2020 inventory & collection
Sales for this year’s spring season are as much as 70 per cent lower than last year—not surprising, considering that consumers had little opportunity to explore the spring and summer collections in stores. Decide how to phase in the 2020 fall and winter collections and develop a plan for dealing with unprecedented levels of unsold 2020 inventory—without resorting to steep discounts, which jeopardize brand equity. Stay informed about wholesalers’ and retailers plans to clear extra inventory. One way to use extra inventory could be to reward loyal customers with gifts or other types of giveaways to surprise and delight them, while also whetting their appetite to shop across collections or categories.
- Enhance digital engagement
As stores remain closed in many parts of the world, e-commerce is a crucial channel for keeping sales up, communicating with customers, and forging a sense of community around a brand. Accelerate your digital investments and shift media spend to online channels, with a focus on customer activation rather than brand building. Aside from enhancing your own websites, also consider partnerships with reputable e-retailers. Digital marketing could help not only boost online sales but also entice consumers to visit stores once they reopen.
- Manage cash
Set up a cash-control team, with representation from the procurement and sales teams, to examine spending and identify responsible reductions in cash outflow. Review lease contracts and all operating expenses, including marketing spending and events. At the same time, prepare to selectively support wholesalers and department stores by extending accounts-receivable terms and arranging inventory swaps. Work closely with government authorities on a country-by-country basis to find ways to alleviate cash strains with public measures.
- Take a ‘clean sheet’ view of demand planning
Review your 2020 budget and inventory plans, assessing COVID-19’s impact on each region and business unit. Adjust revenue and profit forecasts and create incentives for business unit heads to set new targets. Resist the temptation to push sales at the expense of margins, as a sales-focused approach will likely yield inaccurate demand projections and, consequently, large amounts of unsold inventory. - Adjust merchandising plans
As consumers’ social routines adapt to lockdowns and physical-distancing restrictions, we are starting to see changes in buying behaviour. For example, some luxury players report that, in terms of price points, high-end and low-end luxury items are proving more resilient than those in the middle of the range, perhaps due to a combination of “revenge spending” (a phrase that refers to pent-up demand for luxury items during or after crises) and a desire to maximize value for money by purchasing functional items. They’re also seeing handbags and small leather goods selling better than ready-to-wear apparel during the crisis. Children’s wear seems to be doing particularly well. Millennials haven’t reduced their spending as much as other adult segments have. These are the observations of a few luxury players, but clearly, there is no one-size-fits-all merchandising plan. Brands should carefully analyze sales data and embed consumer insights into their merchandising plans.
Shape the new normal
Stabilizing the business during the crisis is crucial—but management must not lose sight of the longer term. COVID has seen consumer thought shift; more than ever before we are looking for connection and a humanist approach. Brands succeeding are showing genuine compassion and have put themselves in the shoes of their consumer.
(Source: McKinsey)
Want to revive your Luxury Jewellery Business post covid?
Upgrade your jewellery story with Plushvie
Plushvie offers a real-time & smooth jewellery try-on experience online. It is highly recommended for every Jewellery retailer who wants to expand their business and cater to Millennials. Plushvie’s virtual try-on makes a huge difference in the overall shopping or purchasing experience of the end-users. It can be in-store or shopping through a website, Plushvie provides the consumer with a realistic & personalised experience. With Jewel-try integrated for your website or in-store Consumers will be able to try an infinite number of jewellery and other products no matter where they are at that moment & make the right choice.
JewelTry is made by using Artificial Intelligence in which you can try a variety of jewellery online without any hassle. We have expert developers and designers to give you this flawless virtual jewellery trial online at your comfort with extreme ease. To book your demo or discuss how you can increase your business through augmented reality, visit our website now.
Plushvie.in
