Although the luxury market was drastically affected from the outset by the situation triggered by COVID-19, this crisis was perhaps “necessary” to accelerate certain changes and increase public awareness. Could this be the start of a new era for luxury brands?
As with any crisis, analysts, journalists and moralists question themselves about the future of luxury… “How is luxury going to bounce back?”, “What is the impact on luxury consumer behavior (“Revenge Buying or not?”)?”.
And yet, after each crisis, whether it be 9/11, SARS in 2002-03 or the financial crisis in 2008, the world of luxury is starting up again, with a few adaptations but without major changes in terms of the business model
This crisis seems to be different! Unheard of even in history… Why?
On the one hand, because the luxury industry was not as dependent of China 10-15 years ago:
COVID-19 strongly affected China in the beginning of the crisis – preventing millions of people from traveling and forcing the closing of thousands of luxury brand stores – which naturally had a direct and immediate impact on luxury brands, compared to previous crises which usually had consequences at a later time.
On the other hand, COVID-19 then strongly affected Europe – the headquarters of parent companies and a large number of suppliers of luxury brands in Italy and France – forcing them to limit or even suspend production. A hitherto unknown situation!
The luxury industry was already facing major challenges before this crisis, but the situation faced in recent months will accelerate this transformation.
Luxury brands after COVID-19: 3 trends deciphered.
#1: Luxury with a sense of purpose
Luxury consumers (but not only of this industry for that matter!) are seeking meaning and are sensitive to environmental and social issues:
To consume less but better is part of their philosophy. However, they will be more uncompromising with the beautiful luxury Houses. If price remains a guarantee of quality and sustainability, luxury brands will have to take their “positive luxury” approach a step further and rethink their entire production, distribution and unsold goods chain…
Ethics becomes just as important as aesthetics, since consumers give priority to brands that have a specific mission and defend a cause.
Traditional luxury brands will need to challenge their current messages and brand narrative as well as ensure that their internal procedures and practices respect these new messages. We will undoubtedly see new brands appearing on the market with a stronger positioning based on a mission and positive impact on society. I can already see this emerging through the brands I currently work with: it is the cornerstone of their strategy!
#2: Acceleration towards digital
Confinement has shown us that some events that were previously organized face-to-face could actually be organized differently, at a distance. This is the case for the renowned Fashion Shows, as well as other shows such as “Watch & Wonders” (formerly SIHH).
This being said, this “digitization” of events raises questions:
- On the one hand, the need to reinvent these gatherings on behalf of the organizers by switching to a much more interactive digital experience with more discussions and exchanges between speakers and participants.
- On the other hand, brands no longer wish to follow the trade show calendar to launch their collections: they prefer to present fewer collections with more sustainable pieces and follow their own calendar and not the one dictated by Fashion Weeks. This position has actually been confirmed by major luxury brands such as Gucci and Yves Saint Laurent.
“Our decision not to be part of a predefined calendar this year stems from our desire to recognize the importance of our time, of our life. What is currently out of fashion is the calendar of the entire system: the shows, showrooms, orders”, says the current artistic director of Saint Lawrence, Anthony Vaccarello, in an interview with WWD.
Moreover, luxury brands after COVID-19 will accelerate the implementation of a customer-focused rather than product-focused strategy: a holistic approach to their CRM (Customer Relationship Management) thanks to Artificial Intelligence..
Although already timidly used by luxury brands (augmented reality, chatbots or facial recognition…), the challenge for luxury brands will be to take it a step further in terms of the digital customer experience while preserving a “close and human” relationship.
#3: Heading towards new business models
In the field of fashion, where the second-hand model has lagged behind the automobile and watchmaking industries, companies such as “Rent the Runway”, “Armarium” and “The Real Real” could suddenly take off.
Several factors could influence this trend:
- In terms of supply – consumers questioning the need to have so many creations that have only been worn once, could rummage through their closets and, in hard times, be looking to make some quick cash.
- In terms of demand – this model could cater to the new meaning and values of the luxury industry.
As for luxury fashion brands, circular economy could be a new source of revenue and offer new partnership opportunities to
enhance the entire distribution chain.
Some luxury brands after COVID-19 are even starting to internalize and prioritize this business model as a new distribution channel within their own strategy.
Similarly, the “phygital” seems to be gaining momentum.
Brands are turning to “Direct-to-consumer” online, offering an immersive, 360-degree experience. The presence of ephemeral pop-up stores or events to maintain a human relationship and dialogue with the consumer, supports their digital strategy: virtual and automated.