Quo vadis luxury?

Things are looking up for name brands post-COVID

WHILE things might still look gloomy in the retail arena as the COVID-19 (coronavirus disease 2019) pandemic keeps stretching out, things are actually looking up, especially for luxury brands.

FAME+ Market Days, a reconfigured online version of the capital’s biggest design fair, brought over Vogue Business Head of Advisory Anusha Couttigane for a webinar called “PH Fashion: The Leap to Global.” The webinar was streamed via Hopin on Oct. 20.

Ms. Couttigane concentrated on the effects of the COVID-19 pandemic on world markets, and post-pandemic recovery strategies. “The luxury industry is expected to grow considerably, according to data by BCG (Boston Consulting Group),” said Ms. Couttigane. “In the context of COVID-19, a full recovery is expected between the end of 2021 and 2022. When we look at that on a segment level, the luxury personal goods industry, although expected to grow significantly by 2025, it is actually going to account for a smaller proportion of the overall luxury industry.”

“I don’t want this to ring any alarm bells, because that segment is going to be expanding from an estimated value of $340 billion today to around $390 billion by 2025, with the potential for that segment to grow to $440 billion by next year,” she said.

“That really depends on different economic scenarios. Of course, there are still a lot of uncertainty in the world today.”

She points that the search for experiences (a known preference by millennials and the succeeding generations) have changed how we consume: “It’s actually experiences that are driving development and expected to expand further,” she says. “That suggests that there could be opportunities to collaborate or extend into sectors such as homewares or hospitality and leisure, perhaps by collaborating with hotels, for example, to really further commercial success.”

An article from BCG titled “A New Era and a New Look for Luxury” by Sarah Willersdorf, Joël Hazan, Guia Ricci, Alexandre Prénaud, Filippo Bianchi, Javier Seara, and Veronique Yang says “Brands must create online experiences that feel exclusive and beyond what nonluxury retailers offer. Experiences should take into account not just shopping and purchase transactions but also related activities such as fashion shows, private showings, personal shoppers, white-glove delivery, and other customized services.”

KEY CITIES
Ms. Couttigane also points to the differing rates of post-pandemic recoveries in cities. “When we look at this at a regional level, it’s really important to know that the post-COVID-19 recovery is taking place at a different pace depending on the city you’re in.” She says that while London “is heading in the right direction,” its pace is slower than capitals such as Paris, Tokyo, and Amsterdam.

“There’s a much bigger recovery and progress in cities such as Rome, Stockholm… and New York. When you’re considering which cities to either expand in or grow your footprint, or where you might have physical retail stock, it’s very important to note where the faster pace of recovery is taking place,” she said.

“Be prepared [for] the perhaps slower returns on investment in these cities that are taking a slower trajectory towards recovery.”

GOING ONLINE
Ms. Couttigane acknowledges the switch to online sales during the pandemic, which arguably has made the world even smaller and more accessible.

“We know that online has had a huge moment over the course of the pandemic. It’s been the primary way in which consumers have been accessing fashion goods,” she said. “There’s a real focus on commercial performance online, especially amongst smaller brands and businesses that are currently seeing a revenue of under 100 million euros. If you are one of these businesses that are operating around a hundred million euros or less, then it’s really important to be aware that your rivals in that revenue segment are going to be investing heavily in digital, and that’s where you’re going to see more fierce competition.” — Joseph L. Garcia