Luxury consumption is driven by feelings, emotions, self-identity and social status. These motivations will never wane or fade. However, the beliefs and values that shape what people consume and how they consume is undergoing drastic changes. With the outbreak of COVID-19, there has been paradigm shift in luxury consumer behavior. This makes it imperative for luxury companies to transform their strategies as well as offerings.
Here are the 6 key shifts that will determine the success of luxury players in the post-COVID era.
1Opacity to transparency
With consumers’ growing concern about the environment, fair trade practices and sustainable resourcing, luxury companies should ensure transparency and visibility in the entire supply chain, right from the procurement of the raw material to delivery of the final product to the consumer. Luxury brands such as LVMH are embracing blockchain technology to trace luxury goods supply chain. Such technologies will help in gaining consumer confidence and trust by bringing awareness about the authenticity of the product.
Note: Ethics will become as important as aesthetics as consumers prioritize purposeful brands.
2Disconnection to connectivity
Despite of gradual reopening of the stores, consumers are reluctant to visit these stores as the fear of the virus still surrounds. Across the globe, there has been massive shift to digital channels. It is highly probable that some shoppers will stick to digital offerings even after the pandemic is over as it will become the ‘way of their life’. Therefore, luxury companies should make all efforts to connect with their consumers at all touch points, be it physical or digital. In the near future, if the companies do not have their own digital platform, they should look for partnerships with existing marketplaces (for example, Farfetch; YOOX Net-a-Porter) to sell online. They should explore collaborations with tech companies to boost not only their digital sales but also give a compelling reason to shoppers to visit their physical stores.
Note: Companies should invest in technology to build deeper connect with people both online as well as offline.
3Linear economy to circular economy
The long-term sustainability of the luxury industry is under significant threat from various social, economic, human rights and climatic factors. Circular economy approach requires companies to use sustainable raw materials, close the material loops and keep the material and products in the loop, as long as possible. Transition requires a new organization, a new mindset and new forms of action by companies. Italian fashion label, Gucci has recently announced that it will cut the number of fashion shows from five to two every year in an effort to reduce waste. It is first major brand to make such a bold decision to support the move to a leaner, less wasteful fashion system. Similarly, Adidas and Allbirds have collaborated to create a sneaker with the ‘lowest ever carbon footprint’.
Note: Luxury brands need to do careful and smart slowdown with more emphasis on sustainability, creativity and craft.
4Status symbol to self-expression
Today, consumers want to spend on luxury products to express themselves rather than to flaunt. They want to rejuvenate themselves and feel special by owning high-end items. Luxury is no longer about ‘fit in’. In the most recent quarter during the pandemic, affordable luxury brands have been severely hit as compared to true luxury brands. Although, Hermes reported a 6.5 percent dip and LVMH’s fashion category reported a fall of 9 percent in revenue, affordable luxury brands such as Coach has seen a drop of around 20 percent. Affordable brands which are resorting to deep discounts to get the sales may run into the risk of jeopardizing their brand equity. During this crisis, even the younger generation has started valuing quality, craftsmanship and design over quantity. Hermes sales of $2.7 million on a single day after reopening of its Guangzhou flagship store, clearly highlights that there is increased aspiration for timeless and eternal luxury.
Note: Luxury brands should focus on values, heritage, craftsmanship and authenticity rather than emphasizing on loud logos.
5Rigidity to flexibility
Companies will have to devise newer ways to work, add new product lines as per the changing consumers’ lifestyles and explore new strategic associations. Once the lock down lifts, companies will have to redefine their processes. They have to ensure that safety, hygiene and social distancing norms are adhered in-store through contactless selection and try-ons, self-checkout counters, automated doors, etc.
Also, with onset of the pandemic, health and well-being has become priority for everyone. From ethical beauty products to organic food; from conscious clothing to fitness equipment, are seeing increase in demand. Likewise, there is surge in demand for household appliances, home decoration pieces, indoor games and electronic devices, as people are spending more time in their homes. Luxury brands should capitalize on the opportunity to serve these areas. Recently, French Fashion house, Louis Vuitton has unveiled designer gym equipment range. Similarly, top designers are entering into home décor or selling designer masks and chic track pants.
At this time of crisis, companies can look for new partnerships and alliances to strengthen themselves. For example, Walmart for the first time has entered the clothing resale market with online fashion resale platform ThredUp to sell previously owned branded clothes, shoes and handbags.
Note: The ability and speed to adapt to the new environment will be the key factor in determining the success of the brands.
6Classic stores to experiential places
Today, brands need to make their physical stores instagrammable, sharable and relatable to entice millennials and Gen Z who breathe in the digital world. However, while doing this, they must stick to their brand’s DNA and core values. This will make the brand authentic and meaningful for the new generation.
Note: Brands need to redesign their stores into experiential places. They must be innovative and modern, yet holding to their roots.
To emerge as winners in the ‘new normal’ luxury companies have to understand the evolving expectations of consumers, their changing preferences and priorities. Luxury companies that restructure their business processes, relook at their value chain, rework on their product portfolio, redesign their distribution channels and redefine their communication strategies to embrace the new needs of the consumers will certainly emerge as champions.