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How the luxury industry is staying afloat during Covid-19

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How the luxury industry is staying afloat during Covid-19

History denotes that crises are often followed by periods of reflection and development and, like aviation, the luxury industry is facing an extensive shake up in the coming months. Before anyone heard of Covid-19, experts were saying that our modern way of working isn’t sustainable long-term so, in some ways, the pandemic has served as a catalyst for change. Innovations previously sat in the pipeline have been rushed through as companies battle to plug unexpected sink holes, while industry leaders have been forced to think outside the box to keep their heads above water. 

But there may be a silver lining. Management consultancy firm Bain predicts that while global luxury sales may decline by 20% to 30% in 2020, brands that adapt successfully could emerge stronger. “Leadership teams can mitigate today’s threat and accelerate into an eventual recovery if they govern through a new leadership framework; maximize short-term financial, operational and brand resilience; and transform the value proposition and business model for the future,” the firm states.

From new digital showrooms to refreshed fashion calendars, we look at some of the ways the luxury goods industry is shifting gears – and what may lie in the future.

 

Digital revolution

As luxury brands adapt to the “new normal”, it’s becoming increasingly clear that technology will play a fundamental role in the preservation and futureproofing of the industry. Louis Vuitton, a Butterfly Mark holder with a track record of digital innovation, has been at the forefront. In February, when buyers were unable to physically attend Paris Fashion Week, the fashion powerhouse launched a digital virtual showroom enabling them to view and order designs remotely. “Everything’s been digitalized so you can zoom in on every product,” Chairman and CEO Michael Burke said at the time. “It would have taken me two years to get it done, but for the coronavirus.”

“It’s going to raise the bar for everyone,” Burke added. “My prediction is that in the future, you’re not going to have to come to every showroom. Pre-collections, once you get used to doing it online, they’ll be just as well done as if you had been there in person.”

He wasn’t wrong. Virtual showrooms used by the likes of Joor, a wholesale platform featuring brands including Butterfly Mark-holder Loewe, have seen an incredible response in the wake of the pandemic – Joor saw a 400% increase of value on orders placed during the crisis compared to 2019 figures.

As bricks-and-mortar stores see a drop-in footfall and customers shift their spending habits online, even traditional brands which previously operated with a ‘you come to us’ attitude, have seen a rebalance of power where the customer is once again King. In March, Patek Philippe, one of the world’s most rarefied watch makers, went against a long-term pledge and began stocking new timepieces online for the first time in its history.

 

The new fashion calendar

As companies get used to doing business long-distance, the relevance of intensive travel is being called into question, with potential benefits for the environment. The fashion industry emits 241,000 tons of carbon dioxide equivalent annually from travel associated with wholesale buying practices, online wholesale platform Ordre estimates in its recent Zero to Market report. The annual Fashion Week calendar is a key culprit. The report reveals that travel to New York Fashion Week alone accounts for 37% of carbon emissions. 

Simon P. Lock, founder and CEO of Ordre, reveals there was “frustration with the infrastructure” even before Covid-19, suggesting that future Fashion Week schedules could be made more sustainable by combining men’s and women’s events and showing main and pre-collections at the same time.

Carlo Capasa, President of the Italian Fashion Chamber, echoes Lock’s call for change. “To make change possible, it is necessary to slow down,” he tells WWD. “What is being considered is to respect more the rhythm of the seasons, choosing to sell spring-summer from January to July and autumn-winter from July to December. Many are thinking of working on fewer collections, without drop and over production, probably there won’t even be a need for cruise collections anymore.”

Even when shows restart, digital elements tried-and-tested during the pandemic will likely remain. During the crisis, live streaming has become an important way for luxury brands to engage with their audience, with excellent results. In February, the Italian Fashion Chamber created the ‘China, we are with you’ initiative and live-streamed shows on the chamber’s website and select Chinese digital platforms. Around 16 million people tuned in live on Tencent, while 9 million accessed the content via Weibo. Meanwhile in France, Dior livestreamed its fall 2020 collection to 12 million people in February.

“It’s a fact that when an initiative is so successful it’s really hard to go back. I think we inaugurated a new phase where the physical and the digital will perfectly coexist,” Capasa says.

 

Silent luxury

As people around the world begin to heal from the emotional tole of the pandemic, we can expect a shift in consumer values, with transparency, sustainability and community at the core. These values will impact design, too. A new report by the Bank of America, titled “Nobody wants to show off in a crisis”, implies that ‘understated wealth’ is the next big trend is on the horizon. This kind of ‘silent luxury’ echoes changing habits following the 2008 financial crash. 

The report’s prediction is based on the bank’s Brand Leading Indicator which ranks the popularity of a wide array of fashion companies. Within the top 10 for April, 60% are classified as “understated” – Brunello Cucinelli, Bottega Veneta, Celine, Dior, Hermès and Prada, while brands classified as “loud” – such as Gucci, Versace, Balenciaga – failed to rank.

“Loud brands are particularly appealing in times of economic expansion but are less successful in maintaining resilience when the macro-economic situation worsens. This trend happens because it’s less socially acceptable to show off at a time when the economic environment is weak,” the report states. 

Whatever strategy a brand takes going forward, one thing is clear – they are being judged by their handling of the crisis. Companies facing backlash now may struggle to regain trust, while those who’ve shown compassion, such as Garrard, which launched a campaign to recognise and reward Britain’s key workers, will be remembered.

“As a brand we are extremely proud of our British history and heritage. We launched the Garrard Angels campaign to express our gratitude to the country’s key workers. The Wings collection represents peace and protection – and so we felt it was the perfect way to say thank you,” says Joanne Milner, Chief Executive, Garrard.

But more than being a lesson in PR, the pandemic has shown the importance of being agile, adapting to suit your customers, and investing in the future. In many cases, it’s been a long time coming.

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Written by - Rachel Ingram

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