Coronavirus has triggered a global economy meltdown and the luxury fashion industry is highly impacted. Factories that produced perfumes and scarves are producing hand sanitizers and face masks. Ralph Lauren & Louis Vuitton are producing thousands of hospital gowns to be donated to frontline medical workers.
In the first quarter of 2020 itself it is predicted that the luxury fashion sales will decline by 25%-30% year-on-year sales. When the virus started in China, the country which accounts for 35% of the global luxury sales growth in 2019, brands had already started to see the decline in sales. And when the virus reached Italy, where most brands have their headquarters, key suppliers and operations, it started affecting their key operations as well.
Luxury after Covid 19 is not going to be the same anymore. The coronavirus pandemic will accelerate the change in the fashion industry, a change for the good. Transforming the business model for a fundamental change will be the key driving factor post Covid 19. However, prioritizing a few key areas of the business can help luxury fashion brands mitigate the impact of the coronavirus crisis.
eCommerce and Digital Fashion as core:
Online luxury sales account for 10% of the luxury market, according to Bain. While brands like Gucci and Louis Vuitton have been transforming digitally over the last 10 years, Chanel and Hermes are still battling the retail war. But the industry is now starting to see a change. Patek Philippe, a physical-first luxury watch brand has started allowing it’s retail partners to sell selected models online.
Post Covid 19, eCommerce will become more important than ever. There will be an accelerated shift to ecommerce, which will put digital at the center of every brand’s operating model. The crisis will act as a catalyst for brands to draft an omnichannel strategy, converging in-store and online experiences. As luxury consumers are acquainted with concierge, tailor-made in-store experiences, brands need to create a digital personalized experience online. Start investing in eCommerce, partner with luxury e-tailers like Nordstrom & Farfetch, digitize your entire supply chain, automate your operations, and try rental as a new revenue stream.
Digital Fashion: Leading edge technologies like augmented reality and artificial intelligence are going to be the key driver for the next industrial revolution in luxury fashion. With travel restrictions and social distancing in place, digital prototyping and sampling via 3D printing, Augmented reality enabled beauty cams and virtual try on rooms, the industry is going to see the next-big-thing in digital fashion post pandemic.
Go sustainable for real and long term:
Post pandemic, many consumers will look for investment pieces – last forever items. This will force brands to be more conservative, responsible and slow on production, focusing quality over quantity. Responsible consumerism will be the new norm. From this stage, you can no more escape being not kinder to the environment.
Timeless designs, sustainable materials, local craftsmanship, slow production cycles, fair wage for workers, reducing carbon footprints across the entire supply chain – brands have to address these for customer acceptance.
In 2018, the upmarket British label Burberry burned unsold clothes, accessories and perfumes worth £28.6m in the name of ‘preserving it’s luxury branding’. Consumers are watching and they are watching even more closely now. Don’t be the next Dolce & Gabbana in the China market.
With increased environmental consciousness, It’s time to re-think the end to end product cycle, supply chain & disposal of unused stock.
Luxury Brand Marketing post pandemic:
1) Communicate the real self. Be Transparent: This is not a time to be tone-deaf. Brands need to start addressing this pandemic to be real. The stores across much of the world are closed. It’s time to communicate and be real with your customers. Strike the balance and communicate with your audience around Stay at home, personal care, work from home & self love, at this tough time. Bring out your brand’s ethics along with the aesthetics.
2) Provide virtual experiences: Connect with your consumers online. Give them a virtual experience. A recent campaign by LVMH owned Kenzo, called ‘Stay at home with Kenzo’ included artists and DJ sets on social media. Partner with streaming/broadcasting services to create interesting content. H&M has partnered with Netflix to promote a new collection, inspired by the teenage romantic comedy “To all the boys I’ve loved Before”.
3) Discount Smartly: Consumer spending will decrease more than before. Brands will have piles of unsold, out of season inventory. When the month of April used to be a full price selling season, it now started to look like end-of-season sale has arrived early. Though discounting is an easy way to recover the costs, it is a race to bottom which will be hard to undo when consumer sentiment starts to improve.
4) Send more emails but don’t spam: The mailbox is going to get a lot of attention than ever. Capture this opportunity to connect with your customers and drive engagement. Brighten their day with interesting content around your niche or even outside. Rent the Runway has recently started a newsletter series on poached egg tutorials and inspirational quotes. Similarly Bonobos is sending satirical blog posts about different types of people in Zoom conference calls. So, break the stereotype and connect with your audience.
A new china?
When SARS happened in 2002-2003, the industry was not dependent on China back then as it is now. According to Bain, Chinese consumers (including the travellers) accounted for 90% of global luxury market growth in 2019. Overall, Chinese consumers represent 35% of the global personal luxury goods market. Beyond consumption, China remains the world’s largest textile producer and exporter, rounding up $119 billion in textile exports in 2018. A new China? Only time will say.
The luxury fashion industry was already going through a paradigm shift before the pandemic, to become more customer-centric, digital & sustainable. Covid 19 has hit the ‘now’ button.