Does Covid19 finally make us realise that luxury is superficial?
Written by Kaz Lam (Visual merchandiser & fashion stylist, based in HK) & Stephane Boghossian (Founder & CEO of ExJewel, based in Paris)
In this article, you will find some interesting luxury and fashion trends post-covid19. It might help you restructure your brand’s supply chains and boost your online shop to recover this epidemic’s economic crisis.
Luxury was exclusively for the elites that can afford it. It was all about building your family status. Price tags were the prime criteria of any luxury product. It was never for the masses like what luxury is today. The younger generation is witnessing the premier status of Luxury remodeled to the level of premium and in contrast to the street brands and the micro brands arise and putting more customers money into their pockets. With epidemics such as the one we just witnessed, luxury codes are being broken constantly. Let’s deep dive into the luxury trends during Covid19 and post-Covid19.
Table of content
Luxury during Covid19
- Buy & sell pre-owned luxury goods
- Digital supply chains: no inventory
- Hermes and Rolex – The new assets
- Experiential luxury, it’s all about lifestyle!
Luxury in the next 5 years
- Production and shopping go local
- Short-term action for Veblen good* demand – Luxury price increased
- Crazy flash sales and big discounts on consumption goods
- Rent your runway
- Digital Engagement – Fashion weeks, trade shows, showrooms going virtual
- Rise of a post-aspirational mind-set
- Activewear is so active!
Luxury during Covid19
The coronavirus crisis put street and (partially) online shopping of luxury goods on hold: watches and handbags prices fluctuated, production all but shut down (or switched to producing masks and gel for local hospitals), online pre-owned luxury sales boosted, and recently-released fashion collections depreciated in value. The global disease is testing our sector’s ability to continue to add value to society.
Buy & sell pre-owned luxury goods
In difficult times, customers turned even more to buying and selling designer clothes and accessories through Vestiaire Collective, Vinted or Depop. Consumers with luxury items and in need of cash offered their items for sale, thus expanding supply, albeit at lower prices which stimulated demand. This trend seems to be gaining momentum even in Hong Kong. With this boom in the second-hand market during Covid19, consulting firms BCG and Altagamma predicted that the second-hand market, estimated at 22 billion euros in 2018, would continue to grow.
Digital supply chains: no inventory
To dispose of their inventories during the closure of their stores, luxury houses strove to offer an online service with first-class customer experience, a flawless process from the product offering through to the secured payment and timely delivery. Ecommerce like Farfetch and Lyst (i.e., merchant websites managed by a third-party provider of goods or services) attracted many new customers to their digital platforms. The switch to online purchase will involve initiatives such as the creation of virtual stores or ephemeral “pop-up shops”, as some players have already done on WeChat. However, the use of extra inventory could be a good reward to loyal customers with giveaways options to surprise and delight them, while also whetting their appetite to shop across collections or categories.
Hermes and Rolex – The new assets
High-ticket items like Birkin bags and Rolex watches are often seen as barometers for the luxury business. There are several reports shown that the secondary-market prices for Birkin or Chanel bags increased during the breakout. Luxury watches now trade at the price of contemporary art. They are an asset that has been increasing at a rate of 12-15 percent per year for the last 10 years. This confirmed the good reputation historical brands have as a good investment luxury product. The luxury house like Hermes can be seen as an aspiration for timeless luxury and an ethically committed house.
Experiential luxury, it’s all about lifestyle!
A fashion trend like a specific style of shoes comes and goes every now and then. You may catch it at a recent fashion week event or on an influential person. According to Heuritech, the hashtag #Coronamask on Instagram has grown exponentially making it viral in days. Fortunately or unfortunately for the fashion industry, such trends have a huge impact on luxury and fashion brands: Should coronavirus face masks be a fashion statement? Selling a 3500$ Hermes washable mask is just wrong.
The Covid-19 crisis has hit the luxury and fashion industry hard. These past few months were hard for both online and offline retailers. According to a study conducted by the Boston Consulting Group, sales in these two sectors could drop by 25% to 30% compared to 2019. But what would be the luxury trends in the next 5 years or so?
Luxury in the next 5 years
During this temporary economic downturn, luxury brands have the opportunity to rethink their fundamental and underlying values. Though their roots are deep-seated in scarcity and luxury, a true legacy brand creates a history that extends beyond a prominent logo.
Production and shopping go local
“Some of our customers are looking to source much closer to their production facilities,” said Luxe Packaging Insight. Luxury brands need to avoid being insensitive to local cultures and pride. The de-globalization phenomenon is backed by a rising urge of patriotism. People need to rely on local production instead of overseas production sites. According to McKinsey, shoppers are buying more luxury goods from either local brands or local shops, think of a Chinese consumer buying an LV bag in China instead of having a Paris shopping trip.
Short-term action for Veblen good* demand – Luxury price increased
Chanel ramps up handbags price by a quarter, Vuitton increased price in March and May, while entry-price products take center stage online. The percentage increases reflect prices in France, but the hikes are being phased in globally. After a long period of lockdown and working at home, many people might want to give themselves a treat, a new iPhone, a new bag, something new to start fresh, and wash away the “past year” experience.
*Veblen good – which demand increases as the price increases, in apparent contradiction of the law of demand
Crazy flash sales and big discounts on consumption goods
The absolute distress sales that are happening, especially on women’s clothing, with people getting emails on one-day or one-hour flash sales with true discounts ranging around 70%, according to the Wall Street Journal. Still, many consumers and resellers will face a reduction in their financial resources and could put a hold on their purchases. This situation may force luxury houses to reduce the number of collections and products offered each year. Consumers could even reconsider the concept of ownershipand shift toward rental services.
Rent your runway
Confronted with the lasting effects of the crisis and taking into account the observed consumption trends, significant changes in the industry are to be expected. The concentration of ownership in the luxury sector will intensify, the shift to digital will become absolutely crucial, and efforts in terms of sustainable development will be expected from consumers. The new business models linked to second-hand and luxury goods rental should also come out as winners. Rental marketplace Rent The Runway sees an opportunity in this sector for a few years.
Digital Engagement – Fashion weeks, trade shows, showrooms going virtual
The crisis has raised the need for brands to innovate the way fashion-week organizers and trade associations broadcast to their primary consumers and the rest of the world. With travel restriction and limitation on crowd assembly, the digital launch of collections is a new normal. From live-streaming and augmented reality e-commerce (e.g. Burberry, Instagram, etc. ) to launching new apps and video games, these fashion brands have turned to virtual reality to engage with customers. The adoption of XR technologies may apply to the office environment. Regarding retail operation, many restructuring is in place: intertwining and adopting advanced technologies in ways of vending.
Rise of a post-aspirational mind-set
The pandemic has alternatively driven high demand in other sectors such as FMCG and e-commerce. Hygiene products namely hand sanitizer and protective surgical masks are now in limited supply due to panic buying and a nationwide shortage of both stock and key ingredients. Ethics will become as important as aesthetics as consumers prioritize purposeful brands that care. We anticipate a shift in the consumer mindset. Corporate philanthropy can play an important role in unprecedented disasters. While short term marketing messages display a commitment to helping a cause, brands can act and respond in much more powerful ways. Luxury for good is gonna rise much more.
Activewear is so active!
“Sports have always been the arm around the shoulder at the end of major trauma,” said basketball strategist Andy Dolich to The New York Times.
Pre-pandemic, activewear was already a hot market. Nike’s sales increased by 7 percent in the last quarter, despite the pandemic’s grip on its key growth market, China. Lululemon closed down most retail stores in the States, meanwhile, their e-commerce showed growth and many activewear start-ups have the advantage of being digitally native; their focus on social media marketing and online sales will serve them well in a crisis that has forced most stores to close.
This crisis, which forces us all to reconsider our purchasing decisions could bring the era of “slow luxury” and trigger a new awareness of the circular economy. Fashion must go on, however, in what form? To which direction? Some companies need to review 2020’s inventories and rethink 2021 collections by reinventing the material and fabric to create the coming collections. The awareness of social responsibility was evident even before the start of the pandemic, in particular among millennials (those born between the early 1980s and the late 1990s): 64% indicated that would be influenced by sustainability in their buying behavior.
Thank you for reading this article.
Kaz & Stephane