The new Coronavirus drastically changed things overnight. The pandemic has presented a paradigm shift in consumer behavior, whether in terms of daily lifestyles or spending on luxury goods. COVID-19 has halved most brands’ incomes, but the luxury industry still hopes Chinese consumers will return to their previous consumption levels soon after the outbreak stabilizes. The pandemic could bring a major shift in the mindset of consumers and the value systems that underpin their luxury shopping decisions.
According to the recent report by Bain & Company, global luxury sales could drop as much as 35% by the end of 2020, this impact can be very subjective when it comes to the target country or population.
Changing behavior of luxury consumers
Brands will focus on maintaining the engagement of millennials and Gen Z, who are already very tech savvy, through digital platforms; from showing their new collection to unraveling their couture creations. AI will step in to create more personalized experiences for different brands. Online shopping will be more attractive in the future. This slowdown is likely to allow luxury brands to reinvent themselves to digitize their processes and improve their systems and technologies. This will allow them to develop operational efficiencies and deliver personalized experiences to consumers.
Luxury brands enter the innovation cycle
One of the main drivers for brands after the pandemic would be to get back into the booming business. To do this, brands will need to revamp their strategies by exploring new product categories at a lower price, or revitalize their brands to bring in new strategies. Full diversification would be a global trend due to the enhanced omnichannel approach that brands are already starting to adopt. The global luxury consumer will see a new era, where luxury brands will explore markets with dual strategies; both at an accessible premium / entry level price point as well as a point where luxury will become more and more exclusive. The middle market consumer will drive sales for lower tier brands while niche luxury consumers will become more conscientious about their purchases.
Based on several factors, most brands would adapt to these changes. However, some brands from the old heritage luxury segments, like Chanel, Cartier, Patek Philippe, etc., would take a narrow approach. They can choose not to completely indulge in too many extensions or offers after the pandemic, but rather take a more minimalist and conscientious approach to attracting their consumers and connecting with them emotionally. Luxury is all about emotional connection and in order to do this brands need to steer clear of all activities that involve aggressive sales tactics. Their approach will be to woo their consumers by talking about what they do to take care of their employees, their consumers and the brand as a whole.
Compared to heritage brands, modern luxury brands like Armani, Versace, Jimmy Choo, etc. can take a totally different approach. They can introduce various offers to maintain the interest of their consumers and attract them with new line extensions and new products, possibly at a lower price than previous collections.
The strategies that can be adopted depend on the country of origin of the brand, the type of DNA of the brand and the perception it has in the market. Above all, the brand will only go to the extent that it can be acceptable to its target consumer. They may not allow themselves to explore multiple opportunities or new endeavors to excite consumers, and instead focus on the less is more approach, which is what luxury is all about.
A new era of phygitization (physical + digital)
After the pandemic, the luxury consumer experience will be like never before. People will want to return to brick and mortar retail after excessive use of digital platforms in the luxury shopping space. However, the protracted pandemic / containment phase has forced brands to explore and adapt to new technologies. Means such as AI technology, easy chat, and online interaction options are widely considered in the luxury consumer service space. Many of these trends will continue after the pandemic in the very long term, and some of them may end up becoming permanent ways of keeping the consumer-brand connection alive and relevant.
Brands are constantly updating their social networks and other digital platforms, as they would change store windows to adapt to the seasons. Today there is a constant dialogue between the brand and the consumer, whether it is about their work, their history, how they take care of their employees and of course, safety measures during the pandemic. . All of this is done through the language of social media, and much of it is highly regarded by the ever-curious luxury consumer who wants to be connected with their favorite brands every step of the way.
The brands that can successfully adapt make this change, are the ones that will emerge stronger after lockdown, and experience a much smaller impact than others.