The novel Coronavirus has dramatically changed things overnight. The pandemic has presented a paradigm shift in consumer behaviour, whether it is with regards tothe daily lifestyle or spending on luxurious goods. Covid-19 has slashed revenues in half for most brands, but the luxury industry still remains hopeful that Chinese consumers will return to their previous levels of consumption soon after the outbreak stabilizes. The pandemic may bring a major change in the consumers' mindset and the value systems that underpin their luxury buying decisions.
According to the recent report by Bain & Company, global luxury sales could drop up to 35% by the end of 2020, this impact may be very subjective in regards of the country or the target population.
Change in Luxury Consumer Behaviour
Brands will focus on keepingthe millennials and Gen Z, who are already quite tech savvy, engaged through the digital platforms; fromshowing off their new collection to unravelling their couture designs. AI will step in to create more personalised experiences for different brands. Online buying will be more attractive in the future. This slowdown is apt for luxury brands to reinvent themselves to digitize their processes and enhance their systems and technology. This will allow them to develop operational efficiencies and provide personalised experiences to the consumers.
Luxury Brands entering into the cycle of innovation
One of the key drivers for brands post the pandemic would be to dive back into the business in full swing. In order to do so, brands will have to revamp their strategies by exploring new product categories at a cheaper price point, or revitalise their brands to bring in new strategies. Completely diversification would be a global trend due to the heightened omni channel approach that brands are already beginning to embrace. 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 brands playing at the lower level whilst niche luxury consumers will become more conscientious towards their purchases.
Based on several factors most brands would adapt to these changes. However, certain brands which come from the old heritage luxury segments, for example, Chanel, Cartier, Patek Philippe and so on, would adopt a restricted approach. They may choose not to completely indulge in too many extensions or offerings post the pandemic, but rather adopt a more minimalistic and conscientious approach to attract their consumers, andconnect with them emotionally. Luxury is all about emotional connect and in order to do so, brands have to steer clear from all activities which signify aggressive sales tactics. Their approach will be to appeal to their consumers by talking about what they are doing to take care of their employees, their consumers and the brand as a whole.
When compared to the heritage brands, modern luxury brands like Armani, Versace, Jimmy Choo, etc, may have a different approach altogether.Theymay introduce varied offerings to keep their consumers interested in them and attract them with new line extensions and products, probably at a cheaper price compared to the previous collections.
The strategies that may be adopted depend on the country of origin of the brand, the type of brand DNA, and the perception it has in the market. Most of all the brand will only go as far as they know would be acceptable to their target consumer. They may not indulge in exploring several opportunities or new endeavours to excite consumers, and rather, focus on the “less is more approach,” as that is what luxury is all about.
A new Era of Phygitization (Physical + Digital)
Post the pandemic, the luxury consumer experience will be like never before. People will want to get back to the brick and mortar retail after over usage of digital platforms in the luxury buying space. However, the prolonged pandemic / lockdown phase has forced brands to explore and adapt to new technologies. Means such as AI technology, easy chat and online interaction options are being widely considered in the luxury consumer service space. A lot of these trends will continue post the pandemic for a very long term and some of them might end up becoming permanent means to keep the consumer-brand connect alive and relevant.
Brands are constantly updating their social media and other digital platforms, the way they would change store windows to adapt to seasons. There is a constant dialogue between the brand and the consumer today, whether it is about their workmanship, their story telling, how they are taking care of their employees and of course, safety measures during the pandemic. All of this is being done through the language of social media, and much of it is being highly appreciated by the ever-curious luxury consumer who wants to be connected with their favourite brands every step of the way.
Brands which can successfully adapt do this change, are the ones that will emerge stronger post the lockdown, and suffer a much lesser impact than others.
The author of this article is Ms Smita Jain – Director, MGLUXM, S P Jain School of Global Management.