COVID-19’s Impact: A New Look for the Luxury Industry
The COVID-19 pandemic has disrupted the very fabric of our daily lives. It has left many businesses and industries questioning their future; the luxury industry is no exception.
In these uncertain times, luxury-goods companies must take action not just to navigate the now by staying afloat, but also to remain relevant in the mind of the consumers in a time of accelerating trends and visibility.
A study by Bain & Company estimates the global luxury sales to drop by 35% by the end of 2020. While some believe the luxury sales in India will take an even bigger hit and fall by 50%.
Despite these worrisome analyses, the travel restrictions have presented the Indian luxury brands with the perfect window to outshine international brands. And, demonstrate to the Indian consumers that they aren’t missing out on anything by shopping local.
There is no doubt that the luxury industry will bounce back fully. The question is when, and how? And which changes are here to stay?
Change in Luxury Consumer Behaviour
One of the most striking characteristics of a luxury consumer is that the buying decision is often based on emotions rather than rational decision-making. The corona-crisis has made consumers more mindful of their purchases and seek brands that reflect their values and beliefs.
Consumers may also indulge in ‘revenge buying’ to uplift themselves during these uncertain times. This phenomenon has already taken China by the storm. The French brand Hermès’ Guangzhou flagship store witnessed the largest sales of $2.7 million, post lockdown. Revenge buying may play out in India too since consumers cannot travel overseas as safely as before.
With retail stores closed, online luxury buying has become the new normal among luxury consumers. Therefore, retailers that have often shied away from building a meaningful online presence are working on connecting with their consumers via the digital landscape.
According to a study by Forrester, the Indian luxury e-commerce market is expected to grow at a five-year CAGR of 25.8% to reach $85 billion by 2023.
Consumer Spending
Post-pandemic consumption looks hopeful as the pent up demand in non-essential sectors such as luxury accessories, beauty, wellness, and fitness will notice growth. We can expect revenge buying to take place in almost every one of these sectors.
According to a recent study by Statista, India’s luxury market will amount to $7,956 million in 2020 (after considering the pandemic) and grow annually by 9.7% (CAGR 2020-25), with cosmetics and fragrances taking the lead.
With people working from home for months now, they will want to invest in their homes more than ever. People are looking to add more zoning in their homes, such as home offices, gyms, leisure corners or large balconies to get the outsides in. People have become more aware of the flaws of their homes and the importance of this space and are now willing to pay a premium to get it done right.
The Luxury Industry Moving Forward
How can we bounce back stronger than ever? What will the luxury industry look like moving forward? The answer is - a lot more digital!
Imagine augmented reality filters, 3D exhibitions, super-charged apps, virtual reality showrooms and the much awaited - online shopping for luxury goods. While COVID-19 has undeniably had a sizable negative effect on the luxury industry, it has also encouraged emerging trends to evolve quicker.
Besides digital, luxury brands are going to be a lot more consumer-centric. Retailers will need to become more purposeful to stay relevant to the new mindset of luxury consumers. The focus will remain on delivering what the consumer really wants; personalization and advanced tech will play a major role here.
Despite 2020 labelled as “the worst year in the history of modern luxury,” experts argue the luxury world will rebound just like it did in the past. The emerging trends reflect an enduring optimism about the industry’s resilience. The key is to dive back into business and adapt!
