Pandemic-Proof?
Being stuck at home is no fun and this period saw several luxury buyers pick up their dream products with the click of a few buttons. For them, it was a way of cheering themselves up while under lockdown and for the luxury sector it meant ‘sales’- a much-desired state of affairs for businesses globally, especially over the last three months. Having said that, it is imperative to mention that the pandemic has brought in changes to this sector.The post-Covid-19 era will see fundamental changes in the way this sector interacts with its consumers. As per an early June 2020 report by the World Bank, India’s GDP is set to contract by 3.2 per cent in the current fiscal. The dismal figure is due to the pause in economic activity during the lockdown. The impact of the lockdown across sectors has been varied, the hit for the luxury sector is between 25-40 per cent for 2020 as per the Boston Consulting Group.
All that glitters
As per the luxury market expert, Anita Khatri, CEO & Founder of Anita Khatri Luxury Consulting, boasting of brands such as Audemars Piguet, Ulysse Nardin, Burberry and Salvatore Ferragamo among others, “Luxury brands in India over the last few years have encountered several changes. Around 2016, luxury sales were growing at a comfortable rate of 15 per cent to 20 per cent year-on-year. In the same year, India had become a favourable destination for brands. Demonetisation happened in 2016 followed by a complex GST structure leading to a slowdown for the market in India. The economic and socio-economic conditions in 2018 coupled with the political disturbances further diluted this positive growth rate. The growth rate in India is currently between 7.5 per cent to 10 per cent.”
In general, it has been noted that political unrest and economic downturn do not impact the luxury sector that much because the UHNI (Ultra High Net Worth Individuals) and the HNIs (High Net Worth Individuals) continue their tryst with luxury. Further, at times it has been noted that unrest ramps up sales. Psychologists believe that anxiety increases our desire to splurge on luxury objects. Oftentimes individuals use it as a way to alleviate anxiety and deal with emotional distress.
Amit Pande, Brand Head, The Collective & International Brands at Aditya Birla Fashion & Retail, with a portfolio of sought-after brands like Prada, Polo Ralph Lauren, Fred Perry and Tom Ford among others, highlighted that the brand did not get impacted much during the coronavirus pandemic. He said that the company is almost back to their pre-Covid-19 double-digit growth and on the digital medium the trends have increased three times of what they were before the Covid-19 disruption.
Winds of change
The coronavirus pandemic caused a big headache for most sectors because they got hit from several sides including financial markets, loss in jobs and as a result loss of income. And it managed to dent the luxury sector too. When the coronavirus outbreak took place, China and Italy were the first to feel the hit given that these regions account for the largest number of luxury buyers and house some of the biggest brands.
As per recent findings by Bain & Company, sales in the sector (global luxury) could dip up to 35 per cent but companies could emerge innovative, stronger and purposeful. There is a belief that the market could recover by 2022-23 and the China market, which accounted for 90 per cent growth of the market in 2019 is showing signs of recovery further adding to the positive vibes.
This pandemic has been a gamechanger in terms of how a business will be done in the near future. For the luxury sector, in particular, things to be kept in mind is the fact that even post Covid-19 buyers will increasingly use the digital medium. It is quite possible that they might forsake the physical store altogether. Secondly, buyers are aligning themselves with brands that are purposeful and ethical therefore, meaningful brands will come up as winners. Creating an emotional connect with the buyers will have an equal focus on ethics, purpose and aesthetics.
Thirdly, these brands need to note that the new buyer is no longer the ultra-wealthy individual with pots of disposable income. He, in fact, could well be the hardworking, ethical middle-class individual who values the experience provided by the luxury product/service. Therefore, in addition to being grandiose, it is necessary for brands to keep their conversation with the consumer intelligent and at the same time-sensitive.
This article was first published in the print issue of (25 June- 09 July) BW Businessworld. Click Here to Subscribe to BW Businessworld magazine.
