The world as we know it has changed over the last three months, some believe that it has changed forever. Tens of millions of people around the world have lost their livelihoods. Thousands of companies have collapsed, and entire countries are facing a historical recession for this year, one that absolutely nobody could have foreseen. Entire industries are facing what seem to be insurmountable challenges: Air travel, hospitality, Fine dining, and of course, the Luxury Retail industry.
While in March and April we have seen several countries around the world close their borders and confine their population, condemning most – if not all – non essential retail operations to close, May is the month during which most governments have started allowing the populations to come out of the strict confinement. While we are not yet looking at a complete return to the free circulation of people and goods, we are witnessing what could be called as a “light at the end of the tunnel”. The de-confinement process will be different from one country to another, from one region to another and the key element that will dictate the speed of implementation will remain the ability for each nation/state/region to guarantee that the risks of contamination are continuously reducing.
What this means for our industry is that we can now re-open the boutiques and the stores and that our retail staff will finally be able to get back to work. The key question will be whether our customers will come back or not. We know that – ultimately – they will. But until they do in relatively important numbers, brick and mortar retail sales will remain well below what we used to consider as a normal level.
In the last two months, the management of luxury brands had to manage an extremely challenging situation the likes of which no one has ever seen. We had to take extremely challenging decisions impacting the livelihood of our colleagues. We had to find new ways to communicate with our customers and new ways to sell. Our customers themselves have completely changed their spending habits: For the vast majority, they have refocused their spending habits towards what they considered as essentials. We have witnessed an incredible drop in the “Want” purchases at the expense of the “Need” ones.
It is not all bad though. If we were to look at the social animal that we are, we know for a fact that human beings will always need to feed their need of belonging. We will always look for ways to distinguish ourselves as individuals from our fellow human beings and ultimately, this is something that luxury goods and luxury services allow us to do. So, the Luxury Industry, while semi-comatose right now, is heading towards a recovery.
While this is true for the industry, it is not necessarily true for all players in the industry. As we very well know, not all companies, not all brands entered this COVID-19 roller-coaster equipped the same way. Many large organizations, group-owned or independent, had enough resources, know-how and flexibility to adapt, many smaller players were ill-equipped to face such a long drought. AS with every crisis, when all will be said and done, we shall see that there will be clear winners and clear losers at the end of the path.
What we can expect is that some of the small brands within large groups will be facing existential questions: They were already under transfusion before the Virus appeared, and they very well could not survive the aftermath. These are still in a slightly better shape than independent small brands that simply did not have access to cash-flow, know-how and a generally well-built support system. What will happen to them? Simple: Those that have strong Luxury industry fundamentals will end-up being acquired and others will simply disappear. We have already seen the likes of Jeweler deGrisogono collapse just before the crisis. The watchmaker Romain Jerome followed suit in Q1 of 2020. In the world of Fashion, we are witnessing that brands such as Sonia Rykiel and True Religion filing for Bankruptcy. Retailers are not exempt, in the US, Neiman Marcus is also collapsing. Robert Cavalli, that was acquired entirely by Dubai-based DAMAC group last summer is also facing a grim future. Even what seemed to be done deals a few months ago might even be up for negotiation once more (LVMH acquisition of Tiffany’s, Victoria’s secret acquisition by L Brands).
There are, however, several (relatively) small independent brands that have the right fundamentals to face the post-COVID world. I’d classify these fundamentals in the following fashion:
- Original, creative and identifiable products
- Uncompromising quality
- Fair pricing
- Strong online/social media presence
- Balanced omnichannel distribution
- Easy-to-grasp intellectual values
- Social and Environmental consciousness
When the hope for a better tomorrow comes, consumption will pick-up again, but the consumption habits will change. Pricing will be a sensitive issue. Brand values will matter more. Experiences will have to evolve.
As industry professionals, we need to stay focused and remain hopeful. We should take a good hard look at what we have been doing and seize the opportunity this crisis is given us to drive home some of the desires we all had and that we kept under wraps forever: Our environmental footprint, our social responsibilities, our constant race towards performance at the expense of our humanity. It would certainly be a waste if we were not able to use this opportunity to evolve. Don’t you think?