Back in April, at the start of a global lockdown in response to the coronavirus pandemic, analysts and experts warned of a new era to come for the fashion and luxury industries.
Nine months later, at the onset of a second lockdown forcing retail closures in the U.K. and across Europe, almost no CXOs expect a return to normal, according to a McKinsey survey.
In a global survey for the year ahead many feel the outlook is worse for North America (47 percent) and Europe (41 percent) in comparison to Asia (36 percent). And while these figures may be in stark contrast to the robust sales of 2019, the mainstream fashion market is feeling the squeeze even more.
One thing is certain,the evolution of travel will significantly affect recovery, when currently there are no Asian tourists spending in Europe or the U.S.
Recovery scenarios are vital to luxury strategists, with McKinsey identifying several themes for businesses to come out the other end stronger. This includes assessing if a business has reached it full digital potential. For example, does it have operational e-commerce in different markets and languages, can it fulfil orders in different locales? Are all of its products available online?
China is nearing sales to pre-pandemic levels and luxury brands would do well to focus on where customers are currently spending and being present in those markets. Luxury businesses, however, will need a different strategy for successful Chinese sales. According to Jing Daily many brands operating in China “do not have a distinct brand story. Instead, they define themselves with a categorical position.”
“A combination of storytelling deficits, customer journey deficits, and pricing mistakes will lead to significant underperformance and failure.”
In a survey conducted by Équité, more than 90 percent of polled luxury managers were not clear about the best way to attract young, sophisticated Chinese customers to their brand. In China, 70 percent of luxury consumers are women aged 20-25.
Within a brand some product categories will be doing so much better than others, like the recent casualisation of fashion and understated luxury. Brands that understand the shifting trends and can quickly pivot to embrace popular categories are winning.
Local customer activation and retention is important for luxury players to be seen to act locally and think globally. This also leads to companies re-appraising their brand’s store network and service model, to be able to cater to clients expecting the highest levels of personalised service from the moment they visit a website or a physical store, wherever that may be.
Despite the new lockdowns across Europe, manufacturing is continuing in all of the countries affected and there is no halt to production. Luxury giants like Kering and LVMH outperformed in Q3 proving the appetite for luxury goods remains strong. Share prices have recovered from big losses in February and March and should continue to remain stable as long as new lockdown restrictions are lifted by December, just in time for partly salvaging the Christmas season.
Article source: McKinsey; image via Bottega Veneta