Luxury brands are strategizing to overcome the economic challenges caused by COVID-19. Some have taken the approach, “do good and stay safe, but make it fashion.”
Rabat – Consumers and brands are redefining the role of luxury in today’s society as the world battles through the COVID-19 pandemic. While some say the latest financial downfall could cripple luxury brands’ frontline spenders, others suggest it is only a matter of time before the high-end industry reaches new heights.
Luxury brands are strategizing by hiking up prices, investing in benevolent crowdfunding campaigns, and even developing products to protect consumers from COVID-19 in the most fashionable of ways.
Recent unemployment rates are staggering and unless you are in the business of luxury loungewear, let’s face it, there has not been a huge demand for non-essential buying.
Leading brands such as Chanel, Louis Vitton, and Tiffany & Co. have raised their prices anywhere between 10% and 20% in hopes of making up for lost revenue. Nearly all luxury brands have seen a dip in sales — some have lost as much as 80%, a hit that could spell the end of business without a prompt recovery.
Other luxury brands have attempted the opposite approach, moving their inventory at all-time-low prices. Brand strategists suggest that lowering prices could reduce opportunities for building lasting customer relations, negatively impact companies’ long-term pricing approach, and harm their brand equity. Temporary price reductions have yet to show success. Total profits are still declining with such hopeful brands.
The millennial generation, particularly in the United States, has been recognized for their coming of age in back-to-back recessions, living in a near-constant state of economic cataclysm whilst in their peak employment years. Luxury brands targeting this audience will need to find innovative solutions to face the challenges marked by frugal spending and a lack of conspicuous consumption.
Evaluating options moving forward, some luxury brands are seizing the opportunity to rethink their approach, expand their digital presence, and invest in their connectivity with customers.
Do good and stay safe, but make it fashion.
Many consumers are gravitating toward a growing expectation that companies will act responsibly and “do good” amid hard times.
Gucci, the Italian luxury fashion brand ranked number one by Luxe Digital’s Most Popular Luxury Brands Online in 2020, has teamed up with the United Nations and transformed the home page of its website into a COVID-19 giving campaign. The brand calls on its customers to follow its lead and contribute to a fundraiser supporting those impacted by the global health crisis.
“Gucci has created a world, open and free: a Gucci global community. We ask all of you to be the Changemakers in this crisis, to stand together with us in the fight against the Coronavirus. We are all in this together,” said Gucci’s CEOs, Alessandro Michele and Marco Bizzarri.
Forbes Magazine recently published an article highlighting more than 30 luxury brands in the business of designing stylish protective face masks. From pink sequined or lace masks to black leather or eco-friendly tree fiber masks, the industry has not wasted time appealing to those who may be willing to spend up to $100 for a mask a few grades above what one might find in a hardware store.
The potential of ‘revenge spending’
Fortunately for luxury brands, research shows that consumers do not readily adjust their buying habits. Brands savvy enough to create a perceived value in a person’s life are likely to prove resilient despite the changing economy.
For many consumers, online shopping does not deliver the same satisfaction as wandering through a mall or indulging in high-end dining and shopping atmospheres. “Revenge spending,” a term used to describe a spending frenzy which usually follows a significant interruption in normal spending habits, is what most businesses are banking on to bounce back from their lockdown lows.
China, the first majorly impacted country to lift lockdown measures and reopen businesses when COVID-19 cases slowed, saw an impressive rush toward non-essential and luxury spending.
In the city of Guangzhou alone, French luxury fashion brand Hermes brought in approximately $2.7 million on their first day reopening. Just-in hand bags were sold out before 10 a.m. and shoppers flocked to enjoy the newly renovated consumer spaces.
Some commentators claim that the US may not experience revenge spending in the same way China has. For one, China’s unemployment rate rose to 6.2% during the country’s state of emergency, compared to the US’ rise to nearly 19%. In Europe, the level of impact from lockdowns has varied, making it difficult to predict future spending on luxury goods.
Overall, the general trajectory is a decrease in luxury spending and plunging profits for most brands. Some may see a decent turnaround once spenders are relieved of their duty to stay home and governments give businesses the green light to open.
Luxury brands, like many other components of our precarious lives, are discovering a need for more sustainable and innovative solutions to their business and branding models.