COVID-19 has hard hit the luxury industry resulting in the biggest fall in the personal luxury goods market since 2009. The industry has witnessed major transformation with digital being one of the biggest and the most impactful ones. E-commerce has proved to be a silver lining for many companies that were initially skeptical to embrace digital technologies.
The last few months have seen a significant shift in the luxury consumers’ beliefs, values and lifestyle. The key question remains: Will the pandemic alter the way shoppers buy in the future? What will the ‘new normal’ look like?
Here are the 6 key trends paving the way forward for the luxury goods industry:
According to the recent Deloitte report, the leading 10 luxury goods brands sold more than the next 90 combined. The big luxury players are becoming bigger than ever while the weak are traumatised by the crisis; thereby resulting in massive consolidation in the industry.
Many stressed players, such as debt-laden multi-brand retailers and cash-poor independent brands are finding it difficult to survive. The exceptionally complex situation of 2020 undeniably increases the likelihood of more mergers and acquisitions and consolidation within the luxury industry.
Note: In the post-pandemic world consolidation of the luxury industry will further deepen. Leading companies need to be agile to grab the opportunities as weak players shutter.
First-time digital buyers on rise
COVID-19 undoubtedly accelerated the speed of digitisation as companies had no other option but to go ‘online’ to reach their prospects. Many consumers who historically purchased through physical luxury mansions have switched to online channels for the first time during the pandemic. Also, there is upsurge in the demand from buyers residing in tier 2 and tier 3 cities who had limited avenues earlier to buy their favorite designer labels at the click of their fingertips.
As per a recent report by Bain & Company, online luxury purchases were worth $58 billion in 2020, as compared to $39 billion in 2019, nearly doubling the sector’s share of the market for global luxury sales to 23 percent from 12 percent.
Note: In the post-pandemic world, some of these buyers are likely to stick to digital.
Surge in serious buyers
The fear of COVID still looms large across the globe. Consumers are shying away from visiting physical stores. They are making focused, to the point visits to retail outlets to fulfil their luxury purchase requirements and not spending time on window shopping and browsing through goods in the physical stores. Further, the ticket size of purchases has gone up due to a decline in frequent visits. In addition, consumers have become much more informed and are very clear about their needs and preferences. Hence, marketers need to go the extra mile to engage and capture consumer’s attention during these times.
Note: In future, brands need to inspire and motivate their buyers by innovative tactics- both offline as well as online.
Back to possessions
Today, luxury consumers can’t travel. They cannot splurge money on lavish dinners or big fat weddings. In this scenario, affluent people are parking a good amount of their money on acquiring luxury goods. They are celebrating their special moments like birthdays and anniversaries by purchasing high-end labels. Possessions have become a way to feel good at the time of this crisis. Although, this trend will be more prevalent in the short-term till experiential luxury again gain momentum.
Note: Brand should take this situation as an opportunity to acquire new consumers by creating targeted, focused customer acquisition and marketing strategies
Pre-loved luxury taking lead
As per ThredUp’s 2020 resale report, 50 percent of individuals are decluttering their closets more than pre-COVID times since they are spending more hours at home.
Today, increasing number of young consumers are seeing the brands in their closet as not just a way to express themselves but also as a valuable tradeable resource. At the same time, pre-owned fashion gives the opportunity to cash-strapped aspirational buyers to live their dream of owning luxury goods without making a big hole in the pocket.
Recently, Italian fashion house Gucci has collaborated with consignment site, The RealReal to expand their target audience in a circular manner. The luxury fashion second-hand goods market is estimated to grow from $24 billion in 2019 to $51 billion market by 2023. Further, the second-hand apparel market is projected to overtake fast fashion by 2028.
Note: In the post-pandemic world, pre-loved luxury may become the new norm.
Rise in ‘woke’ consumers
Young consumers are extremely concerned about people and the planet. With the onset of pandemic, they are rooting for those brands that are aligned with their value system and beliefs. Nine out of ten Gen Z consumers believe brands have a duty to address environmental and social concerns. Therefore, a growing number of luxury brands today are repositioning themselves as ‘caretaker of mother earth’.
Note: In future, brands are expected to demonstrate increasing commitment towards sustainability. Today, luxury companies in all categories are compelled to adapt and reinvent themselves in order to survive in the new luxury landscape. There is an increasing need for companies to become ‘customer first’ entities to attract and retain their customers.
Consumer expectations and buying behaviour has evolved during the pandemic and luxury companies need to be on toes to remain in sync with the changing market trends.