The events of 2020 have shifted collective understanding of words like “luxury” and “exclusivity.” Put “luxury” in the context of COVID-19, and many will say it’s about health, access to care and time with loved ones. As for “exclusivity?” That’s a different conversation in terms of race.
Yet here we are. In the midst of the year’s challenges, questions arise about offering — and attaining — the best of the best. Bain and Company predicted the global luxury goods market will contract up to 35 percent this year. The largest target demographic — those in the $100,000-$250,000 salary range — are experiencing layoffs, furloughs and reduced hours. And months of isolation and uncertainty could well lead to questions about what we really “need.” Chanel lipstick, to wear under a mask? Designer clothing, to stay at home?
Variables and projections
“If we look at luxury, that’s a psychological purchase,” says Pam Danziger, founder of Unity Marketing and an expert on affluent consumers and the luxury market. Historically, she says, consumers have opted for small luxury purchases in times of financial stress, helping reinforce who they believe they are.
It would be tempting to seek parallels and projections based on previous economic downturns, but not this time. “We’ve been off of the shopping treadmill for months now,” she says. “And that’s how long it takes for habits to change.”
When people emerge from isolation, “they may be looking at luxury from a different perspective.” With income, equity, mortality and job loss so front and center, a logo on a handbag may be conspicuous to a point of shame. And it’s not just the additional psychological elements of the pandemic that make the future of luxury so muddy; it’s also that Chinese consumers have been hit as well. But who really knows?
Experts anticipate a return to what made “luxury” in the first place: expert craftsmanship, quality materials, innovative design and exclusivity.
“My basic comment is that the blind are leading the blind,” Danziger says. “There are just so many variables, and no historical basis upon which we can draw to make any kind of projections.”
Technology’s role
Danziger and other luxury market experts do anticipate, however, a return to what made it “luxury” in the first place: expert craftsmanship, quality materials, innovative design and, yes, exclusivity.
“Not everyone can buy a private jet, and that’s OK,” says Milton Pedraza, CEO of the Luxury Institute. “Not everyone can have a bodyguard, and we seem to be OK with that. But in the desire to grow, luxury brands have become commoditized. There will be a rethinking that, if there are less brands out there, less luxury pretenders, then luxury should be what it used to be: something special. The best of the best.”
Those left standing post-pandemic will be able to charge luxury prices, but perhaps for something slightly different. As brands like Gucci and Chanel seek a greater wallet share from consumers, “they’re going to have to produce the little black dress, the navy blue suit, the staples people want” in addition to the innovative and creative pieces.
Pedraza wonders when luxury will catch up with the technology that allows rapid-fire, custom-made, perfectly fitting garments, too. “We still think it has to be done by people,” he says, “but we’re running out of tailors.”
He foresees a bloodletting of excess inventory, but not necessarily with announced “sales.” Luxury retailers will find other ways to drop prices without calling it that. As for specialty shops, Pedraza believes they’ll be fine in the long run, but it might take a while — and a renewed overall sense of safety and security — to get there.
Rethinking priorities
Oliver Chen, managing director and head of retail and luxury for Cowen, notes that the luxury industry is relatively consolidated, and the overall trend of the “big getting bigger” applies there, too. He is optimistic overall but does expect a rethinking of priorities.
He sees inclusivity, for example, as the new exclusivity. “The reason that’s important is that the evolution of what ‘exclusivity’ means is different for different generations,” he says. There’s still a storytelling aspect, and there’s still heritage, but in a time when “everything is available to everyone at all time, to all people in all places,” there’s a rise in limited-edition collaborations and accelerated trends.
Here, Chen mentions brands like Supreme, and the integration of streetwear and casualization in fashion by designer and Louis Vuitton menswear artistic director Virgil Abloh. Members of Generation Z and younger are like the baby boomers, he says, in wanting to stretch their dollars. Luxury brands must execute with versatility and value while staying true themselves to win.
Chen says pent-up demand from the pandemic likely will lead to bifurcation: a desire for basic needs and essential goods, but also a thirst for the theater and emotions of luxury. Prior to the pandemic, “what we had was a lot of sameness,” plus too much debt and too many stores.
His advice? Embrace digitization and brand-appropriate convenience; rise to the challenge of repurposing content to help with current cultural needs; and rethink the store to serve as a hub, distribution point and base for livestreaming as a channel for commerce.
In luxury as elsewhere, a crisis can — and must — still drive innovation.