Most of us are very sure businesses in the luxury industry always have backup plans for everything. Do these plans actually cover semi-apocalyptic scenarios like the one we are witnessing today with the Covid-19 outbreak that’s putting the whole world in a corona lockdown?
By Patricia Issa
While this is being written, the global aviation sector is losing track of its losses; the financial markets are in a free fall; equity is being devalued while a few governments have already chosen to save the people and bankrupt the economy, and others are planning to resume the work within a week or two.
In the luxury industry, the ripple effect of the crisis is going to be substantial and will probably need several quarters of hard work to start balancing out. Not impossible as long as lives are being saved and the world can soon put this experience behind.
Here are 5 ways the luxury industry is expected to be experiencing the post-crisis phase:
1- The digital business model is accelerating to the top, along with all minimal intervention trends: with social distancing being the new norm during the outbreak, and probably for a few months afterwards; luxury retailers are jumping online to make up for the lost revenue from their brick and mortar shops. This necessity of the day favoring e-commerce, will accelerate the digital transformation of the luxury industry as a whole.
2- Companies are reconsidering outsourced production and might be relocating to their countries of origin: the moment the lockdown was imposed in China, every single luxury brand outsourcing its production to the Chinese mainland had its business chain completely frozen. The loss of control over the business is forcing many luxury manufacturers to reconsider their outsourced operations in favor of producing locally.
3- Luxury services are becoming even more private: Providers of luxury services and lifestyle management services are considering a serious shift towards minimal human intervention in service execution. This particular branch of the luxury industry will soon be managed through the invisible hands of seasoned lifestyle managers who will make human intervention and contact in service execution almost seamless.
4- The market for luxury suppliers is being filtered: with 43 billion dollars of revenue expected to be completely wiped up from the luxury industry over the next two quarters, only solid businesses will be able to balance out the losses within 2 to 4 quarters. The market will filter out competition, while windows of opportunity will close in the face of direct competition, and open for newcomers delivering value and innovation.
5- New openings in the industry will be for value based luxuries and sustainable business models: The COVID-19 global crisis is introducing a new model of consumer behavior redirecting focus to value for money and sustainability. This is why great opportunities and a greater market share will be available for luxury suppliers who will introduce these values to their businesses and to newcomers whose business is all about delivering value along with brand prestige and featuring a sustainable business model.
The luxury industry post COVID-19 will not be the same, and we have yet to observe consumer behavior in order to be able to draw the rest of the picture.
Patricia Issa is an entrepreneur and Lebanese influencer with a passion to share.