5 Trends to be seen in the luxury market due to Covid-19
COVID-19 has hit the luxury marketplace real hard. Companies are expected to lose 25 to 30 percent of thier brand value which is going to lead to a $1 trillion collective loss. This economic and health crisis is also expected to have long-term repercussions on purchasing behavior and will trigger tremendous changes in the luxury segment.
This can be reflected by the fact that the luxury companies have now started producing hydroalcoholic gels and face masks in the wake of COVID-19. Companies such as Louis Vuitton, Prada, and keeping have also decided to provide financial support to health services and thier employees.
But there is something beyond these immediate measures too. Companies are rethinking thier strategy as they know that this pandemic can be worse than the financial crisis of 2007. Data from some sources suggest that the sales are gonna plunge by 60-80%, although the impact will vary from region to region. The problem is also related to the logistics, leaving thier stores closed in most parts of the world. Consumers have also stopped spending money on the non-essential commodities which have caused a disastrous effect in the fashion industry. This has also left some major companies filing for bankruptcy.
To avoid and overcome this negative effect there are some strategies that companies are expected to follow so that they can cope up with these significant changes. The trends can be enlisted as follows:
Taking the online platform to a higher level.
The products left behind in thier inventory needs to reach out to the customer. The only way possible now is through the online stores. Companies will now focus on providing first-class facilities, flawless and secure payment gateway, and of course on-time delivery.
Collaboration with third-party retailers is also very much expected as they already have a lot of unsold products left from the previous season and collection which they need to sell-off. Initiatives like the creation of virtual stores and “pop up shops” can be something which can attract the customers, although companies can think of other such alternatives which will help them increase thier sale in this time of a global pandemic.
Boom in the resale market.
The 2nd hand market is expected to rise during this situation and increase by 12% till next year. It’s quite obvious that customers would turn to the second- hand goods in this time of the pandemic. Consumers having luxury items and who are in need of cash will offer their items for sale for lower prices than usual which could in turn stimulate demand. Resale companies have started to observe this trend already which is actually a good thing for the market. This trend is now gaining momentum across the globe and will be more visible in the upcoming days.
Towards a more responsible luxury behavior.
It is expected that consumer behavior will change towards luxury and people will stop spending like they used to. In the time of a financial crisis, consumers will be less in number and will try to put a hold on thier purchases. This trend was seen prior to the COVID-19 pandemic, particularly among the millennials. They already started showing sustainability in thier buying behavior before the crisis started. This fact will force the luxury houses to reduce the number of products offered annually, thus reducing its productivity and eventually it’s revenue.
Reduction in public relations budget and a probable cut in communication.
Brands will now have to reexamine the way they communicate. Traditionally they used fashion weeks to do so, but now they will have to switch to events which will avoid large gatherings and help maintain social distancing to counter and fight the COVID-19 virus. Events which were scheduled for June have been canceled in both Paris and Milan. Luxury houses are now shifting to virtual means and more private events. Faced with the crisis, these companies will have to restrict spending and realize that communication and events budget will be affected drastically, so rethinking the way to do so will help them thrive.
Concentration of ownership.
Given the situation where companies are facing a lot of difficulty, losses and even bankruptcy, it will be very easy for big players in the game like Louis Vuitton or Chanel or Prada to busy out thier competitors. The small companies will now become affordable targets and will be provided by the big companies who have earned thier name and are not facing a challenge to sustain in the market. Thus in this was the concentration of ownership will intensify and will lead to buying out of competitors subcontractors or even suppliers.
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