In April, when the high fashion luxury goods brand Hermes` reopened its store in China, it saw sales worth US $2.7 million in a single day. When early this year the coronavirus spread to countries all over the world, governments were quick to impose lockdowns, and eventually, countries like India, China, France, Italy, and the UK implemented some of the world’s most stringent restrictions and quarantine measures. With more and more consumers forced to spend their daily lives from inside the walls of their house, the trends in retail shopping and consumer buying have shaped up very interestingly in the past few months.
What is often termed as ‘revenge spending’ – this behaviour of Chinese citizen queuing up outside luxury retail stores is a phenomenon we’re especially seeing post-Covid, and there is a chance that similar patterns may follow in other parts of the world. A psychological effect wherein consumers, after having missed their shopping patterns in times of strict restrictions, overindulge in retail spending when the restrictions are lifted – ‘revenge spending’ is an interesting observation to be made from recent consumer behaviour.
A 2017 BCG1 report forecasted the personal and experimental luxury market to grow to a €11260 billion market by 2024, with accessories leading growth in personal luxury and hotels and exclusive vacations leading the experiential luxury industry. According to the same report, the total number of consumers indulging in luxury products is expected to reach nearly 496 million by 2024.
With the coronavirus pandemic forcing the world into somewhat of a standstill – luxury brands all over, just like a lot of other industries and companies, have shifted focus to health, safety and precaution for all its employees and customers. One of the most important insights about the luxury industry is that a significant percentage of luxury purchases are made abroad, i.e., luxury purchases are often made by global consumers. Customers purchase luxury brand products from abroad not only to take advantage of price differences, but also because luxury shopping is a major part of the global travel experience.
With the pandemic putting severe restrictions on and majorly halting international travel, the luxury industry has had to take a big hit. With fashion shows and ramp walks being shut down, another channel of expanding the reach of luxury brands has been severely affected. Italy alone produces more than 40% of the world’s global luxury products and the pandemic has forced all Italian factories into shutdown2. The biggest impact however comes from retail consumers who, considering severe conditions, prefer to completely cut down shopping and luxury entertainment, and are only focusing on essential commodities and necessary purchases.
What is currently being seen in China is consumers hoarding luxury items and forming long queues in front of luxury stores, as the country gradually opens. But is this indicative of the start of a luxury sector boom? Is this pattern likely to follow in the other parts of the world?
A research conducted by RedQuanta3 on Indian consumers reveals that 67% women and 51% men miss shopping due to the severe lockdown, 59% respondents said that they’ll continue shopping as much as or even more than they did pre-covid, and 57% respondents said that they will make as many as or even more shopping sprees after restrictions cease.
Whereas such surveys and recent events of luxury spending in China – slowly spreading to Europe too – have fuelled hope that this might revive the luxury goods industry, experts and analysts are still cautious about its recovery, a recent report by Bain and Company4 even stating that the industry will contract by 25-30% in 2020.
The luxury market, in fact, is set to emerge out of the pandemic with a changed outlook – with consciously driven consumers who have been forced to transform the way they think about fashion in the preceding lockdown. Consumers are expected to indulge in lesser-priced feel-good items but give the ultra-luxury items a miss. Driven to make conscious consumption choices during the pandemic, consumers are expected to take stock of what they have and what they need and shop accordingly – especially in nascent luxury markets like India.
With more and more consumers inculcating minimalism in their lives – the regular luxury customers are the only customers who will likely stick to their consumption patterns. Consumers will indulge, but more consciously, preferring demure fashion choices over ostentatious ones. Within luxury too, grooming and beauty services are expected to get the most boost – since consumers, after having spent months without visiting salons and spas, are eager to get these services back.
What is to note here is that the shopping experience in itself will undergo a huge change, with a significant portion of it conducted online. Even once restrictions are lifted and stores reopen, consumers will be slightly more reluctant to step out as regularly, instead opting for online shopping sprees. Once online delivery was reopened in India, e-commerce saw a massive upsurge, with large number of consumers going back to indulging in shopping, and the pattern is likely to follow even once the lockdown period ends. Shopping for luxury items too will largely be routed through online mediums, and physical shopping will include certain safety precautions.
The coronavirus pandemic has seen major industries suffer and the luxury industry is no less. Whereas a full recovery to pre-covid times will take time, there are still hopes that the industry can start to come out of the crisis, provided it moulds itself to consumer sentiments and shopping patterns. With retail, luxury and ultra-luxury consumers all indulging in shopping once out of the pandemic world, the luxury industry can see growth, provided it is ready to serve the needs of each segment of consumer and changes itself according to the post-pandemic world.
- “Growth in the Luxury Market”, BCG
- Antonio Achille and Daniel Zipser, “A perspective for the luxury goods industry during – and after – coronavirus”, McKinsey and Company Insights, Apr. 1, 2020
- “Running the Show Post Covid-19”, RedQuanta Thought Leadership_Post-COVID Consumer Sentiments, May 2020
- “Global personal luxury goods market set to contract between 20-35 percent in 2020”, Bain and Company, May 7, 2020