Translated by
Nicola Mira
Oct 17, 2020
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Luxury industry decision-makers stay upbeat despite Covid-19

Translated by
Nicola Mira
Oct 17, 2020

In these troubled times, top executives from global luxury groups remain extremely confident and optimistic, sentiments that emerge from a survey carried out by French consulting firm MAD, which has taken the sector’s pulse to understand its leaders’ priorities.

The latest Louis Vuitton show, for the Spring/Summer 2021 - © PixelFormula

In early September, MAD, founded and directed by Jean Révis and Delphine Vitry, interviewed 57 decision-makers from various segments of the luxury industry, 55% of whom are executive committee members in their groups, and 45% of whom work in operational roles at either national or regional headquarters. After publishing the ‘Luxury Convalescence - Fast Forwarding’ report, assessing the industry's situation post-lockdown, MAD has now published a new survey, entitled ‘Luxury Convalescence - the luxury barometer’, which will be updated every three to four months.
According to this survey, 49% of executives interviewed think their companies will attain a level of sales equal to 2019 in 2021, while 69% think they will do so in 2022. Only 30% of interviewees think it will take more than two years for the sector to recover. Views that are shared across all the luxury sector's categories. Despite the Covid-19 crisis, the luxury industry seems to show more resilience than, for example, the airline or tourism sectors, a resilience that is all the stronger in times of economic crisis. Even better, 2020 will turn out to be simply “an anomaly, a period with relatively limited consequences over time.”

Of course, though the sector expects to start growing again next year, this doesn’t mean a return to a pre-Covid world. The managers interviewed believe that growth in forthcoming quarters will be chiefly driven by three elements: improved end-consumer information (according to 62% of interviewees), China and its local consumption (say 60% of interviewees), and new distribution strategies (according to 45% of interviewees).

Given this context, Thomas Mesmin, one of the survey's authors, told FashionNetwork.com : “An acceleration in investments in China, with the opening of scores of stores, while retail networks and staff in Europe will be significantly streamlined,” is to be expected.

“With regards to rent payments for stores located in traditional luxury shopping districts, whose streets are now deserted, they will have to be slashed very quickly, as labels cannot wait to see whether tourist flows will pick up again,” added Mesmin.

Major changes will also take place in the distribution arena, where there will no longer be barriers between physical and digital shopping modes. As shown for example, during the lockdown period, by remote sales made in stores with virtual customers, video-linked with shop assistants on the web.
While 80% of respondents felt they are well-equipped to manage a local demand spurt in China, they seem to be less prepared on other fronts, according to the survey. Especially on that of big data, including how to collect and tap consumer information. The survey found that luxury industry executives “feel weaker on the subject of creating value via data management (according to 55% of interviewees) and of client-centricity (according to 45% of them).”

Another concern, notably for 37% of interviewees, is keeping staff motivated. In many cases, especially in the retail sector, staff has experienced genuine moral and psychological distress, which their management didn’t always know how to respond to.

In terms of the investment priorities on which companies should focus in the next 18 months, five areas emerged clearly: e-commerce (according to 86% of interviewees), digital communications (74%), CRM tools (61%), retail in China (57%), and the customer experience (53%).

“A coherent, hardly surprising top-five, reflecting the vision of a post-Covid world that will be more digital, more customer-focused and reliant on the Chinese market,” concluded the report, observing that, instead, “three areas weren't regarded as priorities by respondents, who made a case for lowering investment in European and US retail, and on the wholesale channel.”
A clear gap can be glimpsed, one that is destined to widen, between players that will continue to invest, especially major groups with a more robust financial position and the ability to leverage scale economies and tap their negotiating power, and those that won't invest. “In future, some financial statements will post growth rates of 15%, and others will post 20% downturns,” predicted Mesmin.

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