The recent coronavirus crisis has affected all industries, but one that has been particularly touched is the luxury sector. Not only has it had to deal with lockdown measures, but it has also had to deal with the rapidly changing habits of customers. This article looks at how luxury brands are handling the current crisis.
The crisis has pushed many to go back to the essentials and reconsider their purchasing decisions. While some brands have greatly suffered, however, others have been able to flourish due to strong management and innovation, and the industry will undeniably have to adjust in order to survive.
Fashion Conglomerates are Tightening their Grip on the Industry
Large fashion conglomerates have been silently acquiring major fashion houses, while the number of independents has been dwindling. Over the years, major brands such as Buccellati, Ulysse Nardin, Versace, Dior, and Jimmy Choo have all been acquired by conglomerates. These groups have not only been able to gain additional market shares but amass vast cash reserves that have made them largely immune to the crisis.
We can expect groups like Kering, Richemont, LVMH (and Capri Holdings to a lesser extent) to continue consolidating their power as minor brands who didn’t plan for the pandemic start crying for help. This will be an opportunity for them to acquire struggling but promising brands at a discount.
Why Conglomerates were able to Stay on Top
Conglomerates have many benefits that allow them to not only survive but flourish during times like these. For one, they can benefit from economies of scale and get material at a rate small fashion houses can only dream of.
They can also centralise their capabilities and use joint resources to benefit brands that might be underperforming. They can use the power of their central marketing team to help boost lesser-known and newly acquired brands in their portfolio. They can also bank on their years building their flagship brands to sustain cash flow. Not to mention the capital they can raise in addition to the enormous cash reserves they have on hand.
Smaller brands, on the other hand, often have very limited cash reserves, and live season by season. One-quarter of mass disruption can be disastrous to them. Being able to count on your cash reserves not only to keep the lights on but to actually rebound from a crisis is what truly separates conglomerates from the rest.
Brands are Banking on Innovation
Other brands have been able to stay afloat by using innovation and adapting their marketing strategies. Brands like Hublot, for instance, have recently launched new advertising campaigns and collaborations to curb the crisis and boost sales.
One of the greatest moves was for them to host their very own events in the midst of industry event cancellations. Hublot is owned by LVMH, which also owns Zenith and Tag Heuer, and was able to hold conjoined events. They also benefited from their collective selection to keep the event interesting.
Hublots also had the benefit of being seen as great stores of value. This is also a great time to make a statement with a Hublot on your wrist. This is why online retailers like CHRONEXT have seen a lot of sales of Hublots lately. They have one of the widest selections of Hublot watches online and allow buyers to buy models in various conditions.
These outlets also allow customers to buy some of the most iconic Hublot models at various price points and are a prime destination for savvy collectors who want to make a sound investment.
How Brands are Looking after their Employees
While not all watchmakers were forced to shut down, some have done so voluntarily out of concern for their employees and to avoid scandals. The Swiss government never strictly mandated a shutdown, and many factories were free to operate, but Bulgari still decided to close their workshops due to logistical issues. CEO Jean-Christophe Babin stated that many of their employees were on the other side of the French border, and had difficulty crossing between the countries due to the heavy restrictions in France. This, according to him, forced them to accelerate a shutdown they were already anticipating.
The Swiss government was also encouraging companies with a large inventory to shut their doors momentarily to avoid the spread of the virus amongst their employees. Many other brands have also decided to shut down their operations voluntarily like Girard-Perregaux and Ulysse Nardin. CEO Patrick Pruniaux stated that the decision was first and foremost to protect their employees. He also stated that 100% of launches would be done digitally for both brands.
There is no doubt that coronavirus has shaken the luxury goods industry to its core. However, while some may not be able to recover, some can expect to bounce back even stronger than before.