By posting dire quarterly results one after the other, luxury brands show the extent of the unfolding economic crisis. Hermès, the sector bellwether, just posted this week a 42 percent decline of its sales in the second quarter of 2020. Burberry shares are down 40 percent over the past year. LVMH, the industry leader, announced its profits have fallen more than industry forecasts in the first half of the year. Richemont, the Swiss giant and owner of Cartier, IWC and Piaget, also suffers. Johan Rupert, its owner, announced in May that it would take at least three years to return to pre-coronavirus results. The slump occurs despite the relative resilience of sales in China.
The wider economic context is not good and even gloomy for the rest of the year, according to the International Monetary Fund. The U.S. just announced its worst GDP quarterly slump, 32.9 percent, in the second quarter. Meanwhile, the euro-zone GDP plunged by a record 12.1 percent in the second quarter. As the virus is re-emerging strongly in multiple European countries, and is still growing strong in the U.S., South Asia, and South America while South-East Asian activity remains subdued, luxury brands have no other choice but to reinvent themselves with agility to survive.
Let’s not forget, we’ve been talking about luxury reinventing itself for quite some time now. So, what exactly does a decisive transformation means for all the brands across the different luxury sectors, in automobile, hospitality, fashion, watches, jewelry, and cosmetics?
Independent brands, with their lack of restraints from Head Office and contrarian tendency, as discussed in a previous article, are well-positioned to lead the way.
Here are seven new ways that independent luxury brands think will help them weather the COVID-crisis induced changes and bounce back stronger. These new practices might well help the industry in general.
From shirking virtual marketing to using it for emotional bonding
There are multiple dimensions of emotion that can affect the luxury consumer. Coronavirus, and our utter dependency on virtual communication, has arguably helped luxury brands find their place in the virtual marketing world. It was always a tall order to do so before coronavirus: virtual was for the masses and luxury was for the few.
Kurt Kupper, Board member of Louis Moinet watches, the specialist of terrestrial and extra-terrestrial material, says his company has, “accelerated the digital wave with retail partners to share news, updates, images, videos […] to further create emotional bonding via certain new virtual anchors.”
He gave an example of giving manufacturing updates of a client’s masterpiece via a live chat with the workshop, adding “I have read that Porsche will offer this now with cameras in their factories.”
From lavish extravaganzas to asking “Is the Return on Investment really worth it”?
On the one hand, coronavirus has ruined play because fashion shows have been impossible to carry out. But beyond that, even as and when they return which they surely will in some shape of form, the industry has started to question their worth. What is intriguing is that this is not happening just in fashion.
Still speaking, Kurt Kupper of Louis Moinet declared: “Our marketing mix will change durably: we will definitely question the return on investments of large trade shows, events, product launches and we will experiment more, implementing flexible, digital marketing initiatives.”
This, like so much, goes hand in hand with digital taking center stage, as he hinted, saying: “Our Sales & Marketing will become more like that of many other niche manufacturers: more digital, more agile with our retail partners and more direct.”
From long-term strategizing to incorporating shorter-term, more pressing concerns too
For Knirke Fester Schindler, Brand Director at La Vallée, a Swiss independent luxury cosmetic brand, interviewed for this article, the brand would have in mind a combination of both long-term strategies and shorter-term ones. She elaborated on how La Vallée’s strategy would prioritize societal impact, diversification of the supply chain and focusing on gaining momentum in what the brand was at heart: an agile, independent one.
She said that part of the shake-up in strategizing would be “being reactive to the new trends and behavior that our active, ambitious, executive target woman will follow in the post COVID-19 market.”
Florian vom Bruch, CEO of luxury watch winders and safes Buben & Zorweg, says he believes the company’s recent appreciation of balancing long-term rational business versus short-term emotional impulses is there to stay. “We aim to get a better ratio here,” he said, citing as examples of new focal areas since COVID-19 being “more hybrid sales channels” and a focus on areas that were “likely to be more stable”.
From putting the brand center stage to elevating the customer to this role
You don’t have to think much to relate this idea of reactivity to customer-centricity, which was perhaps the area that came up most across the board, with independent brands interviewed for this article.
“Our ability to respond quickly, even in a time of serious international crisis, has been highly appreciated in recent weeks and has made us understand the importance of keeping our procedures streamlined with the aim to make the consumer feel at the center,” he said.
From being at the more irrelevant end of some industries to actively bringing value to the table
For Jean-René Bouton, CEO of Paris-based fashion designer Koché, also known as the haute streetwear label, the luxury market and its clients would now search for more relevancy in terms of products: “A collection will have to be more relevant than ever for its clientele: quality, design, sustainability, and societal messages. The buying will be more thoughtful. Brands “that have something to say” will be more desirable than others, he added.
David Candaux of the eponymous watch brand, said his vision was to not muddy the waters in these times: “The goal is to continue on the same path that we have been moving on, even as unexpected challenges arise. […] Value just became more important again, more than ever and that’s what we deliver, real value, real craftsmanship.”
Whilst he acknowledges this attitude is nothing new, it does mark a certain renewed conviction in a concept that had been somewhat up for sale; one of the biggest challenges for luxury brands in recent years has been to make optimum use of social media without compromising brand values.
Maybe this will no longer even be a worry for luxury brands, newly convinced that values triumph a certain type of mainstream social media presence.
From the growing reliance on Chinese traveling consumers to the re-connection with local consumers
According to Patrick Delarive, founder and owner of Whitepod Ecoluxury Hotel in the high Alps, “we are going to have done better in 2020 than 2019!” thanks to the brand ability to attract local consumers, Swiss in this case, not just the international ones.
Reconnecting with local consumers, i.e. Americans in the U.S., Europeans in Europe, Delarive thinks it is critical to be in tune with the post-crisis trends: people are currently showing a noticeable desire for experience and quality. This should be giving luxury brands a confidence boost.
“We are better-known than ever at this point in time, grappling with the crisis. We are foreseeing wider margins and improving infinitely what we can offer in terms of experience and quality.
The brand is going international with utter confidence and plans to open one new hotel a year between now and 2025.
Delarive sees the future of luxury as bright – especially for independent brands – because they are better placed to provide hyper-personalized experiences than large multinationals which suffer from stifling governance. For multinationals, he says, the only way will be to “spin off their brands increasingly” to overcome this rigidity and become more locally relevant.
From mysterious company cultures to transparent good practices
Luxury brands were always supposed to be the good guys in terms of how they valued their staff. Markus Kramer wrote a whole column on how company culture could learn a lot from luxury brands in 2014. Admittedly, anyone who has seen the 2009 documentary The September Issue, which goes behind the scenes at Anna Wintour’s Vogue or anyone who follows supply chain ethics carefully might have a thing or two to say to the contrary.
Generally speaking, companies do well to align their company culture with their brand values. And yet institutionalizing those values and defining how they relate to behaviors and expectations unique to your organization (what the textbooks might suggest you do) is no small feat.
Cosmetics House Maison Valmont has quickly learnt the value of team cohesion, as CEO and co-owner Sophie Guillon said. Coronavirus gave her the chance to witness collaborative team dynamics at play and want to bottle them up forever.
“We [now] share a bond – which we highly praise,” she said referring to how the company pulled together during COVID-19. “I believe we will listen to one another’s needs more actively. Our teams were flexible enough to put their daily tasks on hold and to stand united behind any new opportunity, issue or constraint, which I think they all liked all will keep doing. […] Team spirit was and will be our motto,” she told me.
Independent luxury brands can help dictate the way
There seems to be a lot of headlines flying around right now that focus on the recovery of sales in the “hard-hit luxury sector”. China repeatedly appears as a possible ray of hope – a bright spot suggesting returned consumer confidence – given that normal shopping patterns resumed there first.
But what if the sector is busy dictating a new way forward? So far, it would seem that
smaller, independent brands in particular are drawing on key components of agility —customer centricity, quick adaptation, team collaboration around a clear and common purpose, long-termism melded with short-term experimental strategies, and simplifying bureaucracy — to help redefine luxury.
It is not yet clear what big brands’ response to independent brands’ new direction will be. But given the tendencies explored here, it would only be a good thing if they followed suit, given that the approach is a wholesome one and the sector was, prior to coronavirus, desperately looking for an excuse to reemerge reformed.
The author thanks Alice Tozer for her assistance with the research.