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THE LUXURY MARKETS

LUXURY CONSULTANTS URGE COMPANIES TO MAKE CHANGES TO ADJUST TO THE WORLD THAT WILL EXIST POST COVID-19

 

 

The COVID-19 pandemic has provided the luxury product industries an opportunity to rethink the way the way they do business. Many of the measures necessary may have had to be instituted at some time in the future, but they are more urgent now the current crisis has accelerated many consumer trends that were already underway, notes the Milan headquartered luxury markets team of the Boston Consulting Group, in a report just released in conjunction with Altagamma, the foundation responsible for promoting Italian luxury brands

Over the long term, the luxury product consultants expect there to be a polarization of between West and China, with Europeans and Americans True-Luxury consumers being more likely to prefer brands that are understated and timeless, while the Chinese prefer luxury items with brand visibility and iconic patterns. A value that is common to all consumers, however, is the importance of sustainability

Consumers are also showing themselves to will be more appreciative of personalized attention both through online and offline channels, but a new shopping equation is emerging with the fast adoption of online shopping and the evolution of physical stores.

“Store 2.0 will look very different from now: they will focus on experience and service, they will have ‘hyper-localized’ assortment and they will upgrade their digital offering. Mono-brands store will have a new role to appeal consumers: they will probably be less in number, more immersive and more experiential, and a place for connection and sociality,” the report states.

STRUCTURAL CHANGES IN THE NEW BUSINESS ENVIRONMENT

These trends are contributing to redefine the meaning of luxury, the BCG/Altagamma report says, noting that brands that address the new challenges and opportunities without delay will be in a better position to navigate the new reality.

The crisis will result in structural changes in and in shifts in luxury consumer behavior and preferences. In the shorter term, consumers will buy less, but more locally and more selectively, while distribution will have to reset taking omnichannel economics into consideration.

“The shopping equation between online and offline is made possible by a solid omnichannel strategy,” the report notes. “Create an online connection that feel exclusive and beyond what non-luxury retailers offer. Shift from store to experience, trying new concepts such as store in store, test and try, brand storytelling and brand-related services. Leverage data and technology to make your consumers live a seamless omnichannel experience: invest in tech – Advanced Analytics and Artificial Intelligence – to create end to end consumer journeys.”

As they prepare for the post-COVID world, luxury brands need to reset, streamline and focus on five critical components of business, the report states.  These are:

 

Over the long term, luxury product consultants expect there to be a polarization of between West and China, with the Chinese preferring luxury items with brand visibility.

  • Distribution: Redefine the luxury brand’s footprint, including the role of wholesale, physical stores, platforms, digital and omni-channel sales.
  • Making supply chains less costly and more agile: This may require renegotiating supplier partnerships to increase flexibility, risk-sharing, and decreasing the time it takes from getting products from the factory to the market.
  • Adjusting profit and loss strategies: Redo costs to reflect lower revenue.
  • Rethinking the fashion calendar: Produce fewer collections and match delivery to the seasons.
  • Implement a zero-based organizational redesign: Review organizational structure and adopt “bionic” operating model, which to combine human and technology capabilities.

The BCG/Atagamma luxury team suggest companies hire members of staff with an understanding and experience in using Artificial Intelligence.

SIX PRIORITIES FOR FUTURE SUCCESS

The BCG/Atagamma reports also suggests that brands would also need to invest in six priority areas to maximize success in the new market reality:

  • Addressing changing consumer demands: Amplify brand purpose, sustainability, and community.
  • Investing in inspiration: Excel in inspirational content creation and amplification.
  • Embracing clienteling 2.0: Personalize client relationships and enable staff to use analytics to improve selling.
  • Accelerating the digital ecosystem: Cover the entire customer journey, including inspiration, purchase and post-purchase.
  • Building an AI-driven technology backbone: Digitize core processes for product development, and to accelerate e-commerce.
  • Bring fresh skills to the workforce: Hire, retain and train people who know Advanced Analytics and Artificial Intelligence.