By Pauline Rady, Group Director, Spark Foundry MENA
The dramatic spread of COVID-19 has disrupted lives, livelihoods, communities and businesses worldwide. The luxury sector pivoted to address urgent public-health needs: factories that produced scarves and perfume shifted to manufacture facemasks and hand sanitizers during the pandemic.
The pandemic has certainly shaken some of the radical aspects of the luxury industry, causing a behavioral change for consumers and retailers alike.
The global ban on international travel caused the biggest impact on the luxury industry. Global shoppers normally generate approximately 20% to 30% of luxury goods revenue that is no longer achievable and will not recover anytime soon. This means that although last year you travelled to London to buy your Dior bag, this year you will probably be on the lookout for something that is a little unique to the city that you live in. Luxury brands have always used a combination of traditional lines and unique and exclusive city-based pieces to attract global tourists who want to take a piece of the city they visited back home.
So, what happens now? Well, we know that domestic travel will be recovering faster than international travel. In-fact, Emirates Airlines is anticipating 20% traffic once it resumes its operations during July and August at Dubai arrivals, with an estimated recovery timeline of 2021 at least. Therefore, the focus should shift to attract local luxury shoppers in their home countries. Brands will need to explore new innovative ways to redefine their experience powered by data, convenience and technology while keeping first-class luxury standards. And yes, a touch of localisation goes a long way.
What about engagement? This was somewhat lost as human interaction took a back seat. Brands need to be incredibly active, and successfully connected with their customers. While stores were closed, they were still able to show their appreciation, sell goods, and provide personalized services, while leveraging new digital, real-time insight technologies. Brands need to create tailor-made services offering customers the convenience of shopping online while maintaining the in-store experience. They have to focus on storytelling around purpose and values, heritage and authenticity to remain relevant to their newly discerning customers.
COVID-19 has provided the luxury sector with the opportunity to re-invent itself, moving away from the traditional brick-and mortar, and take immediate actions to weather the storm as well shape its future in light of the new normal.
There has been a grand reset in a sector that always acted with caution versus innovation. Innovation was left to designers, not retailers, and that has transformed now. Brands are now prioritizing the enhancement of their digital capabilities, allowing them to capitalize on current and future opportunities while also protecting them from future risks.
With the announcement of the global pandemic, governments promptly implemented a lockdown across the GCC, shutting down malls, airports, and all human engagement. Digital content was the primary solution for brand interaction and it is now time for retailers to get creative, pushing the limits of everything digital.
E-commerce was always part of luxury brands’ long-term plans. This crisis has been a catalyst for luxury leaders to react and streamline the development of their own DTC platforms, and explore new ways of collaborating with established e-retailers to recruit new buyer segments online. We all agree that online stores will never replace the revenues generated from brick-and-mortar stores in the luxury industry. The real opportunity today is not for brands to only become digitally savvy but to acknowledge the need for change, hence transforming their businesses in preparation for the new normal.
E-commerce is no longer considered as innovation. It is part of the new normal and brands should grab the opportunity and dig deeper for innovation.
COVID-19 might have changed the way we work, interact, shop and spend time but it will not change who we are and what we want from life. Having had time to reflect, people will value authenticity and meaningful values more than ever before. After months of isolation and anxiety, customers will want to experience life again. The lockdown resulted in a pent-up desire to consume, and when malls opened again, people went back to stores with a strong motivation to buy. People were spending on luxury items to celebrate the end of lockdown.
Companies that will figure out how to offer tailored experiences instead of services will be leading the way. Luxury has a bright future ahead. Life has proven to be short. Live well, look great and do not shy away from innovation. We have been given the opportunity to reinvent ourselves and this business we all love.
It is time for the Great Reset.