According to a recent study by Interbrand, the success in the luxury sector for many brands will depend on several key factors.
While it is clear by now that all luxury brands across all sectors will be negatively impacted by the Covid-19 pandemic, a faster recovery depends on several key factors – desirability / exclusivity / finest quality – craftsmanship / creativity – innovation / credibility / consistency.
Desirability
There is no universal recipe and this may very well depend on how consumers perceive a certain brand. This can depend on all the other elements which make up the DNA of luxury. Consistency in terms of quality may be different when it comes to design – the power of the DNA of a most desirable brand may also come from ultimate creativity not even following trends and not creating products based on marketing research.
Exclusivity/Scarcity
It usually relates to limited editions which in some cases are also collaborations. It is also about limited availability of certain products especially in the case of brands which offer for sale online only a small part of its collections. Customers would also need to make an effort to search whether other stores feature the desired product or having to place an order, which in some cases, it would take some time.
Exclusivity is also about customisation or the possibility to configure its very own version of a luxury product. Beyond placing your initials on a product, a consumer would be able to opt for a very specific colour or a raw material that is not normally used for the specific product – which could be the case of a handbag, a pair or shoes, a watch or even a car. In the case of a car examples include bespoke engine performance or customised bedding (ex. mattress, linen and pillows) in the case of hotels.
Finest Quality/Durability
The real winners are the brands which demonstrate consistency and reliability when it comes to sourcing the best quality materials such as leather or the finest fabrics. Hermes and Louis Vuitton have their own crocodile farms while Loro Piana and Ermenegildo Zegna secure the finest wools, cashmere or vicuña by owning or financing farmers. Brunello Cucinelli is a brand which has built an exceptional reputation for securing the finest quality cashmere.
Despite advanced technology, connoisseur luxury consumers will always appreciate hand-made products, whether it is about apparel, handbags, shoes, watches or jewellery. Hand-made craftsmanship requires extensive training and major companies invest consistently in the various crafts.
Creativity / Innovation
Innovation also comes in the way luxury brands communicate whether in print or on social media. Achieving the WOW factor which makes people remember a certain design feature or a reflection of certain products in lifestyle, will remain a major challenge. Addressing different markets and cultures most often requires bespoke brand communication campaigns.
Credibility
Irrelevant brand extensions can be risky – examples of the worst such initiatives include: Porsche branded residential project in Miami, Ellie Saab branded residences project in Dubai or Versace Hotels. At the opposite, most successful such product extensions are Bvlgari Hotels & Resorts and Lungarno Hotels (Ferragamo Group).
The Bvlgari Hotels are a most sophisticated reflection of the brand DNA and its Italian heritage – with an impeccably ‘hard luxury’ architectural concept perfectly conceived and implemented by Italian interior designer Antonio Citterio. The very scarce and subtle reflection of Bvlgari’s main products, jewellery and watches at the Bulgari Hotels is what lends credibility and desirability. Without even attempting to become restaurateur, the fine dining restaurants at all its hotels are overseen by
Post Covid-19 pandemic outlook
- the appetite for luxury brands will take time to recover
- there will be no such ‘revenge shopping’ as luxury stores reopen
- the ‘show-off factor’ will remain unchanged – even if purchases will continue to be driven by how recognisable a product is from a distance with the buyer completely unaware of the mechanism of the respective watch – such brands include Rolex, Cartier, Audemars Piguet or Panerai – which for the long term may be very damaging to these brands
- value and relevance will be perceived differently – consumers paying more attention to the type and quality of materials or fabrics – so they may ‘justify’ a certain purchase with its durability in time – luxury consumers are likely to appreciate a hand-made pair of shoe from the finest leather instead of a pair of shoes made from recycled materials
- the investment factor will play an even more important role especially with brands / products whose value is guaranteed to increase in time – Patek Philippe,and Hermes top the list of products with guaranteed value increased in time)
- ‘guilt shopping’ of luxury branded products will be an important disruptor – this will be dominating mature markets
- the anti-luxury sentiment will persist across all sectors – the mix & match trend will regain steam, driving the so-called ”upscale” brands such as Massimo Dutti – a cashmere sweater would cost a fraction compared to any of the luxury brands
- comprehensive safety measures regarding the smallest health hazards will become crucial across all luxury sectors, especially hotels, restaurants, cafes, bars, Spas, wellness centres, fitness centres but also department stores and travel retail (duty free shops at airports) – ideally, consumer will prefer a neutral certification, instead of the company’s own newly created ‘hygiene’ policies coordinated internally
- social responsibility will prevail, with guests being more at ease to donate especially to fund medical research or equipment
- newly opened hotels (newly built structures) and newly renovated luxury hotels will have a major safety advantage, being perceived as cleaner especially when it comes to air-conditioning, mattresses or carpets
- the word ‘renovation’ so easily used by luxury hotels, even in cases when they superficially change a carpet or the upholstery of furniture will no longer be accepted
- luxury cars will be probably the least affected luxury sector, with a preference for purchasing new cars – that is not to be confused with safety in terms of driving (ex. Volvo will not necessarily become a more desired car brand)
- worst impacted will be the First/Business Class offerings by commercial airlines – measures to ensure disinfection will likely be very costly giving an edge to private aviation which will surely adapt to become more affordable
Major luxury brands with a weak positioning, especially when it comes to desirability and creativity (predictable & lacklustre): Chanel, Gucci, Burberry, Louis Vuitton (women’s) Dior (women’s), Prada, Valentino, Miu Miu, Ferragamo, Fendi, Jimmy Choo, DVF, Carolina Herrera, Longchamp, Zegna, La Perla, Philipp Plein, Versace, Etro, Ralph Lauren, Balmain, Stella McCartney
Luxury brands which command a powerful positioning and brand DNA, delivering exceptional collections / products as well as advertising and most innovative communications campaigns include: Hermes, Celine, Bottega Veneta, Dior Homme, Louis Vuitton (men’s), Loewe, Giorgio Armani, Tom Ford, Balenciaga, Jil Sander, Tod’s, Lanvin, Pucci, Max Mara, Missoni, Maison Margiela, Off-White, Givenchy, Moncler, Alexander McQueen, Loro Piana, Brunello Cucinelli, Christian Louboutin, Isabel Marant, Jacquemus, JW Anderson, Dries van Noten, Jil Sander, Comme des Garcons.
Complete report available at Interbrand
