We’re very sure businesses in the luxury industry always have backup plans for everything. But we’re not sure these plans actually cover semi-apocalyptic scenarios like the one we’re witnessing today with the COVID-19 outbreak that’s putting the whole world in a global lock down. As this is being written, the aviation sector all over the world is losing track of its losses, the financial markets are in a free fall, equity is being devalued while a few governments have already chosen to save the people and bankrupt the economy. In the luxury industry, the ripple effects of the crisis are going to be substantial and will probably need several quarters of hard work to start balancing out; but all is doable as long as lives are being saved and all the world can soon put this hard experience behind.
In this short article, we will inform you of 5 ways the luxury industry is going to be affected by the COVID-19 crisis so you can start your planning process if you’re on board with us:
1- The digital business model is accelerating to the top: With social distancing being the new norm during the outbreak, and probably for a few months afterwards; luxury retailers are jumping online to make up for the lost revenue from their brick and mortar shops. This necessity of the day favoring e-commerce, will accelerate the digital transformation of the luxury industry as a whole.
2- Companies are reconsidering outsourced production: The moment lock down was imposed in China, every single luxury brand outsourcing its production to the Chinese mainland had its business chain completely frozen. The loss of control over the business is forcing many luxury manufacturers to reconsider their outsourced operations.
3- Luxury services are becoming even more private: Providers of luxury services and lifestyle management services are considering a serious shift towards minimal human intervention in service execution. This particular branch of the luxury industry will soon be managed through the invisible hands of seasoned lifestyle managers who will make human intervention and contact in service execution almost seamless.
4- The market for luxury suppliers is being filtered: With 43 billion dollars of revenue expected to be completely wiped up from the luxury industry over the next two quarters, only solid businesses will be able to balance out the losses within 2 to 4 quarters. The market will filter out competition, while windows of opportunity will close in the face of direct competition, and open for newcomers delivering value and innovation.
5- New openings in the industry will be for value based luxuries and sustainable business models: The COVID-19 global crisis is introducing a new model of consumer behavior redirecting focus to value for money and sustainability. This is why great opportunities and a greater market share will be available for luxury suppliers who will introduce these values to their businesses and to newcomers whose business is all about delivering value along with brand prestige and featuring a sustainable business model.