For Luxury Brands, Reinvention Is No Longer a Luxury
It’s hard to fathom the scope and nature of the transformation our world is currently undergoing. The global pandemic and resulting economic fallout will change how we live, work, and spend money. The luxury sector will not be immune. The sheer financial impact the crisis has had on many households will likely mean a slower recovery than in past crises.
Immediate business challenges are accumulating: stores are closing and mass layoffs have become common as businesses try to improve cash flow and avoid bankruptcy. But as with all big challenges, there are big opportunities for brands that are willing to be bold.
In a recent report, Bain predicted “sales could fall up to 35% this year, but companies can emerge stronger, more innovative and more purposeful.” That’s why it’s critical for luxury brands to understand how consumers attitudes, values, and concerns are shifting as a direct result of the crisis. This goes beyond simply “doing the right thing”, as many brands in the luxury sector have already done.
Prada, LVMH, Kering, Lamborghini, and Burberry have all dedicated a portion of production to producing face masks and hand sanitizer; Armani, Versace, and others have made sizable donations to charitable organizations. This is all well and good and should be applauded - but does not go far enough.
That’s because in response to the crisis, consumers’ core values and expectations of brands have shifted significantly and permanently. Brands trial has risen massively (brand loyalty is correspondingly down), digital engagement is now a tablestake, and scrutiny of brand contributions to society at large has increased significantly. This new consumer context should serve as a call to action for luxury brands – a one time “rendez-vous” and moment of truth that can’t be missed.
As a strategist and author of a recent book on The Future of Luxury* (Le Luxe demain recently published by Dunod Hachette group), here are some early perspectives and calls for action. In this initial article, we are focusing on three areas that can make a difference in the immediate term and ensure you are positioned as well as possible in the mid to long-term:
Re-examine and refresh your strategy
Now is the time to take a risk and think bigger. Build to the future rather than from the past. Obviously, managing costs and cash flows is crucial in the face of steep declines in revenue. Yet a balance must be struck between protecting your bottom line during the crisis and supporting your top line after the crisis.
Your relationship with customers is predicated on your ability to provide them with products or services during the best and the worst of times, and it is the latter that really speaks to who you are as a brand. The bedrock of branding is consistently being there and building trust over time. That’s why there is no “better” time than right now to re-examine and refresh your strategy in a way that is true to your brand DNA.
Critically, don’t be afraid to get scrappy. Right now, and for a short time, brands will be forgiven for not getting it quite right if the intent is right, and right for their DNA. So figure out the right offerings and experiences with your customer. Get something out to them right away that they can react to and let your target customer guide your execution through their reactions and input.
Some brands, for example, have already undertaken thoughtful initiatives that are in-line with their brand purpose. For example, L’Oreal is working directly with salon partners to help them weather the crisis while providing supplies, masks, and funding to impacted salon workers. People are staying home. Why not create a L'Oreal mobile salon, promote it within a few blocks to most loyal customers and give individual attention? Brands that invest in “doing right” in a way that is consistent with their DNA and purpose will come out of this stronger.
Keep a sharp eye on how customer behavior and sentiment is evolving – understand and anticipate shifts in consumer behavior, and opportunities for businesses
With a crisis of this magnitude, it is unavoidable that customer attitudes and behaviors will shift permanently. Even prior to the crisis, consumers were already beginning to reject overconsumption in favor of experiences, and that behavior is likely to continue. Millennials especially, had high expectations of brands: from transparency, to authenticity, to being experience-driven, and to being socially and environmentally engaged.
Now, we see increasing evidence that consumers are all calling long-held beliefs and loyalties into question and, therefore, rethinking who and what we trust. They are willing to try new things and, therefore, are no longer as loyal to the things we used to hold close. And, perhaps most importantly they are all re-evaluating what truly matters to them and why. Consider that the vast majority (67%) of Americans expect to retain changed behaviours after the crisis ends. So, as leading brands, keep a sharp eye on how customer behavior and sentiment is evolving. Plan for, and start building for, the new normal BEFORE it arrives.
Digital literacy and trial of all things virtual just jumped dramatically. Some customers have discovered that its the better way for many of their needs. The e-commerce channel, where the luxury sector has historically lagged other sectors, is predicted to grow from 5-10% of sales to 20-25% sales.
This presents an important opportunity for luxury brands for which digital isn’t already a fully integrated part of their customer experience to make step-change investments now. As a reference, 45% of electronics are sold online compared to just 8% for luxury goods. Successful e-commerce adoption in luxury will be led by brands who use technology to create meaningful experiences.
For example, Gucci opened themed temporary stores called ‘Pin’ which feature interactive and immersive digital experiences. Hermès, who have a reputation for avoiding digital sales, also followed suit by opening up limited sales from their Spring/Summer collection on WeChat. Others have begun live-streaming fashion shows. The point is not to embrace shiny new gadgetry. Rather, it is to acknowledge the new reality that consumers have crossed the Rubicon on digital – and luxury brands better follow them, quickly.
We are living through an unprecedented shift in customer attitudes, values, and behaviors. The kind of shock brought on by COVID19, while by no means beneficial, can actually lead to a new paradigm, a new mode of consumption. And within this context, the luxury industry will surely be able to enhance its relevance and raison d’être.
* Le luxe demain (French version) published by Dunod, Hachette group
This article was co-authored with Joe Jackman. Joe Jackman is the CEO of Jackman Reinvents, the world’s first and foremost reinvention company. He is an advisor to consumer brands, retailers and private equity partners. Jackman’s expertise lies in sharpening strategy and orchestrating insight-led reinventions of businesses. He just also published a book “The Reinventionist Mindset” sharing his experience and expertise for continued relevancy now and into the future.