How to Beat Luxury’s Long, Slow Recovery, According to Bain - SolidRumor.com

How to Beat Luxury’s Long, Slow Recovery, According to Bain

 How to Beat Luxury’s Long, Slow Recovery, According to Bain

The luxury sector is on the mend after plunging by nearly a quarter this year. But most brands are in for a long slog, Bain & Co. said in the latest edition of its closely watched report on the industry released Wednesday.

Most executives don’t expect revenues to return to pre-pandemic levels before the second half of 2022, Bain said. The consultancy sees luxury sales rebounding to between 85 and 92 percent of 2019 levels next year. Tourist spending, a key driver for sales of high-end products, is only expected to rebound between 25 percent and one-half of 2019 levels.

The burden of the pandemic’s lengthy impact won’t be borne equally, however, with some brands surging ahead while others struggle. That was already evident this summer, when Kering’s Bottega Veneta and the LVMH fashion division (which includes Louis Vuitton and Dior) got back to double-digit growth for the third-quarter, while Tods and Ferragamo continued to post double-digit declines.

“You’re going to see a small number of brands outperforming, with a big tail of brands lagging behind,” said Claudia D’Arpizio, a partner at Bain and co-author of the report. “There are some brands who were stuck with an older formula and but were still doing fine, and now that’s a really dangerous place to be.”

Even as a fresh wave of lockdowns to contain the coronavirus roils retail sales in the US and Europe, some companies will likely end the year with nearly flat sales rather than the average drop of more than 20 percent, she said.

So what will it take to land in the winning camp?

A strong infrastructure in China will be key, as that market continues to surge ahead. Chinese consumers – already the growth engine for luxury before the pandemic – are rapidly shifting their purchases from international shopping trips to online orders and visits to the mall closer to home. Bain estimates sales in Mainland China grew by 45 percent to €44 billion this year.

“The Chinese will not travel as much as they used [to], so having good presence in retail as well as online functions will be a strong mitigator,” d’Arpizio said.

Brands also need to “engage consumers in an ongoing conversation,” d’Arpizio said, connecting to customers through social media, e-commerce, and store associates who reach out to clients at a distance. Even before the pandemic, the majority of purchases were influenced by online touch points. Maintaining that dialogue is only more important now, with coronavirus continuing to put tourist flows and store foot traffic in question.

Offering the right entry-priced products will also be key. Luxury brands have long offered more affordable items, like card holders and sunglasses, to cash in with a broader range of consumers on clout built up through red carpets, runway shows, and top-end handbags. This year, accessibly-priced items surged, accounting for 50 percent of volumes, Bain said.

The strongest luxury brands are investing in novelty in this space, with entry-price products that are both “original and authentic,” according to d’Arpizio. “This is an important task for creative teams: not to just do creativity at the top of the pyramid but to deliver it through all price points.”

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