[ad_1]
By Arushi Sakhuja
Covid-19 has not been kind to industries, and it had a widespread impact on luxury retail as well. From offline to online and now back to in-store retail. The pandemic put a decade’s worth of digital innovation into a single year, giving rise to a surge of online methods of working — one of them being luxury retail moving to digital platforms.
While the luxury retail segment had already started foraying into the virtual world, the change wasn’t an organised shift industry-wide. Many still preferred the experience of shopping in a store. Gitanjali Saxena, Business Head, Tata CLiQ Luxury told LuxeBook.. “Before the pandemic, in-store shopping for luxury was often a preferred option. However, even back then, consumers did explore online shopping for luxury due to limited access to the brands and luxury malls in the country. It was in its early stages, and since the pandemic, it has become an equally popular channel for shopping luxury products.”
But the unexpected hit of the global pandemic put many luxury retailers on the back foot urging them to change the way the industry works. This meant a somewhat forced shift to online mediums to sustain sales. Indian couturiers were also amongst those who launched websites including Amit Aggarwal and Gaurav Gupta, to name a few. But once retails stores opened customers indulged in retail therapy in abundance. However, it’s interesting to note that many of the privileged did spend a great deal of time shopping online, whether in Indian couture or western, simply to pass time and hope to get dressed when the pandemic settled. Retailers and brands shifted their focus to online customer experiences and set up new approaches to provide consumers a seamless experience — from websites to smartphone screens.
Although some luxury giants like LVMH owned Fendi even shut down its only store in India, other online multi-designer brands like LeMill, Farfetch and Luxepolis gained more traction, and some luxury brands also launched a website like Payal Khandwala, Aakaro, JJ Valaya, Ellie Saab, Amit Aggarwal and more. In India, many customers were faced with trouble accessing international brands given the travel restrictions and it is at this time that they looked to Indian designers, and multi-designer agents like Luxepolis, Darveys and Tata Cliq Luxury who brought to India these labels.
According to a report by Bain, the luxury apparel and accessories consignment grew to a $24 billion market before Covid and has been projected to reach $51 billion by 2023. Further, Kearney ‘s report states that despite demand for luxury products plummeting at the onset of the pandemic, the luxury goods market has bounced back to pre-pandemic levels—and in some cases beyond. Many leading brands have seen their sales figures rebounding rapidly to pre-pandemic levels. It is predicted that the global luxury apparel market will recoup its losses and will grow to $149.2 billion in 2022, says GlobalData.
As luxury retail picks up again, Luxebook spoke to Vijay KG, Founder, Luxepolis, Gitanjali Saxena, Business Head, Tata CLiQ Luxury and Abhishek Agarwal, Founder, Purple Style Labs.
Pandemic spurred online sales
The luxury sector is being increasingly reshaped by online sales and the digitalisation of the consumers’ entire shopping experience. Moreover, even in the future we can expect an increase in luxury e-commerce with online sales for personal luxury goods expected to reach 25 per cent by 2025, as opposed to 8 per cent in 2018.
In addition to traditional luxury products, digital assets and the virtual world—the metaverse, social media and gaming—will play an increasingly relevant role in luxury brands value propositions. According to Bain by the end of 2030, digital assets and the metaverse will comprise 5-10% of the luxury market.
The pandemic forced brands that were reluctant to sell online to fully embrace e-commerce, which may become the leading channel for luxury purchases in the next few years. “Online sales jumped manifolds during the pandemic,” said Vijay KG, founder of online luxury marketplace, Luxepolis, which has made a strong digital and online presence since its inception in late 2014. Owing to this, the company was not faced with many difficulties given the rise of multiple e-commerce portal. However, it was a trying time, and it wasn’t without its challenges, says Vijay.
Prioritising customer satisfaction remained a top priority for the brand to overcome challenges faced by clients. Executives from Luxepolis conducted video calls and live commerce experiences. In some cases when the clients allowed, they also sent the products to their residences. While the company had to put their offline expansion projects and investments on hold, the bright side was that online transactions increased. Vijay further shared, ” Online retail is here to stay and grow.” To accelerate the growth and make the experience more fruitful for consumers, he shares a list of developments the company is currently working on…. “We are investing in Augmented Reality (AR), Artificial Intelligence (AI) and Video/Live Shopping technologies, revamping the website and launching more engaging and personable app designs and features.”
Similarly, Geetanjali said “ While offline shopping has seen a surge, online platforms have also seen tremendous YOY growth by focusing on increasing the assortment, expanding the reach to T2/T3 markets, tapping newer audiences, and so on.” She further said the brand is introducing differentiated on-site experience, offering a careful curation of brands, mindfully developed brand stores, luxury delivery and unboxing experiences designed to bring luxury shopping to the customer’s doorstep, and personalised privilege programmes, managed by attentive relationship managers. But two years later, the stricter lockdown times are finally behind us; physical fashion shows and stores are now open.
Luxury retail in the post the pandemic world
Luxury retail was fuelled by a quick digital pivot and rebounded from Covid-19 quicker than many other retail segments. More recently, the performance of luxury retail proves that it is weathering global inflation far better than most thanks to the deep pockets of affluent customer spending.
After a brief recession — that was experienced across industries — the luxury industry was one of the first to bounce back. Luxury retailers have reinvested these gains into their businesses in various ways, all while staying true to the crux of the luxury business model: an unforgettable and unique in-store experience. Today, physical stores are reworking their strategies from personalized services to frictionless logistics, and immersive experiences.
The sale of luxury goods fells by over 20% last year to €217 billion, being the largest ever drop since 2009. But the consumers appetite for spending on high-end goods once stores reopened saw no signs of slowing down. Bain estimates that global sales of personal luxury goods will reach at least €305 billion euros this year, — and up to 330 billion euros in a more optimistic scenario — building on its fast rebound from pandemic lockdowns. Although, the speed of the recovery has been uneven; while some of the biggest groups such as LVMH, Hermes are already risen above their 2019 levels, smaller labels are still lagging behind. Despite the challenges and disruptions, Bain & Company estimates the luxury market growth to reach €360-380 billion by 2025.
However, soaring sales in China helped the luxury retail market bounce back sharply in the first quarter of 2021. It was early last year that Chanel released a statement announcing the news that their sales had almost doubled in China. The luxury goods sector has been able to bounce back despite the coronavirus crisis as Chinese and U.S. shoppers help sales recover to pre-pandemic levels, according to a report by Bain. The United States has also overtook Europe as the largest luxury market last year. Bain now sees a 30% probability that sales of high-end handbags, clothes and jewellery will return to or exceed their 2019 level of 280 billion euros ($340 billion) this year.
In a luxury goods market report by Bain & Company Claudia D’Arpizio, a Bain & Company partner and lead author of the study said, “Luxury goods brands started this year showing especially strong growth while also playing a leading role in the world’s ongoing sustainable and digital transformation.” In the first quarter of 2022, the luxury goods market grew by 17-19%. Bain attributes the increase to multiple factions including, Europe accelerating its recovery, despite the war’s shadow, the US tapping into the power of diversity and inclusion, China spending being crunched under strict Covid restrictions and South Korean brands successfully reinvented their business model in the country to cater growing local demand and influence.
But it wasn’t only revenge shopping, shoppers were back with a vengeance and higher budgets to splurge, making it a global trend. In India to the luxury market surged unexpectedly once retail moved back to pre-pandemic norms. “Our business saw nearly 250% growth overall. Many high-ticket items such as Birkin’s, Rolex, AP, and Chanel products moved swiftly during the pandemic said Vijay. However, he attributed the increase to three key factors; international travel coming to a complete halt for nearly 12-18 months, leaving the rich and aspirational class with no choice but to shop within the country; impulse consumer shopping for special occasions and relationships during the lockdown due to more leisure and finally he says… ” the want to feel good mindset led shopping really bumped up our online sales.”
Luxury retail in India
India has over 912,000 millionaires, representing 2 per cent of millionaires globally, leading to a change in consumer behaviour for those with higher disposable incomes. Luxury brands are now set to cash in on that. However, high import duties on luxury items make a large number of items more expensive in India compared to other countries. “ The increase in disposable income, the introduction of new brands in the country, increased awareness and exposure, increased reach and access to luxury brands as a result of e-commerce, HNI consumers purchasing luxury products in the country due to limited travel, and the youth exploring and purchasing luxury products in new categories have all contributed to the expansion of this industry,” shared Gitanjali Saxena, Business Head, Tata CLiQ Luxury.
“Luxury retail is here to grow exponentially in India. Unlike other world markets, the Indian economy and Indian luxury retail is uniquely positioned to grow over the next 3 decades. We would witness many luxury brands entering India, existing brands expanding aggressively by 2027- 30,” Vijay told Luxebook. And with this insight in mind, it’s no surprise that high-end brands are aggressively looking at India as a potential market for their growth in the post pandemic phase. With the recent foray of Balenciaga into India, it’s only an upward trend. Other brands like Alexander McQueen, Philipp, La Mer and Girard-Perregaux are also looking to expand their footprint into the country.
However, some luxury retail segments were hit differently and one such was the wedding luxury retail market in India. Abhishek Agarwal, Founder, Purple Style Labs (that now owns Pernia’s Pop Up Shop) said the main challenge for them was limited to weddings and occasions coming to a halt or moving to a much smaller setup, but even during the pandemic, they kept expanding offline at better commercials for the long term, which today is helping them foster growth post-pandemic.
Further, another interesting thing to note is that while online might be paving the way for some brands, wedding luxury shopping still continues to be an activity that people enjoy offline. Once stores opened up again, Agarwal said “Our offline business is 6x from pre-pandemic levels whereas online business is only 4x. We have moved to large format store (Pernia’s Pop Up Shop) models only post-pandemic. Prior to the pandemic average store size was 2.5k sq ft but post-pandemic we have opened stores only between 5-10k sq ft and our latest upcoming store in Delhi is spread on a 50k sq ft location.” Agarwal further attributes the rise in sales as a direct outcome of suppressed demand across the globe.
But overtime a key change that will occur for luxury retail is in store talent and experience and hence there is a need to eliminate the gap between digital and physical. Associates must deliver a seamless experience with a high level of service using both physical and digital tools.
The new age luxury shoppers
Today, there is a shift in the demographic of those who are luxury buyers. With millennials and Gen Z stepping in, according to a report by Sia Partners they already account for 50% of luxury sales. This number is to grow past 70% by 2025.
The new-age shoppers though have new criteria while spending and can rightfully be bracketed as value-based shoppers. They crave authenticity, and innovation and are willing to invest in luxury goods that deliver long-term quality. What is also interesting is that in the post-pandemic world, most shoppers are hybrid shoppers who engage with brands through multiple channels simultaneously. To meet these dual desires, luxury retailers must embrace a unified experience across channels, delivering on expectations both digitally and physically.
Physical stores are critical to the luxury experience, whereas e-commerce in luxury is more about storytelling rather than selling. While the pandemic has reinforced the growth of luxury e-commerce, the importance of physical stores within luxury remains undisputed.
You may also like:
[ad_2]
Source link
