July 28, 2020
A few of the key takeaways:
Luxury and retail sales have been challenged across the board by the pandemic — but some categories have been doing better than others. According to Bloomberg Intelligence’s Deborah Aitken, Senior Analyst Luxury Goods, Beauty, Home and Personal Care, leather goods and accessories have both been strong. Limited collaborations have done well, and jewelry has also taken off comparatively.
Engaging with consumers directly through digital platforms has been powerful for American brands. “It’s more than just selling online. It’s how you’re able to connect to the online consumer, and how you’re able to grow that consumer base,” said Bloomberg Intelligence’s Poonam Goyal, Sector Head and Senior Equity Analyst for North American Retail. “For the companies I’ve seen do it exceptionally well, even as their stores reopened, digital sales are just staggering. We initially expected that to dissipate, but it hasn’t. It practically accelerated or stayed just the same,” she said.
Store workers’ jobs are fundamentally changing. This is going to be one of the biggest takeaways from the pandemic shutdown, according to Bhasin. “Millions of workers were furloughed starting back in March, when the shutdowns began,” he said. “In the long-term, their jobs are going to be very different, and executives are finding new ways for them to interact with customers every day. Virtual shopping has been huge.” For some, that may remain permanent after the pandemic. “That means store associates will be talking to customers on their phone and computer, and work schedules will be more flexible,” Bhasin said.
Video commerce is poised to grow rapidly — thanks to social media. “It’s not that video commerce or image-based commerce is a new phenomenon,” said Goyal. “In fact, video commerce has been around since 2012. But the social platforms are all now embracing the video commerce market. If you see a fashion show online or if you see a video ad, you can now transact with them.” Combining video with the ability to go straight to purchase accelerates both brand engagement and conversion, she said.
New business models are helping both consumers and retailers. One example is the ability to buy now and pay later. This differs from the familiar layaway model in two respects, said Goyal. First, consumers take what they want when they want it, instead of waiting. That helps retailers better align inventory to demand. Second, it’s not just mainstream brands participating — top luxury brands are also using this model. “By having this option, retailers are actually increasing not only sales, but also margins,” she said. A movement back to in-season selling may also allow retailers to better manage supply-chain disruptions, helping them avoid both missed sales when inventory is low and deep discounting when inventory is excessive.
“Phygital integration” is changing the luxury experience. New kinds of interactions will create a “specific experience in terms of connecting the consumer socially to online life and the physical environment,” said Bloomberg Intelligence’s Aitken. That can take the form of technology that lets you try on clothes over video, for example, or that personalizes your experience while in the store. Some top fashion brands have built deep engagement during the lockdown with platforms that allow aficionados to be involved in design competitions, said Aitken. “There’s a lot that these companies are doing outside of just the individual store to move digital to physical and the other way around,” she said. Luxury reporter Bhasin added: “The key thing with an online experience is to make it feel luxurious, and that’s really hard.”
Top brands still have pricing power. Many brands will be mindful about making capital expenditures like renovating stores, explained European Luxury and Retail reporter Angelina Rascouët. “But when it comes to innovation, IT, logistics, certainly you don’t want to compromise when it comes to your future online capabilities,” she said. And according to analysts, some powerful brands were able to raise prices across major markets in May, she added.