With all businesses and industries throughout the globe in massive chaos, there has been grave economic impact of coronavirus across the sectors from tourism to airline; from entertainment to education; from cruises to cars; from food to fashion and so on. Marketers across industries are trying to redesign their business models and the luxury industry is no exception.
As per the recent research by Altagamma in association with Boston Consulting Group, it is predicted that coronavirus can bring down global luxury sales between 30 billion Euros to 40 billion Euros. With store closures and customers stooping down in their homes, luxury markets have been severely hit. Major parts of the world, from China to Japan to Europe and the US are struggling with weakening demand and disrupted value chains.
This crisis has resulted in a paradigm shift in consumer behavior. From being reluctant to using masks and sanitisers to buying them at any cost; from loving to shop in-store to going digital; from enjoying classroom learnings to attending online sessions; from doing physical meetings to making decisions through videoconferencing and from attending glamorous fashion events to viewing live streaming at digital platforms. This change in behavior may become the 'way of life' and 'new normal' for consumers.
It's known from the history, each crisis leaves a long term impact and deadly coronavirus is no exception to the rule. The great depression impelled a "waste not want not" attitude that dictated consumption patterns for years. Likewise, the outbreak of Covid-19 may move luxury consumers to assess things from a different outlook.
It may alter the key motivational factors for luxury goods consumption. The beliefs, values and attitudes of luxury consumers may drastically evolve leading to changing consumption patterns.
Let's look at the 3 major changes that this crisis will bring in luxury consumers in the long-term and its implications on the marketers.
1. Consumers may be driven to buy luxury for "conscientious value" rather than "conspicuous value". In the longer term, because of this crisis, people may be willing to spend more on sustainable brands that reflect their own values and beliefs. Buyers will show increased concern towards fair trade product consumption. They will put more emphasis on benevolent values which may result in ethical decision making. Affluent consumers will rethink and re-prioritise their fashion consumption to make it less conspicuous and more responsive toward society as well as the environment. There will be transformation from "what you wear" to "who you are," within conscious luxury consumers, leading to rising consumer demands for product traceability, supply chain standards, product legitimacy and quality.
Note: This is a great opportunity for luxury brands to re-define their business models and create products that are authentic and responsible. They must think deeper beyond the loud logo strategy.
2. Consumers may indulge in hedonistic purchases which make them feel better in this stressful period. This has been termed as 'revenge or retaliatory spending'. They will buy luxury products for 'ego-centered' values, that is, personal values such as health and well-being, hedonism and superior quality. Marketers should make efforts to provide comforting experiences to consumers to help them cope with irrational fears. They must provide offerings that convey emotional values rather than an ostentatious symbol of status and affluence.
Note: This is the right time for marketers to go much deeper to unravel what their brand stands for now and what it can mean in the future. They must re-think how they can serve the needs of affluent consumers purposefully and create meaningful content to inspire, engage and entice consumers.
3. Fear of infection has hit luxury shopping malls hard. People are staying more at their homes and buying products online rather than going physically to crowded locations. In the long term, this may lead to a permanent change in the behaviour of consumers and online luxury buying may become a new norm. (Just like after demonetisation episode in India, consumers who were most reluctant are also gradually embracing digital mode of payments). Therefore, retailers should provide more meaningful online experiences to connect with consumers.
Note: Online luxury buying will become more attractive in future. This slowdown is the right time for luxury brands to equip themselves to digitise the processes and upgrade their systems and technology. This will enable them to develop operational efficiencies and provide personalised experiences to the customers.
The luxury industry remains hopeful to bounce back to previous consumption levels after the pandemic ends. This is the perfect time for luxury brands to prepare themselves for the future by identifying the gaps, turning their weaknesses into strengths and strengths into distinctive competences. This endemic may bring a major change in the consumers' mindset and the value system that underpin their luxury buying decisions. The brands that would work to understand this and adapt accordingly will surely turn out to be the new champions.
(The author is a luxury market strategist, researcher and consumer behaviour expert credited with conducting India's first quantitative study on luxury consumer behaviour.)