Outlook on luxury: Fashion gets real

With analysts predicting everything from meltdown to cautious recovery, industry players from fashion to dining share their insights in this 10-page special

ON THE GROUND, there are reports of spending sprees in all its various guises. Chinese consumers, who have been shopping-deprived for months, are snapping up goods within their country while global travel restrictions remain in place.

Singaporeans, still in semi-lockdown, are online-shopping with a vengeance, gifting themselves and their loved ones with pricey pick-me-up presents.

Top auction houses, such as Phillips and Sotheby's, are moving lots from live to online auctions, with little resistance from buyers and sellers. If there were once reservations over how much buyers were willing to spend on objects they're seeing only digitally, social distancing measures have made those reservations all but disappear.

The best performing brands are already seeing an increase in their year-to-date numbers. Bvlgari stores in China are seeing "excellent results, greater than the previous year", says CEO Jean-Christophe Babin. Hermes' flagship store in Guangzhou recorded US$2.7 million in sales just a day after reopening - the highest daily haul for a single boutique in China. Every e-commerce luxury reseller is reporting staggering sales increases.

But as far as global consultancy Bain & Company is concerned, these numbers may not tell the whole story. According to its report released last week, the global luxury market is headed for a collapse in the coming months. Sales of personal luxury goods - which include fashion, jewellery and watches - will decline by about 50 to 60 per cent in the three months ending in June.

Bain & Company predicts a full-year contraction of 20 per cent to 35 per cent for the global luxury market, for a 2020 estimated sales tally of between 180 billion to 220 billion euros, down from the estimated 281 billion euros in 2019. Bain's report, however, does not account for different scenarios, such as the possibility of a second wave of infections or the discovery of an affordable vaccine - all of which can radically change the picture.

Meanwhile rival consultancy McKinsey & Company also released a report a month earlier predicting a personal luxury goods market contraction of between 35 per cent to 39 per cent in 2020, compared to the previous year.

"There will be a recovery for the luxury market. But the industry will be profoundly transformed," said Claudia D'Arpizio, a Bain & Company partner and lead author of the study. "The coronavirus crisis will force the industry to think more creatively and innovate even faster to meet a host of new consumer demands and channel constraints."

We spoke to players in various industries, from fashion and dining, to travel and art, for their insights and updates.

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Outlook on luxury: Fashion gets real

Fashion brands ramp up their online platforms while working to balance commerce with compassion in response to new consumer demands.

THE COVID-19 PANDEMIC has sounded the death knell for retail while marking a sharp turning point for the fashion industry. With iconic names such as J. Crew and Neiman Marcus filing for bankruptcy and more headed in the same direction, the outlook still remains bleak.

Add to this the recent report by Bain & Company which predicts a 20 per cent to 35 per cent contraction in the global luxury industry for 2020, even as personal luxury goods saw a decline of 25 per cent in the first quarter of this year. Bain - the world's leading advisor to the global luxury goods industry - did the report in collaboration with Fondazione Altagamma (the Italian luxury goods manufacturers' industry foundation). It also showed that luxury sales in Japan and the rest of Asia fell at a slightly slower pace. While all categories have seen declines, accessories show the most resilience while online retail is still going strong.

Luxury fashion houses particularly, have been quick to go online, and have ramped up their efforts to compensate for loss of sales from boutique closures due to lockdown measures around the world.

Brands such as Bottega Veneta, Stella McCartney and Gucci already have a strong presence online whether it's through their own platforms or third party multi-brand sites like Net-a-porter or Matchesfashion. LVMH has also reported an increase in their online sales, while sales in the core division of fashion and leather goods - with brands such as Louis Vuitton and Christian Dior - also fared slightly better despite what some analysts had expected.

Customer activity seems to bear this out, with the high net worth segment still actively buying, according to Fanny Moizant, president & co-founder of e-commerce luxury reseller, Vestiaire Collective. "We have seen a huge uplift in the number of sessions and active users over the last two months," says Ms Moizant, explaining that the company is experiencing a general increase in sales across all product categories particularly from brands such as Louis Vuitton and Prada.

In fact, since Singapore announced its circuit breaker period from April 7, luxury brands such as Hermès have seen a high volume of orders online. And instead of a normal two-to-three day wait, customers have been advised that it will take up to two weeks (upon order confirmation) before they receive their items.

Such shoppers include local fashion personality Willabelle Ong, who owns an enviable walk-in wardrobe filled with designer goods akin to that of a Hollywood star. When it comes to shopping, she usually spends more on bags, shoes and accessories than on ready-to-wear. During the Covid-19 crisis, she admits to doing more online shopping but refrains from impulse buying.

Many luxury brands have swiftly reacted to the demand. Salvatore Ferragamo, for one, recently overhauled its entire website, adding on client services and even Spotify playlists to target younger customers. In Singapore, both Bottega Veneta and Gucci provide personalised customer service that is available via a Whatsapp number. Louis Vuitton for example, provides same day delivery (if you order before 12pm).

Like many luxury consumers, Ms Ong is less driven by sales or discounts, and more by emotions. She has no qualms spending on a full-priced item as long as the items are classics that transcend seasons. Her most recent purchase? A Louis Vuitton Multi Pochette which she bought online, which she chose for its versatility and long mileage.

Physician Loh May Han, a regular face on the social circuit, is always seen in the latest designer threads but since the pandemic hit, she spends most of her time in the hospital and university. As a healthcare front-liner, Dr Loh has also put shopping on hold, but she appreciates the check-ins from the various luxury brands she frequently buys from. "My friends in the luxury industry have been reaching out to me - not about the latest arrivals - but with words of encouragement, gratitude and heart-warming treats."

Another online luxury reseller, The Fifth Collection, observed an interesting trend this time - gifting. According to Nejla Matam-Finn, CEO and founder of The Fifth Collection, customers want to feel connected with their loved ones by continuing to celebrate special occasions despite social distancing. "The usual gifting options online are limited, and people are looking for alternative luxury gifts," she says.

In this era of social distancing and self-quarantine, people crave meaningful gestures and genuine human interaction to keep their sanity. Which is why luxury brands have put the hard selling on hold and are doing what they can to support the healthcare industry while cultivating a sense of community. Many also switched from tailoring fashion wear to making and donating hospital gowns, masks, sanitizers and the like.

Brands are also throwing their weight behind the search for a cure for Covid-19. One example is Gucci, which created #GucciCommunity - a crowdfunding campaign worth two million euros (S$3.06 million) to provide health services, equipment and enabling resources for research on vaccines and treatments.

Many other brands are also making their voices heard in a less commercial, and more humanitarian way.

Dolce & Gabbana funded Italy's university to do a critical study on immune system responses; Giorgio Armani donated €1.25 million to hospitals in Milan and Rome; while Prada delivered 80,000 medical overalls and 110,000 masks to healthcare personnel.

But what lies ahead for the luxury market? Even when the crisis is over, there will be a definite shift in consumer behaviour, which will in turn influence brands' strategies to remain relevant. As Claudia D'Arpizio, a Bain & Company partner and lead author of the study, noted, the industry will be transformed and brands have to follow suit to stay relevant.

Some brands are already one step ahead. Tod's recently launched the "Made By Humans" project where the brand narrates the various stages in creating Tod's products, honouring the art of craftsmanship and the artisans who make it all happen.

Dolce & Gabbana's new digital initiative "DGFattoInCasa" ("Made at Home") gives you suggestions of projects you can do from home like how to make a T-shirt - the Dolce way, of course - with digital workshops hosted by the brand's artisans and friends.

Bridging the gap between the brand and the customer is a smart route to take now that human interaction has been compromised. Going forward, Ms Matam-Finn of The Fifth Collection feels that consumers are going to redefine what luxury means, and expect more substance, and less hype from brands.

How long the industry takes to get back on its feet is anyone's guess, but the consensus is that consumers still want to treat themselves to something precious and lavish. Given how emotion-driven the industry is, it's all the more crucial for brands to set the right tone going forward.

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