Yves Hanania, founder of Lighthouse consulting firm and author of “Le luxe de demain – les nouvelles règles du jeu,” discusses the potential long-term effects of the coronavirus crisis on the luxury market. Hanania explains that the crisis has revealed flaws and accelerated bankruptcies in the industry, with well-known names like Laura Ashley, JCrew, and Neiman Marcus already succumbing to financial difficulties. This has prompted a necessary reevaluation of existing retail models, including concession stores and vertical models. Many brands that rely on a distribution network they do not own are facing challenges with reduced margins and decreased purchases during the pandemic, which could lead to a domino effect of bankruptcies. Paris Fashion Week, which recently took place online, served as a testing ground for new ways of presenting fashion. However, Hanania points out that there are economic challenges for medium-sized brands, as they must prove their ability to be creative while adapting to forced digitization. The most resilient luxury brands are expecting a decrease in turnover of around 20% or less.
Hanania emphasizes that this year will be difficult for luxury brands, as they have already suffered losses due to the global economic downturn caused by the pandemic. Sales are expected to be even less significant as buyers are not attending shows and are negotiating returns for unsold stocks. This could lead to bankruptcies for retailers and brands, potentially ending several years of growth. Additionally, consumers are under financial pressure, and luxury and fashion may not be their priority. However, there is hope in Asia, where demand has started to pick up. Hanania advises luxury brands to act quickly, adjust their growth models, and innovate to survive this crisis. He highlights several strategic issues that need to be addressed, including digitization of company processes, adopting sustainable development practices, localizing economies, balancing distribution channels, and developing brand ecosystems that offer experiences and services rather than solely marketing products. Hanania concludes with a message of encouragement, urging brands to continue their efforts and wishing them luck in navigating these unprecedented times.
Useful links:
1. Lighthouse consulting firm
2. “Le luxe de demain – les nouvelles règles du jeu”
