How Luxury Brands are Performing During this Pandemic


During this lockdown, brands are doing their best to control damage caused by the pandemic but are also now thinking of ways on how they would retrace themselves after the dust settles down.

Companies that were selling perfumes and scarves are now making sanitizers and face masks and have also made monetary donations to health care centres and non-profit organisations. Hence also supporting their employees, craftsmen and labourers. The brands are figuring out ways of functioning because the normal is going to change to new normal.

Brands that were small scale or medium scale were suffering even before the pandemic had started, because of the lack of sales since they did not get much of recognition or because they did not have the capacity to function because of the growth of e-commerce or have a vertical distribution model like the big brands did. If other brands too do not follow these steps or come up with new steps, they too will cripple soon. Hence to avoid this, few brands have adopted aggressive discounting policies in order to make sales. But the luxury brands will not be able to abide by this policy as it would cause damage to the reputation and brand name and they may have to shy away for the main reason why they are called a luxury brand in the first place.

20-30% of revenue for the luxury brands is being generated by consumers making these luxury purchases outside of their home countries. A lot of these contributions are being done by the Asians especially from the Chinese as they have estimated to have made 150 trillion trips abroad, mostly Europe. They do indulge in these shopping experiences as part of the travel experience and also because it costs them slightly lesser when compared to buying in their home countries, as it reduces the prices in shipping and taxes. But because the travelling has been reduced to the minimal now, major revenues would be cut down for the luxury brands.

Major source of marketing for the luxury brands were through fashion shows but now since there are restrictions on travelling, they will have to figure alternative ways to bring awareness and make their presence felt. Before this situation the brands performance was being measured with averages and were ranked about 40/50% to negative or single digit numbers, but after this they will have to change ways of measuring their performance. The polarization would now be based on three fundamentals: the health of the balance sheet before this pandemic, the pliability of its operating model and its response to its COVID-19 situation.

However in order to strive, the brands will have to take certain steps to function further. The sales for the Spring 2020 collection were 70 % lower than expected because there was hardly any time for the consumer to check out collection because of the virus. But however the brands will now evaluate the stock and try various ways to sell and few of the steps will be through cash discounts or to find a way to sell them to their loyal customers. Or they can recycle and reuse them by upcycling them. They will now have to also review their ways of working in the year 2021.

Brands will now pay attention on improving their websites for sales as that will be the new normal and the luxury brands will try to make their supply chain stronger to be able to cater to customers all around the world. The companies will now also pay attention to their cash flows pre and post Covid situation and bring in control for their expenditure.

Brands will now have to collaborate with each other in order to share data, resources and their clientele as this will make them more productive resourceful and will be the only way to come out stronger as an industry, after Coronavirus.

However, time and again the industry has always been able to prove itself invincible, no matter the circumstances and will be able to come up with new norms and reinvention to be back in business and work efficiently and have long term visions too.

  • By Preeti Karia.

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