The evolution of luxury retail in the aftermath of the COVID-19 pandemic – WWD
MILAN – “Digital, physical and magical” is one way of describing modern retail, according to Michael Ward, Managing Director of Harrods, at the Altagamma Retail Insight 2021 virtual conference on Tuesday.
The acceleration of the digital revolution in the wake of the COVID-19 pandemic was among the key topics and “is not strategically neutral”. On the contrary, “it puts pressure on the Italian fashion system,” said Luca Solca, senior research analyst, Global Luxury Goods at Bernstein. He identified potential elements of weakness for Italian luxury companies producing on a reduced scale compared to their international competitors, including “sharply increasing fixed costs”, increased dependence on the sales channel in large multi-brand, which is “now going through a terminal crisis” and which is lagging behind in the digital transformation.
Social media, influencers and multi-brand digital e-commerce further exacerbate traffic and productivity problems, with a “risk of declining retail productivity, which is the financial kiss of death”. which impacts the valuation of brands listed on the stock exchange, for example.
Solca said the need to create capsules, exhibits, pop-ups and other flagship differentiation methods with highly tactile service is costly, resulting in a higher incidence of fixed costs that are difficult to maintain for small businesses. “Tackling the demand for resources, promoting scale,” Solca said, noting that as a result, mergers and acquisitions and new partnership activities have gained momentum in Italy. “The digital revolution is consolidating multi-brand retail, and small multi-brand stores risk becoming the weakest link in the chain.”
Solca said online sales of personal luxury goods increased 50% year-over-year to reach 49 billion euros in 2020 and are expected to reach between 105 and 115 billion euros in 2025.
Matteo Lunelli, president of Altagamma, said Italian companies are going through “a profound transformation of their business model”, which requires investment. He referred to the recovery plan discussed in Parliament by Prime Minister Mario Draghi and the 14 billion euros devoted to the transition and digitalization of companies which “we hope will be a concrete support for companies of excellence Made in Italy ”.
While admitting the growing importance of online shopping, Michele Norsa, executive vice president of Salvatore Ferragamo SpA, was “less optimistic” about the online quota going forward, stressing the quality of the physical experience. “The retail experience is a founding value of the luxury system as well as being a vital impetus for travel and it values European culture. Do you prefer to eat in a starred restaurant or [the same menu] home delivered? The same goes for luxury goods, “Norsa argued, doubting” whether to buy a Bulgari necklace or a Valentino dress on her sofa. We must avoid flattening the experience. “
“I actually think it’s more of a luxury experience being able to shop remotely from your couch with a glass of wine rather than having to drive across town to a store,” said Chris Morton, Founder and CEO of the Lyst shopping research platform. , noting that consumers “expect to do anything with their smartphone,” comparing it to a remote control.
Comparing fashion to other industries, such as travel, he thinks it’s one of the least penetrated industries online. “Offline will continue to be critical, but how do you marry the two together? Customers won’t make this distinction, they don’t know how the spending is made. “
The United States and Europe account for 90% of Lyst’s business, and when asked about Asia, he said the company was in a wait-and-see mode, “to see how it evolves we are looking at the Farfetch and Alibaba partnership. , applauding him and we’ll see when the right time comes for us, ”highlighting the opportunities the region offers.
Harrods’ Ward said that because Chinese people shop locally now, the store opened two private stores in Shanghai and one in May in Beijing because “reaching the customer is a must.”
Harrods reopened on April 12 in London after six months of foreclosure and a 20% drop in sales last year, and, while initially more pessimistic, Ward sees business “rebuilding itself a lot more. strong ”, as the store continues to strengthen. customer experience, adding food with three Michelin-starred chefs, for example a hair salon and personalized chocolate while the chocolate factory is being finalized.
Nicola Pianon, managing director and senior partner of the Boston Consulting Group, said luxury companies will have to respond to an environment in which consumers, at least for a few years, will travel closer to home. While paying close attention to the online channel, “physical stores will continue to play a key role – adequate traffic and profitability will only be satisfactory if brands know how to provide customers with care, personalization and an experience that adds value.”
Ironically, he said millennials and millennials “are the most affected by the pandemic in terms of unemployment, but they are more willing to shop than the baby boomers, who have been less affected and are more cautious. .