Not even during the Second World War did Harrods of London close. However, on March 25th the 170-year-old department store joined nearly every other luxury retailer around the world in a coronavirus-induced closure.
Analysts might debate the effect that coronavirus will have on the luxury industry. Boston Consulting Group estimates the market will plunge between 25 percent to 35 percent in 2020, Bain & Company a broader 15 percent to 35 percent, however these are vague assumptions. One thing is for certain— never before in history has nearly every luxury store around the world closed simultaneously.
The one saving grace, many argue, could be e-commerce. Pre-coronavirus, most luxury shopping might have been done in-store, but thanks to technology, customers can still buy products from the safety of their homes, even in times of a “lockdown” crisis.
“The sector has been quick to pivot and where we’ve seen physical stores temporarily closing, employees are being re-focused into e-commence and online to ensure online demand is being met,” says Helen Brocklebank, CEO of Walpole, the official sector body for UK luxury.
One of the ways they are helping UK luxury is by launching a “virtual Bond Street” given the real one is devoid of shoppers.
Several weeks into the pandemic, brands with existing e-commerce channels, including Harrods, are still seeing demand, while those without them have been quick to embrace online platforms.
Even Patek Philippe, which has never sold a single watch over the web, said on Wednesday (April 1st) that “an exceptional decision has been taken to allow authorized retailers to sell Patek Philippe watches online that they have in stock, while their showrooms are closed.”
This will cater to the many luxury consumers who are spending much more time online during various lockdown measures around the world. Social media usage has skyrocketed, luxury notwithstanding. Fashion shows, tutorials, and product launches are now being hosted on Instagram, Facebook, and other social media platforms. Knight Frank, an estate agency, says online views of luxury homes valued at £10 million (11.4 million euro) or more were up 22 percent in the week ending March 28th, compared to the same period last year.
But sales of high-end items do not come about through websites and social media alone. During a time when in-person communication is so rare, personal messaging has never been so important.
“I started emailing directly my e-commerce customers, directly sending them messages,” says Madhuri Parson, who owns a luxury jewellery brand of the same name. “I normally don't do that, but I thought it was important to say there was a human behind my website and you can talk directly to me… And actually by doing that, a couple of customers showed interested in buying a few things for Mothers’ Day (Sunday, May 10th in the United States)."
This personal approach becomes more important the more “luxury” an item is. The rules for coronavirus-e-commerce do not differentiate from those pre-pandemic: The more expensive an item is, the harder it is to sell online.
“You're asking someone to spend significant amounts of money on one of your products,” says Vartkess Knadjian, CEO of Backes and Strauss. ”You help the sale happen and there's no reason why someone online cannot make an appointment to talk with them and explain what's behind the brand and why we created this particular piece.”
The sales process is only half the battle, however. While Backes and Strauss relies on Farfetch to sell their watches and jewellery online, other e-commerce platforms have made the decision to temporarily close. Richemont owned Yoox Net-a-Porter and its brands (Mr. Porter, Net-a-Porter and The Outnet) have closed all warehouses around the world bar Asia, citing, “the health and safety of our community.” Some individual brands operating e-commerce verticals have also closed online purchases. British jeweller Beaverbrooks said it was closing “to keep our colleagues and their families safe”.
For many of the same reasons, some luxury firms have suspended manufacturing, while others, such as LVMH and Burberry, have repurposed factories to make hand sanitizers or PPE (Personal Protective Equipment).
With luxury sales therefore sandwiched by supply chain issues, it is inconceivable that e-commerce will pick up the slack from closed stores around the world.
“I don't know at what level of luxury sales are still happening online,” says Knadjian.
Other brands contacted for this article said it was simply too soon to say how sales were doing online. However, most said they were anticipating a more permanent change in consumer behaviour.
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Forcing people to shop online, whether for food or fashion, could give luxury e-commerce the boost that it has long needed.
“Some digital shopping habits built during the outbreak will stick,” says Bain & Company.
“The facility of buying online is going to change the scene completely,” says Knadjian.
However, if behaviour is to change when the pandemic passes, then brands need to make changes now, he adds.
“I am optimistic that customers will shift their spending habits online more,” says Parson. “Preparing for a more robust back-end (automation) for e-commerce is likely the key to generate future sales in the luxury space.”
Patek Philippe disagrees, however. Once the pandemic is over, the Swiss watchmaker will return to selling things the old way: In-store. Others, who might have seen a less enthusiastic response to their e-commerce efforts, will likely join them.
And what of experiences and wellness, those two frontiers of the luxury market that can neither be bought in-store nor online? During a period of both restriction and heightened health awareness, companies providing experiences and wellness could see the largest post-coronavirus boom.
“When safe, consumers will return to physical stores (possibly with a renewed passion for real-life experiences),” says Bain & Company. Professor Vadakkepatt, who directs the new Retail Center at the George Mason School of Business, predicts an increase in in-store visits after coronavirus due to “pent-up demand.”
Whether people have any money to spend after the pandemic is another issue. New World Wealth, which tracks global wealth, predicts high net worth individuals (HNWIs - those worth over $1 million) have already lost 15 percent of their collective wealth, and things could get worse still.
The luxury market might therefore be the last to recover from the coronavirus pandemic. This means that luxury e-commerce will not be a quick fix, but brands are going to need to rely on online sales for some time to come.
Cover image credit: Net-A-Porter Spring 2018 Campaign.