In Luxury, Leadership is Crucial in a Crisis
These are unprecedented times. While Europe and the US are battling the pandemic, China is showing a speedy recovery. In an interview last week with WWD, Tom Ford said that in China, “with our cosmetics, we’ve completely recovered. We’re back to 100 percent.” He added that his brand’s “ready-to-wear and accessories, which were down about 95 percent, [is] now back up to 50 percent.” This is an important message: This crisis will be over eventually. Every crisis is a temporary disruption, albeit with lasting effects.
Tom Ford’s assessment of his sales in China after the crisis confirms my extensive research on this topic: that luxury brands are more resilient to a recession than other categories. In 2008, the luxury sector was one of the few not tanking. Instead, luxury sales had flattened, and they returned to growth by the end of 2009, outperforming all other sectors. I expect the same to happen after this crisis, even if many industry commentators disagree.
But make no mistake: The current crisis is different from practically all previous downturns. First, it’s an unprecedented humanitarian challenge, and worries about health and interruptions to our normal ways of life have given way to panic. For millions, the crisis has already led to a loss of jobs or decreased income. Many of those who are still working can’t be sure their companies will survive despite unprecedented stimulus packages from countries all around the world. Second, this is not just a crisis of demand but also supply. Shelves are empty; supply chains have been interrupted; and stores, services, and restaurants are closed. This compounds our issues considerably. Lastly, this has been an extreme personal challenge for many because of social distancing, working and schooling from home, and the isolation of lockdowns.
What makes matters worse for many brands is that we were already in a state of massive disruption before this crisis started. I dedicated many of my past Jing Daily columns to the need for brands to meet new market challenges. Millennials and Gen Zers are driving disruption, and many traditional brands already had difficulties communicating with those younger consumer groups. Massive technology shifts, digital business models, and rapidly changing consumer preferences were regularly upending the luxury industry before COVID-19. In fact, most of my projects over the last two years were focused on transforming brands so they can survive in this new reality. Even before the outbreak, it was clear that most brands couldn’t just go on with business and usual.