The luxury sector has been hit hard by the virus. And what consumers value has changed
The coronavirus pandemic has put many industries into crisis mode, and luxury retail is one of them.
With fewer places to see and be seen, shoppers are slowing their spending, with an estimate from consultancy firm McKinsey forecasting the global luxury goods market will contract by 35% to 39% in 2020, year-over-year.
“Dressing up, buying new clothes and following fashions is incredibly dependent on social activities such as going to work, going out, having parties and simply being seen by others,” stated Vicky Bullen, CEO of branding consultancy Coley Porter Bell in an email to CNBC. “If you’re not seeing anyone, what’s the point?” she added.
Instead of showing off an upscale bag or car, which might feel too conspicuous when the U.S. economy is in a downward spiral, consumers are instead displaying their “wellness” during stay-at-home orders, according to Malinda Sanna, founder and CEO of consultancy Spark Ideas. “Health and vitality … kind of are the new luxury. Any sort of symbols or cues of that are entirely permissible,” she told CNBC by phone.
Spark Ideas undertook research with luxury buyers in cities in the U.S., as well as in Shanghai (to qualify, participants had to have spent at least $2,000 on a single fashion item in the past 12 months, for example), which revealed the popularity of high-end fitness equipment such as the Peloton bike. As well as being able to try different classes, one woman in the U.S. study said she was “in love” with the bike because of “the status it has with my friends.”
Family time was also seen as a source of joy by the study’s participants. “It’s definitely not about showing off acquisitions. Real privilege now is being with a pack, it’s being surrounded by loved ones, having them accessible. Being able to spend time with children and family that maybe, you know that time wasn’t available before,” Sanna stated.