SP Jain School of Global Management (estd.2004) that has campuses in Dubai, Singapore, Sydney and Mumbai has been offering Master in Global Luxury Goods and Services Management (MGLuxM) in partnership with MIP Politecnico Di Milano, Milan since 2017. Students signing up for the year-long full time intensive programme spend six months in Mumbai, another four months in Milan and the remaining two working on a Master Thesis in either Milan or India. Smita Jain, Director for the MGLuxM programme at the institute talks about the impact of COVID -19 on the global luxury businesses and across the luxury ecosystem.
How has the COVID -19 pandemic impacted the luxury segment ecosystem?
Major luxury companies have pivoted to address urgent public health needs. Factories that produce scarfs and perfumes are now manufacturing face masks and hand sanitizers. Mega fashion houses are producing garments for health workers and many from the automotive sectors are building life support systems. Several luxury groups have made monetary donations to hospitals and other non-profit organizations. With thousands of workers relying on the luxury goods industry to make a living, be it factory workers, store employees or craftsman, industry leaders are planning long-term strategies to ensure basic survival of their businesses. Large conglomerate groups are paying their employees or at least providing food and shelter during this halt. This situation may continue for a couple of months given that work from home option is impossible given their nature of jobs.
How are luxury brands bracing themselves in the wake of the expected economic slowdown?
The pandemic has definitely slashed revenues in half for most brands, and according to the American management consulting firm, Bain & Company, global luxury sales could drop by 35 percent by the end of 2020. Most of the luxury businesses are based out of the European region but it is reassuring that governments there have taken serious measures to ‘flatten the curve’. While it may be some time before the economy normalises everywhere, luxury industry still remains hopeful that Chinese consumers will return to their previous levels of consumption soon after the outbreak stabilizes. The luxury segment will bounce back when the e-commerce platforms do. Most brands are already using this slowdown to reinvent themselves, digitize their processes and enhance their systems and technology which will lead to certain permanent changes in the industry.
What big changes will the luxe sector see as a result of this pandemic?
The ripple effect of some trends will last for the months to come. Both large and small luxury businesses will use artificial intelligence to develop operational efficiencies and provide personalized experiences to the consumers, especially millennials and Gen Z who are already quite tech-savvy.
We are likely to see technology-led business models play a critical role in defining strategy as we re-imagine the global supply chains of tomorrow. There will be reduced dependency on physical labor across transportation, logistics, and warehousing through use of technology like machine learning-enabled demand forecasting etc. Digitalising end to end supply chain is the answer for long term growth for the current situation.
Currently, more than 70 percent of the global luxury products in the fast-moving luxury goods category (FMLG) such as small leather goods, cosmetics and handbags are produced in China. But that may change as brands are likely to shift their production focus to new territories such as Vietnam, Taiwan, and India.
Will luxury brands revamp their price points reflecting the reduced spending power in the post-COVID economy?
Luxury brands have always enjoyed an air of exquisiteness however the industry was already witnessing a change in consumer behavior, as more people gravitated towards conscientious, responsible luxury as an effort to lead a more sustainable lifestyle. This saw leading brands and creators seeking slower lines of production promoting sustainability and creativity. Luxury brands are focusing on curating collections to address responsible consumption, and slow living, while maintaining their exclusiveness, and premium quality at the same time.
Some consumers will go for revenge shopping the moment lockdown is lifted but will have to re strategize their sales even selling products at discounted rates as the income will be affected globally in the post-COVID scenario.
Dipta JoshiCorporate, News