The coronavirus pandemic has been a tough test for many major retailers, but it has been relatively easy for luxury brands to handle.
The sharp decline in buying activity has led to the fact that major players, such as H&M и Gap, suffer considerable losses, close shops, are forced to carry out mass layoffs. At the same time, luxury brands, which have always had a high price tag, have been affected much less. But why is this happening?
Of course, it cannot be said that brands like Louis Vuitton, Gucci и Hermes weren't hurt at all. But their losses were much lower than one might expect. Moreover, all of the named brands even increased the cost of production by a few percent, which in modern times may seem like madness.
One of the main reasons for the sustainability of luxury brands is their heritage. It is not for nothing that many of them flaunt their founding date so much - Chanel in 1910, Louis Vuitton in 1854, Richemont's Cartier in 1847. Thus, the craftsmanship underlying the created things is emphasized. And this inevitably increases the value of luxury brand products in the eyes of consumers.
It is also important that luxury brands are bought mainly by people with higher incomes, less affected by economic turmoil. Limited in the ability to travel, many of them prefer to spend the money originally intended for the trip to buy luxury items.
Such brands also have another category of loyal consumers who, although they do not have high incomes, still save money for things of their favorite brand, allowing themselves rare purchases of expensive things. Ordinary fashion retailers can not boast of such.
In this case, the purchase of an expensive item is often evaluated not just as a waste, but even as a profitable investment. Needless to say, a Chanel handbag can be regarded as an investment, which cannot be said about Gap jeans. Over the years, its value may even increase.
And finally, such an important component as supply chains and production. All companies know about the importance of reducing the cost of production and saving at the stage of purchasing raw materials. But luxury brands make more money per item sold than conventional brands. The cost of production often does not differ too much. So, although it is believed that Louis Vuitton is sewn by people, not machines, the manufacturer is modestly silent about how much of the work is done by hand. By the way, in 2010, the UK Advertising Standards Authority even banned the brand's advertising, which talked about handmade work.
One of the problems for luxury conglomerates has always been what to do with unsold inventory. By fundamentally not making discounts on the goods they produce, they are often forced to end up destroying products that sometimes cost hundreds of millions of dollars.
However, a new trend has recently emerged - the supply of online stores specializing in second-hand luxury goods. So, Gucci's recent supply deal with The Real Real is an example. Such deals will potentially give brands additional control over their operations. This means that they can resell items without a discount, and sometimes even raise prices, as "vintage" is often priced higher.
The coronavirus pandemic is not over yet, and manufacturers of a wide variety of products are likely to face many new challenges. However, experience has shown that luxury brands have proven to be much more resilient than initially expected.