Many of us had assumed that the pandemic was as terrible for the luxury industry as for the others. Well, looks like it isn’t true.
Sales at LVMH Moet Hennessy Louis Vuittons division of fashion and leather goods rose 12 percent in its third quarter, excluding currency fluctuations, not far from the levels it reached before the pandemic hit. Meanwhile the analysts’ estimates for the period was a decline of 0.9%.
This success illustrates how demand for costly handbags, cars and watches bounced back once wealthy buyers could emerge from their homes and spend some of the money they saved during lockdown.
According to data, shoppers in China, whose buyers could account for 45 percent of global luxury sales this year, treated themselves when stores reopened. And this so-called “revenge spending” phenomenon has spread to the US and even Europe, as rich people are diverting the money they would have spent on international holidays and fine-dining to high-end boutiques.
Stock markets have rebounded strongly until recently, which usually allows US customers to spend. As a result women are springing for Dior bags and men are shelling cash out for wristwatches. Better-than-expected sales were recently announced by Watches of Switzerland Group, the UK-based watch and jewelry retailer.
But these outcomes are not limited to luxurious pieces you can wear.
A whopping $5.1 billion of industrial free cash flow for the July to September quarter was announced by Mercedes-Benz’s owner Daimler recently. The pandemic seems to have affected its predominantly rich customers less than the hard-hit service sector. If you’re concerned about using public transport or you’re considering moving from the city to the country, cars have also become pretty handy.
The large presence of Mercedes-Benz in China, where sales rose 23% year-on-year during the third quarter, was also a major advantage.
Good times ahead for Apple
Looking ahead Apple, whose top-of-the-range iPhone 12 Pro has become available for pre-order, may be another winner of this boom. Consumers could be more likely to splurge on the more pricey new handsets after saving some cash during lockdown. The iPhone 12 Pro Max costs $1,199, while the iPhone 12 Mini is priced at $649.
Need for caution
But there are reasons for caution, as the recovery of luxury will not be distributed equally across the industry because if customers are going to make a special order it’s likely to be from one of the best-known brands.
Moreover, watches, handbags and jewelry are accessories that work even in casual settings placing it in higher demand. The absence of events to dress up for could affect other high-fashion products, such as formal dresses and stilettos.
In the meantime, the thrill of spending could drop as anxiety about the economic toll of the pandemic increases. Add in the damage caused by a second wave of viruses in Europe and the drama surrounding the US election and even wealthy consumers may opt to stash their cash instead of spending it.
However, the trend is back for now and luxury goods firms should make the most of it while they are able to.