One thing to take away from the third-quarter revenue we’ve seen so far is that consumers are still shopping – and they’re grabbing big, well-known brands for everything from food to face creams. This is dramatic in high-end retail, where in some cases wealthy buyers are buying items that are more expensive than they were a year ago. There are several reasons for this. As I have noted, some of the expenses come from savings accumulated over the years kuncitara, and wealthy consumers want to get the most out of their money. If they hit outside of their regular price range or make their first luxury purchase, it often means paying for a household name: Louis Vuitton, Christian Dior or Hermes – all of which have had strong sales recoveries.
It also helps the largest companies – LVMH Moet Hennessy Louis Vuitton SE, Hermes International, Cie Financiere Richemont SA, and Gucci owner, Kering SA – have the resources to make their brands stand out in a crowded market. They are able to multiply social media campaigns. Meanwhile, consumers want to try and test styles, whether it’s a Hermes Birkin bag or a Moncler puffer jacket. With fewer opportunities to dress up, as well as a growing awareness of the environmental costs of fashion, buyers may decide to buy less, but buy better. All of this supports legacy-rich luxury homes, such as Hermes, the first upscale group to return to sales growth in the third quarter. The handbag maker is also helped by the fact that it is less dependent on tourist spending, which accounts for about 20% of sales globally, than its competitors, which see 30% to 35% of sales coming from tourists, according to Thomas Chauvet, luxury analyst at Citi.
But the shift in demand from cutting-edge to classic may be more of a challenge for Gucci, where sales excluding currency movements fell 8.9% in the third quarter. Her flamboyant aesthetic has won a large following among younger customers. But now they’re cutting back on their flashy styles to adapt to more conservative tastes. Buyers reaching for familiar goods also create special challenges for small companies. Given the power of luxury conglomerates and muscular single-brand groups like Moncler SpA, there may now be more pressure to sell to them. Salvatore Ferragamo SpA, for example, has not yet reported third-quarter sales, but Italian home turnover efforts have been disrupted by the pandemic. Investors will be watching to see if Ferragamo and other companies looking to revive their fortunes, such as Burberry Group Plc, are also being lifted by the rising tide of luxury.
Ferragamo denied this week that it is holding talks with investors about a potential stock sale. But family-controlled groups would be wise not to ignore any choices. The strides that the mega-brand have made this year will make it harder for smaller homes to gain traction with the richest buyers, even though demand for luxury goods will recover in 2021. Of course, there is a chance that consumer tastes will spin back to experimentation. when the world returns to resemblance to normality. But that future seems far and far from certain. Even if buyers want a less familiar and edgy design, companies need to reach them online and via social media channels. Having the best retail locations and the hottest designers will also remain important. That means sustainable investment for all groups, large and small. If life continues to get harder for more specialty brands, the next luxury trend could be an overhaul of industry ownership.
(This story has been published from wire agent bait without modification to the text.)