Luxury and fashion players are facing a deeply transformed consumer and retail landscape post-Coronavirus (COVID-19). Survival and recovery strategies are likely to revolve around agile adaptability and a careful review of legacy standard operating procedures in place before the pandemic. Those best fitted to this new environment are set to survive and thrive.
Despite the strong rebound seen during the first half of 2021, subsequent waves of COVID-19 infections and ever-changing retail and travel restrictions are keeping the corporate focus on risk mitigation, given volatility and uncertainty around recovery.
Financial transactions are at an all-time high within the luxury and fashion space. Mid-market brands and underperforming (or bankrupt) retailers have become ideal targets for conglomerates, digital-native players and private equity funds.
Divesting underperforming brands or entire business units is becoming a common strategy post-COVID-19. On top of additional (and much needed) cash flow, the strategy allows for better focus on and specialisation of top-performing brands.
Proximity manufacturing to enhance supply chains and mitigate risks will have to be considered sooner than planned. In fact, some players, such as Inditex, have already reduced by 13.6% the number of suppliers from China.
Consumers are rapidly embracing renting and resale in luxury and fashion. Either on the back of sustainability concerns or because of financial constraints, younger shoppers are boosting the prospects of business models beyond ownership.
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