Survival of the Fittest in Luxury and Fashion

July 2021

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.

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Key findings

Recovery is a risk mitigation exercise, given subsequent waves of infection

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.

M&A activity accelerates the consolidation of the competitive landscape

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.

Operators streamline portfolios, focusing on winning brands

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.

Reassessing global supply chains to prevent future shocks

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.

Renting and resale unlock growth opportunities beyond ownership

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.

Scope
Key findings
Luxury and fashion industries are set for a strong rebound post-pandemic
Survival of the Fittest in Luxury and Fashion
Exploring Survival of the Fittest in Luxury and Fashion
Survival of the Fittest in Luxury and Fashion in-depth
Risk Mitigation
Mergers and Acquisitions
Divestments
Versatile Business Models
Survival of the Fittest in Luxury and Fashion in focus
Companies are meeting the needs of consumers using various strategies
Risk Mitigation: Schutz launches Live In Schutz for “at-home fashion”
Risk Mitigation: Inditex to close smaller and underperforming stores
M&A: LVMH Group acquires Tiffany & Co for USD15.8 billion
M&A: Nordstrom-Asos joint venture
Divestments: adidas divests Reebok
Versatile Business Models: Gucci introduces its first NFT virtual sneakers
Survival of the Fittest in Luxury and Fashion
Key industry takeaways
Challenges to overcome
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