Covid-19 has changed the world. With nations in lockdown to protect their people and businesses on hold, the wheels of the economy have been brought to a halt. But like everything else, this too shall pass. And when it does, can we expect the luxury segment to take off again, in quite the same way? Do we expect a bout of ‘revenge spending’ by India’s top rung, who will be ready to unleash on pent up purchases? Which segments will recover first, and which of them will be changed forever?
Forbes India’s ‘Luxury Market in the post-Covid-19 world’ webinar brought together a mix of experts from segments including fashion, retail, real estate, automobiles, and more, to discuss the impact of Covid-19 on Indian luxury. Moderated by Forbes India
editor, Brian Carvalho, panellists included Manish Malhotra, celebrity fashion designer; Sharad Agarwal, head, Lamborghini India; Vikas Purohit, CEO, Tata CLiQ; Manish Mehrotra, Chef, Indian Accent; Kapil Chopra, founder and CEO, The Postcard Hotel; Dr Daniel Andre Langer, CEO, Équité; and Abhay Gupta, CEO, Luxury Connect.
The event began with each of the participants setting the tone on how things will change in the luxury market post-Covid-19. Dr Daniel Andre Langer explained that the luxury sector will rebound relatively faster than non-luxury sectors, similar to a trend seen after the financial crisis of 2008. “We'll definitely see a different impact on different categories. Travel and hospitality will be down, everyone in this space has written off 2020,” he added.
The adoption of new standard operating procedures (SOPs), Abhay Gupta said, will be key. “Beauty and wellness will bounce back fastest. Of course, the SOPs will change, but things like weddings will have to come back. The caution is to adopt new SOPs of hygiene and social distancing.”
Consumption will become more conscious, said Manish Malhotra, and labels will have to be cognizant of this. “Consumers will be divided; some will make smaller purchases and will be price conscious. Instead of buying an entire outfit, for instance, they might buy one element to pair with something they already own. We will have to be very clever and correct with our pricing. It is now our responsibility to be slow with our pricing,” he asserted.
As physical retail faces serious uncertainties, what will this mean for luxury ecommerce? “I’ve always been clear that the fight is not between physical and digital, but between efficient and inefficient,” said Tata Cliq’s Vikas Purohit. “In the past few weeks, we’ve seen the who’s who of luxury brands sign up with us—brands that were not even in the realm of our business plan for five years. Our next step is to figure out how to equate the theatre of the physical luxury retail experience to a digital purchase.”
Explaining about what changes will be seen in the hospitality sector, Kapil Chopra, who is also chairman of the board at EazyDiner, said, “People will want no longer just walk in to restaurants; they will want to book a table. Aggregators will help more so now because your table will be guaranteed.” Adding another layer of food for thought, Manish Mehrotra said, “Indian Accent has not traditionally been a home delivery brand. But once the lockdown ends, we will look into the luxury takeaway business, an eating experience by a top chef at home. That segment will grow.”
Lamborghini India’s Sharad Agarwal said that there could be a spurt in demand in the lower segment of cars, since people will not want to rely on public transport. However, he doesn’t expect to see such spending in the super luxury segment. “I think we'll have to wait for demand to come back to normal here, we can't count on revenge spending. Luxury automobiles will also see an impact from the supply side,” he said.
The “Global Luxury market” is likely to see an estimated hit of 20% to 25% or $70 billion to $80 billion, according to BCG, on the back of stagnated demand, broken supply chains and thwarted global trade. The impact of the Covid-19 outbreak could last well into 2021.
However, all hope is not lost. Once a semblance of normal life resumes, HNIs and UNHIs are expected to splurge on luxury purchases. This is likely to give a boost to sales in the short term, and help clear inventory, albeit at a discount doled out by retailers to attract new customers. This opens up two large opportunities for the luxury sector—for luxury at the high end for the revenge spenders; and at the lower end for relatively cost-conscious shoppers who will be on the lookout for value for money and functionality in their purchases.
Abhay Gupta, also the author of an e-book called ‘Corona Virus and its Impact on Indian Luxury’, said he is optimistic that the luxury sector will rebound soon enough, since the target audience, those at the top of the pyramid, will see wealth reduce nominally; their benchamarks of sophistication unchanged.
By the time the festive season rolls around in August-September, people will be likely to indulge themselves in luxury purchases. “We will see the lipstick effect—except this time, lipstick will be replaced by mascara or eyeliner, since the facemask that covers your mouth is not going anywhere!”