Luxury Fashion Industry fights COVID-19

Consumption of luxury items has for long belonged to the “Leisure Class” as explained by Thorstein Veblen in this famous work- ‘The Theory of the Leisure Class.’ The “conspicuous consumption” of luxury goods by the wealthy has enabled them to establish and exercise their superior status in the society. Post the industrial revolution the rise in purchasing power led to the emergence of new wealthy classes.
“The difference between desire and need is what explains the high price points of luxury fashion items.”
This gap helps luxury brands to maintain its exclusive status and aspirational value.

SOME TRENDS

As with most businesses today, the COVID-19 transforming world is posing supply chain challenges. The emphasis on building resilience is rising. In these tough times, consumers will seek brands that empathize and exhibit sensitivity.

However, “The lethal combination of reduced foot traffic and decreased consumer spending in the first quarter of 2020 has brought the retail industry to its knees. In fact, more than 80% of fashion and luxury players will experience financial distress as a result of extended store closures.”

So instead of empathizing with consumers economically, luxury fashion brands are raising prices in retail. Let us discuss why.

• The raw material cost of luxury fashion items varies globally.

• Production costs usually inflate year by year and hardly spiral down. 

• Fluctuations in the interest rates and currency affect prices too, especially during crisis situations.

• As one brand raises prices, the other follows to stay up on the luxury ladder.

• Finally, the consumer behavior is the ultimate cost driver.

“Bain estimating sales for the $300 billion sector to fall by up to 35% this year, bringing to a crashing halt a decade of spectacular growth, luxury groups are moving quickly to protect margins.”