Back to normal: but what is normal today? What is the future for the world of the Luxury Retailer?
The emergence of the Corona Virus has shocked us all, without exception. It was impossible to escape the major changes that this pandemic has plagued so badly around the world.
We have been forced to slow down our lives, to close stores, and stop many businesses, to put people's safety and health first.
But there is a positive side in all of this: observing the revolutions of the engines of our companies, all used to proceed quickly towards our objectives, has - or should have - prompted reflection
Difficult moments like this must give us the opportunity to build new ideas, change strategies and transform a moment of panic and difficulty into a new start, a new beginning. Addressing the present has become crucial to surviving, especially in an ancient and traditional sector such as high jewelry.
Operating in the luxury market, jewelry can be considered a form of universal currency. Over the past 20 years, gold has appreciated 472 percent, while the value of some precious stones has increased by 900 percent or more.
But will it be this time, given that the coronavirus pandemic puts a virtual brake on the global economy?
As in the rest of the markets, the luxury and high jewelry sectors are expected to suffer the effects of these important economic changes.
It must be said that, compared to 2008, when the market contracted to damage the global economy as a whole, today the causes of the recession are not due to banking systems or economic crises. A more positive outcome can, therefore, be expected in the medium to long term. Research predicts that about half of consumers in the U.S. and Europe will cut their spending on discretionary items such as fashion and luxury goods in the next six months. Sales are expected to drop from 25% to 35% by the end of 2020, with profits ranging from 40% to 45% across categories. In such a critical and important moment, in which the health of people all over the world was undermined, certainly the purchase of jewelry was not a priority.
The new strategic assets
With closed shops, stationary tourism and the whole world in turmoil, Italian jewelers have suffered serious losses, leading to the closure of production activities and the reduction of budgets for new products or collections.
It is important now to deal with the present, to draw new future scenarios: to anticipate change in order to be part of it. This has been the philosophy of many famous brands in the fashion and fashion sector.
Virtuous examples of strategic optimizations at the time of Covid, are reported by international brands (Bulgari, Hermès, Nike) who have been able to cope with the losses due to shop closures and production sites, optimizing and promoting digital platforms and online e-commerce.
Although the drop in stores has dropped from 30% to 50%, depending on the days, the conversion rate is higher. Sales are slowly recovering and the hope is that western markets will recover in the same way in the summer.
Small jewelers and multi-brand retailers
The smallest organizations suffer the most, which have had to restructure - and quickly.
Wholesale companies have seen more than half of their businesses evaporate. Already fragile relationships with multi-brand retailers, who often carry jewelry on consignment, which means that the jeweler is not paid until the item is purchased, are taking their toll.
Others who operate with the wholesale model have not always been paid for orders shipped weeks, sometimes months ago.
Brands with a solid online commercial presence and less dependence on wholesale went better. The London-based Annoushka brand, for example, relies on the Hero technology tool - a virtual reality tool built into the website that simulates the in-store experience - to increase sales while the stores are closed.
The new digital strategies must be integrated with reductions and cost cuts.
Also, gold prices are extremely high right now, trading for $ 1.602 an ounce on April 2nd versus $ 1.474 in November 2019.
Small and large brands have been challenged by the pandemic in several ways and the luxury sector has certainly been one of the most affected markets. However, the drop in sales can also be attributed to a momentary lack of "need" for consumers to own and wear luxury clothing and jewelry.
As consumers start spending more, jewelry can still seem a more intelligent investment than other luxury categories, also considering the value that a jewel acquires over time and the fluctuations of the gold market.
The future we imagine
We are monitoring the latest news on the coronavirus epidemic and its impact on the global fashion business.
Companies must introduce innovation in a very traditional sector, but with a high operating margin, both relative and absolute by product. Thanks to this marginality, to the sustainable management of operating costs, to the choice to promote the brand and products exclusively digitally, jewelers can discover very profitable new business opportunities.
Being brave and ready for change makes a difference. It is right to reflect on the adoption of new digital technologies, on the new opportunities and new challenges that these times impose on us.
All this allows us to imagine the future at the same time, allows us to start laying the foundations for a new future, in which the dynamics will be different.
Technology and innovation will undoubtedly be the tools on which to focus, those that will allow us to create and seize new opportunities that are gradually emerging.