Luxury Retail is Dead. Yeah Right !!

The feeling of the COVID-19 pandemic has settled down in our mindsets. The panic, the posts, the news and the prayers are starting to fade away. It has become a part and parcel of life just like the annoying friend who sends Good Morning quotes in Whatsapp every day.

One thing that fails to go away is the doomsday predictions for the retail industry, particularly for the luxury retail industry. From one side there is an argument of e-commerce replacing brick & mortar stores for good. On the other side, consumers will not spend on luxuries and will buy only essentials.

Spanish Flu to Roaring Twenties.

1918 Spanish flu in the midst of the 1st World War led to death tolls of an estimated 17 - 100 million people. The figures are hard to assess because of the strict censorship which existed during that period. Newspapers, institutions were careful in reporting details.

Retail, service and entertainment sectors were hit the hardest due to the social distancing and lockdown rules by the governments. In USA leading department stores such as Macy’s, Bloomingdales and Sears suffered many losses.

Then in the 1920s’ saw a wave of economic growth in the USA by 42% which shifted the economy further into manufacturing from traditional farming. The growth in per capita income led to a phase of consumerism. More and more new luxury products came into the market. Key brands that started in the era were Gucci & Hugo Boss.

Furthermore, metallic charge cards were given by big retailers and hotels to loyal guests who can shop by using them. This lead to the creation of credit cards 30 years later.

Recession to Recovery.

2008 was a special year for me, as I got an opportunity of a lifetime to work with one of the best luxury retailers in Dubai. Little did I know I would be witnessing the greatest global recession which lasted throughout 2009. In the midst of all in November 2008, The Dubai mall opened with the most luxury offerings with a space of 500,000sqm. It boasted a dancing fountain, an aquarium and an Olympic size ice rink.

In January 2010, the world witnessed the biggest event in modern history. The opening of the Burj Khalifa, the tallest man-made structure in the world at 828m.

At that time, everyone thought these constructions will be white elephants in the middle of an economic crisis.

By the end of 2012, The Dubai mall attracted 65 million visitors. Luxury retail soared during the period. Most if not all retailers in the mall doubled if not tripled their sales comparatively. In 2018 Rolex opened their largest watch boutique which has 3 floors in the mall. For any retailer in Dubai, this is the most valued retail space they own.

The prices of Burj Khalifa residential units rose from AED 2500/- per sqft in 2009 to AED 3750/- per sqft in 2013. It was a rise of 50% value. This indicated the wider growth of the real estate sector and the economy at that time.

The Swiss watch industry suffered massively in 2009. The export value fell by 22% to CHF 12.3 billion. The volume dropped by 17% to 21.7 million units compared to 2008. In the year 2012, exports have risen to CHF 20.2 billion. The volume was at 29.7 million units. It has grown by 64% in value and 36% in volume from 2010- 2012.

The Leading luxury group LVMH reported revenue of Euro 17.2 billion in 2009. It grew to Euro 28.1 billion by 2012. That was a growth of 63% for the owners of Louis Vuitton.

Pandemic to Hope.

There is a lot of trading and services waiting to happen even during the pandemic. The human nature to engage with challenges and socialize has not been deterred. It is very clear with how major cities are back at work after months of lockdown.

There is an advantage in the e-commerce of ordering 24/7. Even many brands have their own online shopping sites and associated with partners such as Tmall.

One major aspect for luxury retail to bounce back after the current pandemic is that a larger clientele still wishes to visit boutiques and experience the brand first hand.

Brands have become creative in all challenging times, the future would be creating furthermore synergy online and offline. We will witness more innovations in this space where the client can seamlessly experience more technology but will still want to spend time inside the boutiques.

Luxury and retail go hand in hand, what innovations do you think we can expect to engage with the clients in the future.