• Dialogue Communications

Luxury Brand Strategy During the Pandemic: Discount Is Not Always the Way Out

As we step into the second half of 2020, many countries are still battling against the corona virus worldwide. The businesses are slowly rising up although not yet 100% recovered, this also includes the business of luxurious brands. McKinsey teamed up with Business of Fashion magazine, predicted that the sale of these luxurious brands will again experience significant decrease by 35-39 percent or equivalent to 650 billion US dollar in 2020 compared to 2019.

Take for example Kering, a company that is home to high-end fashion brands such as Gucci, Balenciaga, Yves Saint Laurent, and Bottega Veneta reported the loss of sales by 15.4 percent as the direct impact of COVID-19 pandemic. The same thing happened to its biggest competitor LVMH that is home to Louis Vuitton, Christian Dior, Bulgari, Fenty, and Givenchy has also been experiencing decrease up to 15 percent. Market analysts stated that the loss is caused by lockdown policy that is implemented across Asia-Pacific regions, especially in China that has become the main source of income for the luxurious goods industry in the world.

Many of the luxurious business players are hit by panic as they watched COVID-19 stroke China quite furiously. One of the reasons is because these USA-based fashion/ accessory businesses are still relying heavily on production in China. Reported by South China Morning Post in May 2019, it is found that this production dependency towards China is caused by the factors of product competition. It is said that no country is yet able to compete with China in providing goods production both in terms of quality and quantity. China has the most cutting edge machinery that is able to meet the demands.

The pandemic and crisis have forced the luxury brands to stay in touch with the customers in a much more relevant and appropriate way that is suitable to the public preference. The advice is for these brands to avoid product discount strategy. Some experts believe that discount potentially could hamper the luxurious brand that has been going through a long uneasy road when building its reputation along with the equity that result to high selling points. Even though this strategy could bring more new customers, it will slowly kill the loyal existing customers.

The COVID-19 pandemic obviously affected the decrease of sales in many industries. However, luxurious brands have less to worry about as their loyal customers will always get back to them to shop. Therefore, it is better for brands to maintain and strengthen communication with their customers rather than implementing discount.

One of the ways to deliver relevant communication to the customers is by building brand equity through social activities that will show significant impacts. LVMH for example, changed some of their manufactory functions from cosmetic purpose in producing perfumes to sanitising purpose in producing hand sanitisers and donate some profit to medical team in France. An ethical and responsible bran knows that the only way in the future is to serve the community who needs more help.

Another important strategy is to use the digital platform to maintain the business line amidst the COVID-19 pandemic. We have to admit that the virus has brought the digital world to a new level where daily activities take place including the activity of business. Therefore it is important for luxurious brands and producers to open up the potential omni channel retailing and to take over the digital marketing.

The pandemic has created a difficult situation for luxurious brands to focus on scale of priority. However, a lot of these brands have shown successful resilience towards crisis and global economic turbulence. Therefore, these luxurious brands need to sit down and reevaluate market before making decisions on discount policy for their products.

Written by: Margaretha Nazhesda

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