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Deloitte: “The pandemic is an accelerator for brands to adopt new paradigms of value creation”

Katie Nichol

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Deloitte: “The pandemic is an accelerator for brands to adopt new paradigms of value creation”

There’s nothing like a crisis to accelerate change. The 2020 global pandemic looks in some ways to have changed the luxury-goods industry for the better, with the importance of adopting sustainable initiatives one of the key takeaways from a recent report by Deloitte. Digitalization and the need for an augmented in-store retail experience are also brought to the fore.

The 2020 edition of Deloitte’s Global Powers of Luxury Goods report highlights luxury-goods players' investments in green technologies and carbon offsetting, and positions carbon neutrality as a “core value for luxury”. Initiatives in this area are in no way thin on the ground as the crisis has served to accelerate, rather than initiate, brands’ focus on climate change and going green. The report cites some examples, including Chanel’s 2019 investment in Evolved by Nature, a company that creates high-performance materials from liquid silk, and Moncler’s carbon neutral jacket made from castor beans. Beyond innovations in the supply chain, says the consulting firm, luxury-goods companies will need to embrace new values and perspectives as the needs of consumers and the planet evolves. “The pandemic is proving to be an accelerator for brands to adopt new paradigms of value creation,” comments Patrizia Arienti, Deloitte EMEA Fashion & Luxury Leader.

Digital and physical converge at retail

When it comes to retail, while online sales have boomed, the in-store experience is set to be more essential than ever as brick-and-mortar foot traffic returns. In store, luxury brands will have to come up with solutions that maintain the luxury ‘VIP experience’ while adhering to hygiene measures. Indeed, virtual technologies and digitalization will be key as stores shift from simple points of sale to critical consumer touchpoints.

“Physical stores offering a unique customer experience won’t be completely replaced by digital; an agile omnichannel sales approach is needed," comments Tianbing Zhang, Deloitte APAC Consumer Product and Retail Sector Leader.

Brands have, of course, already made headway in digitalization as they sought to capitalize on boosted online sales during lockdowns — global online retail sales were up by 209% in April last year — and looked to counter travel and event restrictions by organizing virtual runway shows.

Burburry, for example, teamed up with Google to launch an AR shopping tool enabling consumers to experience and purchase products in the brand’s online shop, while Gucci developed an app offering AR virtual try-on. Dolce & Gabbana launched webcasts to better explain products online by recreating the interaction between shoppers and sales assistants.

While luxury-goods players’ sales took a hit in 2020, in 2019, the top-100 luxury-goods companies generated combined sales of $281bn, growth of 8.5%, according to the report. The top-10 players alone contributed more than half of sales (51.2%). Top of the list was LVMH with luxury goods sales of $37.5bn, followed by Kering ($17.8bn), The Estée Lauder Companies ($14.9bn), Richemont ($13.6bn) and L’Oréal Luxe ($12.3bn).

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