When life as we know it came to a standstill due to the pandemic, fashion retail, which was already contested before the pandemic, became one of the hardest hit industries.
Many people did not have to show up for work, so the purchase of new clothes was put on hold, with the exception of casual comfort clothes suitable for a home lifestyle. And with the fashion stores closed for months, they couldn’t attract customers window shopping.
Overall U.S. consumer spending on clothing and footwear fell 9% from 2019, from $ 398.2 billion in 2019 to $ 362.4 billion in 2020, returning to 2014 levels, according to the Bureau of Economic Analysis.
Sales at clothing and clothing accessories stores did even worse, falling 24% from $ 268.7 billion in 2019 to $ 204.2 billion, a level not seen since 2009, according to the report. monthly census retail trade.
At first, experts like the Boston Consulting Group predicted a similar fate for luxury brands at the top of the fashion food chain, which were doing well as the pandemic approached, unlike their more mainstream competitors.
But luxury fashion consumers surprised everyone as their favorite place to shop has become online and their willingness to spend extravagantly has not been lacking.
While global luxury brands have suffered a quarter or two of weak sales, overall they have emerged from the pandemic stronger than ever. And a new study from Dataweave, a retail price and data analysis company, predicts that the changes imposed on the luxury fashion market by the Covid pandemic will result in a stronger luxury market and more resilient in the future.
By analyzing pre-pandemic, during and post-pandemic data from a wide range of online luxury retailers, including Neiman Marcus, Nordstrom
“We expected a slowdown at our retailers, but we saw the opposite: demand has increased,” he shares. “We also expected more discounts, but the opposite happened. There were fewer discounts compared to what was happening before the pandemic. “
For example, before the November 2019 pandemic, around 11% of luxury handbags were downsized, with the share of markdowns increasing dramatically to almost 20% in April 2020. But then it quickly reversed, from so that in August 2020, only 7% of the luxury handbags were reduced while 10% posted a price increase.
Even the much-loved Louis Vuitton has not escaped the pressure of markdowns, with a third of its bags on sale over the July-December 2020 period on Farfetch Marketplace. But in the first half of 2021, Dataweave did not find any discounted Louis Vuitton bags.
“While supply struggles to keep up with demand, the clamor for Louis Vuitton products is so strong that consumers often agree to be put on waiting lists,” he recalls.
The pricing power is back for luxury brands as dictated by the natural economic law of supply and demand. And given the high demand today, which is expected to get even stronger as more people return to work, it gives brands confidence that even higher prices will prevail.
“As consumers have returned to school or the office, more and more have invested in timeless fashion pieces (like handbags) as status symbols, indicating that the habits of consumption shift from the essentials to the desires, ”explains Bettadapura.
Fine jewelry, another status symbol, has also gained influence on prices in the wake of the pandemic. The average price of jewelry sold on luxury retail sites more than doubled from October 2019 to May 2021, from $ 986 to $ 1,981.
E-commerce is a destination of choice
Before the pandemic, luxury brands weren’t convinced their customers really wanted to buy luxury goods online. Brands knew they had to be online, but more for marketing reasons than as an essential distribution channel.
If there was any doubt before, those doubts have been dispelled. Luxury consumers have eagerly embraced e-commerce for fashion.
In 2020, nearly a quarter of luxury goods purchases were made online, according to Bain, and the e-commerce market share has doubled since pre-pandemic 2019. Additionally, 40 to 50% of purchases in 2021 have been digitally activated.
The market share and dominance of e-commerce as a channel of influence for luxury consumers will continue to accelerate, especially as the appetite for luxury among young, digital-native consumers continues to grow. By 2025, millennials will account for about half of luxury sales, according to Boston Consulting Group and Altagamma.
And for one of the leading luxury e-commerce retailers, Farfetch Marketplace, they and the young GenZ cohort make up two-thirds of its shoppers. Farfetch also reports, according to a recent survey of its new customers, that about 45% plan to continue doing more of their shopping online.
Farfetch sits in the seat of the catbird
When it comes to luxury fashion via e-commerce, Farfetch Marketplace is killing it. In its second quarter, April through June 2021, Farfetch moved more than $ 1 billion in merchandise, including its branded platform ($ 72.2 million in the quarter) and marketplace platform digital ($ 913.4 million), representing the fashion of 1,400 sellers, including partner brands, boutiques and department stores.
With a gross value of its merchandise up 40% from the same period last year, it increased its consolidated revenue by 44%, reaching $ 523.3 million from $ 364.7 million the last year. Profitability increased equally from $ 159.4 million to $ 230.1 million.
As its customer base has surpassed 3.4 million active customers, Farfetch Marketplace is able to get its hands on the most demanded merchandise. Available storage units (SKUs) reached nearly 400,000 in the quarter, and its top ten third-party franchise partners increased their available SKUs by more than 70%, while doubling their sales.
By meeting the growing demand with the most popular products, Farfetch has been able to increase sales at full cost. He said 90% of its year-over-year growth in the quarter was attributable to full-price sales.
Dataweave analysis shows that the average selling price in May 2021 on Farfetch Marketplace for clothing was $ 653 and $ 521 for shoes. More remarkable still, the average selling price of accessories fell from $ 456 in February 2020 to $ 633 in May 2021.
Farfetch Founder and CEO José Neves said: “I am truly impressed with the resilience of the luxury industry, which, after an unprecedented period, is already back to growth with even stronger fundamentals. This is evidenced by the larger Dataweave analysis.
The next step on Farfetch’s agenda is the launch of its “There Was One” private label developed by the Milan group New Guards, which Farfetch acquired in 2019. By leveraging data from what is being sold by its third-party partners, There Was One fills the gap for bullion coins that will last and be “Planet Conscious” – only made with a percentage that includes organic and recycled materials.
The initial collection will include some 70 styles and Fashion business reports that more brands are planned with the New Guards Group.