Post-Covid, will revenge buying boost the luxury market?

Have you fantasised entering through the glass doors, and walking down the allies flanked by clothes and accessories from your favourite brand? The understated satisfaction of touching a satin dress, or a leather bag- talk about ‘Confessions of a Shopaholic’! With such suppressed desires, chances are that revenge spending will be the new avatar of retail therapy in the post lockdown world.

The word ‘revenge’ has almost uniformly held a precarious notion so far. But when it comes to the market, the word can actually be seen glimmering with hope. The phrase “revenge buying” has been doing quite a few rounds in the luxury market scenario. In April this year, market analysts observed an intriguing shift in consumer behaviour in China: people had lined up to visit and shop from their favourite luxury outlets, in a newly opened world after the lockdown.

Buyers have missed the understated satisfaction of experiencing products before purchasing them during the lockdown.

Revenge buying in China

The term was first used in 1980s when the country witnessed a surge in the demand for foreign products, after the end of Cultural Revolution in 1976. A few decades later, the trend seems to have echoed following a gloomy lockdown period where the luxury segment has been hard hit.

Cultural Revolution in 1976 (Source : www.theguardian.com)

Hermes is said to have recorded a whopping sales of 2.7 million USD in its Guangzhou flagship store, which comes as a surprise. The predicted consumer behaviour had announced a drop in the number of visits to physical stores, citing reasons relating to apprehensiveness in touching things again, and the need to observe social distancing. Louis Vuitton, another major luxury fashion brand also observed a spike in the number of sales in the country, in addition to Estée Lauder and Apple among others.

Source : lifestyleasia.com

Chinese consumers occupy a significant space in the global consumer arena. They are extremely vital for the growth of luxury market, and this has been demonstrated by revenge spending. Prior to the pandemic, luxury brands had been investing in all ways possible to retain the Chinese audience. Take for instance, the Valentino Spring 2020 ‘DayDream’ show held in Beijing. The collection was a confluence of Chinese grandeur and Italian Renaissance, and it garnered immense appreciation by the brand’s Chinese patrons. Even now, a lot of brands have cautiously increased prices after facing a difficult time in managing logistics, owing to a positive outlook in future sales.

(Source : valentino.com)
Valentino Spring 2020 ‘DayDream’ show held in Beijing

Elsewhere

A majority of the world’s countries witnessed plummeting sales by luxury brands in the first quarter, on account of the lockdown imposed, even as the virus continues to hold several businesses under its claw. For now, most of the people are focused on purchasing essential goods. If this quirky move of patrons thronging to indulge in all things luxurious prevails in other countries post lockdown, then it can briefly contribute towards the recovery of an injured luxury industry.

South Korea also reportedly observed revenge buying in the post-lockdown period. According to data portal Euromonitor, the country is the world’s eighth-biggest luxury goods market. Queues of customers have been spotted outside Gucci, Louis Vuitton, Cartier showrooms in Western Seoul. It remains to be seen whether the sales will continue to boost after the brands increase their prices.

Here are some vital statistics and predictions to be considered while looking at the global luxury market:

• USA and China are the top two countries when it comes to luxury revenue generation, contributing to a global revenue of 283,979m USD. (Statista)
• This year, revenue growth has dropped significantly in all luxury segments, but is expected to bounce back in 2021. Revenue collected from luxury watches and jewelleries is expected to rise by 16.8% next year. (Statista)
• Consumers will be socially and environmentally conscious, and will have a strong sense of local pride in the post-pandemic world. (Bain & Company)
• Luxury brands need to optimise digital strategies and tap into omnichannel retailing. (Bain & Company)

A major change in the post-Covid world relates to travel restrictions. With countries limiting travel activities, and people too refraining from travelling, luxury shopping by tourists will no longer contribute to a rise in luxury sales.

Revenge buying in India

In India, the foreign luxury sector is relatively young, and a majority of consumers are price conscious. With major layoffs, unemployment rates have increased in the country. Added to this are the newly developed conscious limitations, brought about by the virus. Rentals and properties are two sectors that might take a significant period of time to recover. Fashion and beauty are expected to grow rapidly.

Conclusion

Overall, it remains debatable whether this behaviour will be momentary (a fad, perhaps) and give way to a predictably bleak future, or it will accelerate the growth of the luxury sector. One cannot solely rely on revenge buying as a steadfast indicator to foresee a boost in luxury sales. Each country has a different background, and is recovering differently. It remains to be seen if revenge spending will be a prominent phenomenon everywhere in the post-Covid world.