Focusing on customers and the finer details makes the sector well placed to thrive in a challenging market
British luxury brands are certainly facing a significant challenge in the coming months. The latest 14-day quarantine rules for many countries may deter tourists and foreign shoppers from visiting the UK and the overall picture shows budgets are strained after months of lockdown. The current situation does present some opportunities, however, and the sector is demonstrating that creativity and agility may be the key to not only surviving but also thriving in the coming months.
What is the likely effect of the quarantine rules?
With an overall dampening of consumer sentiment, an influx of tourists and shoppers from overseas would have been a welcome boost for the luxury sector but the quarantine rules put this in doubt. Data from Global Blue regarding tax free shopping demonstrate that some of the world’s wealthiest shoppers hail from regions where the UK, at the time of writing, is imposing a 14-day quarantine, including China, Southeast Asia, Gulf countries, Russia and the USA. Based on Global Blue’s recent research, shoppers are more likely to travel to Germany or APAC countries, based on a perception of greater safety and ease of travel. The UK remains in the top three retail destinations, behind France and ahead of Italy, but the advent of the pandemic may upend all the hard work of establishing the UK as a prime destination. Bain & Co estimate that luxury sales across the world will fall by 35% in 2020 and smaller brands, less likely to have a global platform and therefore more reliant on trade from visitors overseas, may be amongst the hardest hit.
Brand loyalty to the fore
Shops may have reopened mid-June but retail sales are struggling to find a foothold. Part of this is due to the pressure that individual households are facing and consumers are cautious while the figures regarding unemployment remain gloomy. In addition, there is amongst many a reluctance to return to their normal routines and particular caution regarding safety in shops. This provides an opportunity for luxury retailers to do what they do best – focus on the details and customer service. Alongside the required safety measures to protect against the virus, any aspect of the service that can reassure customers during these challenging days may help to boost brand loyalty. A trusted brand is a particularly powerful asset in these uncertain times; reaching out to customers and helping them feel safe on the high street will not only help to boost sales in the short term, it will provide long term benefits. Customers have been through some difficult times and it’s unlikely they will forget the brands that act ethically and with sensitivity in the coming weeks.
Building the online experience
Online sales have helped to keep many brands afloat during lockdown and as with all aspects of the sector, paying attention to the details can pay dividends. Many brands have been creating a virtual shopping experience that aligns with their brand. By reimagining customer journeys online and ensuring every aspect of the experience from the initial search right through to delivery, brands that may in the past have focused on the personal, one-to-one experience of retail customers can extend their brand online. Social tools are helping companies reach out and social media usage has seen a 40% increase during the pandemic. Pinterest noted a 351% increase in support of small businesses, suggesting that customers are keen to support quality, independent brands so a well-executed strategy on Pinterest may help to reach those motivated customers. In addition, Pinterest has turned itself into a virtual shopping platform by creating its Verified Merchant Program. The new YouTube video builder tool allows for the creation of video ads, which can be invaluable in reaching out across multiple social platforms and Instagram has created virtual vouchers or “stickers” which make it easy for customers to order deliveries, buy vouchers and support the brands they love.
What lies ahead for the luxury sector?
The challenges of the pandemic don’t mean that brands will migrate online entirely and mark the end of the high street. The most likely way to success is a hybrid model which raises the standard of the retail experience on the high street and takes the best of each unique offering and delivers this online. As well as a creative approach to in-person and virtual customer service, businesses will need to remain agile to respond to market demand. Empowering teams to make swift decisions and providing support and training for the very best customer service will make a big difference. Putting people at the heart of all decisions – staff and customers – will demonstrate highly-valued brand values that will support long term sales and growth.
Considering the impact of currency fluctuations
From import and export costs to determining overseas pricing, the volatility of the currency market is another challenge that many brands face, particularly those reaching out to global markets to mitigate the impact of a decrease in UK sales. While it’s not possible to predict or control the movements in the currency market, there are tools to track, target and even fix a prevailing exchange rate which may mitigate the risk of currency fluctuations. It’s important to assess all areas of your business that are vulnerable to fluctuations in the exchange rate – from overseas costs and revenues to international offices, staff and more. The currencies you’re operating in will also indicate your measure of risk. For example, in recent weeks the pound has been weaker and struggling under the pandemic, picking up recently with increasing optimism of a vaccine being on its way. Increasing Brexit negotiations may continue to add pressure in the coming months as well. Other currencies, such as the US dollar have proven to have more resilience as a safe-haven currency, being the most common denomination worldwide, although it’s not entirely unassailable.
Expert currency support for your business
There are certainly challenges on multiple fronts for the luxury sector, from nervous customers to reduced tourism and radical changes to their business model. If you want to find out more about how your business might be vulnerable to the risk of currency fluctuations, all Walpole members are entitled to a complimentary 1-on-1 currency session with FX experts moneycorp. These sessions will provide you with the latest currency market news and future potential movements to help you manage your cash flow, and to work through where you could be potentially exposed.