Coronovirus is putting pressure on luxury retail as companies suffering the consequences of the closure of physical retail stores. But former North America LYMH (LVMHUY) president Pauline Brown says the epidemic is only about issues the industry was already facing.
“It’s not luxury right now,” Brown told Yahoo Finance The Ticker. “Remember that pre-COVID, the luxury sector was at a high watermark, and I’d argue that it was more relative to its long-term potential.”
Last year, 57% of premium fashion executives voted for a joint report by The Business of Fashion and McKinsey & Company said they expected the 2020 economic situation to worsen. The pair offer a bleak picture for brick-and-mortar, with US retailers announcing more than 9,000 store closures in total last year.
While luxury brands are seeing a strong e-commerce presence, coronovirus is still taking a heavy toll. For example, Prada reported online sales growth of 150% in the first half of 2020, the same period last year, but overall sales fell 40%.
The decrease in total sales of brown notes is strongly influenced by the lack of global tourism.
“[It’s] Brown points out that the biggest issue does not adequately speak as a big part of luxury, especially in the US and Europe. He said, ‘Tourism industry is in decline [it]. The Tiffany flagship on 57th Street alone accounted for 10% of total global sales, and you know the store is closed. “
Tiffany (TIF) reported a 29% drop in worldwide sales for its second quarter ending July 31.
“There’s a large proportion of Tiffany buyers who aren’t super rich,” Brown says, “They are aspiring buyers. You have a large proportion of Tiffany buyers who are shopping for wedding rings. I don’t know when we’re Going to weddings, then the way we were a year ago. “
In early 2020, according to Bain & Company, digital sales accounted for only 12% of all luxury sales. The management consultancy firm predicts that the stock could reach 30% by 2025.
But Brown says that most consumers want to try out luxury goods in person instead of buying online, and the epidemic is stopping that experience.
“The majority of luxury shoppers are not going to make decisions based on a two-dimensional pixel image, especially when you’re talking about products that run for thousands of dollars,” she notes. “Some segments of luxury are going to be maximizing very fast, with fashion being the fastest to show its limits online. Jewelry is not far behind. “
Meghan FitzGerald is a producer for Yahoo Finance’s “YFi PM” and “The Ticker”.
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