Luxury tends to weather storms well. Or, at least, to do better than other industries. The global supply crisis, derived from a lack of raw materials, logistical problems and the rise in the price of energy, was not going to be less. While brands such as Adidas have recognized that the tension in the supply chain will have a negative impact on their sales of around 500 million euros, Ikea is beginning to have problems with certain accessories, and El Corte Inglés rations video consoles, the high-end does not gets restless.
The key, according to experts, lies in local production and slower consumption times. Some particularities that, in addition, will mark two completely different situations: one for authentic luxury and the other for so-called accessible luxury. The first is highly protected, says Susana Campuzano, director of IE’s luxury universe strategic management and direction program. There was a time when brands understood the value of what was made in Europe and those that had been brought to China by the factories returned to production in close proximity. This is why the expert is blunt: “It may affect the high-end range, not luxury.”
Frequently, These more aspirational or accessible brands begin to manufacture the product in China, although it is auctioned in Europe to be able to put the label made in France, Italy, Spain … Even if it is produced 100% in proximity, it is common that there is a certain dependence on Asia for certain ornaments or accessories, such as zippers and studs. “We must also take into account products that are not a fundamental part of the product, but that do influence it, such as packaging or supplies for the decoration of new stores”, details Néstor Hap, associate director expert in personal luxury of BCG.
Campuzano also warns of possible problems related to more accessory issues, such as packaging, but insists that authentic luxury is always very close to its suppliers. In this sense, the expert highlights the case of Chanel, which made a vertical integration of its suppliers, from button makers to manufacturers of tweed, to ensure control of production and ensure that smaller trades are maintained over time. Firms such as Hermès also have a network of suppliers that the brand itself protects.
The negotiating capacity of each company also comes into play here, explains ISEM Fashion Business School professor Luis Lara. A battle in which luxury has the upper hand against other industries, especially for your planning skills. Along these lines, Campuzano highlights the flexibility of independent brands to adapt to changing situations. A skill that they have developed to the extreme during these months of pandemic.
The fact that these firms are limited to a maximum of eight or nine collections per year, as well as that these are shorter, also helps to control possible shortage problems. “One difference between luxury and fashion is that in the latter everything is constantly renewed, but in luxury you have a series of references that are always the same. Most of the turnover comes, precisely, from these classic products ”, describes Campuzano. Nor should we forget that this crisis occurs after a period of hiatus in which it is likely that the brands had stored stock. “If this problem had come at a time of euphoria, it would have been worse,” acknowledges the IE professor.
In any case, if stockouts were to occur, this would not be a problem for luxury brands. Quite the opposite. “The hard to get [difícil de conseguir, en inglés] it has always played in favor of luxury, as one of its factors is exclusivity “, Lara points out. A vision shared by Campuzano: “Scarcity is part of the luxury game. It is not uncommon for a certain product to be bought and that reference is not present, only the one that is exposed ”. Waiting lists and on-demand production are two old acquaintances in the industry. “It is something very special, there is a very large production process behind it and it takes time to complete,” defends the expert.
Another advantage of the high-end in this sense is that a stock break would not be an advantage for the competition. “Unlike in the mass market, where you always find a substitute, in luxury it is not so easy. If you want a certain model of watch or bag, the normal thing is that you wait for it to be available again because you want a specific one ”, says Lara. Thus, if a Chanel 2.55 or a Birkin is desired, the client will not give up to choose another design that is available or damage the image of the brand, but will wait patiently.
A consequence of this phenomenon, however, is being the boom (even greater than before the pandemic) of the products of second hand, so resale platforms that guarantee authenticity are experiencing a golden moment. “People want to have it already, so in some designs we see prices even above the original value. They have the great advantage that it is not necessary to wait to enjoy it ”, justifies the ISEM professor.
Whereas before sending a container was around 2,500 euros, now it can reach 10,000 euros, but brands are not raising prices in their own sales channels. For Hap, this is because they have a higher profit margin than other industries, which means that they do not need to pass on this extra cost to consumers. “If they do, it will be to align with the market, but not to cover expenses,” says the head of BCG. In his opinion, to reduce the tension in the supply chain, the best strategy is to choose to stop doing promotions, since it is even a way to protect the brand.
But China is, in turn, the main consumer of many high-end brands, even reaching more than 50% in cases like Gucci. With dates as important as Singles Day (October 11) and Black Friday (November 26) ahead, the question is whether brands will be able to withstand the pull. Esic professor Beatriz Irún has no doubt that this will be the case: “The Chinese government has asked for more restraint, but for now it has not had any impact on the population. The brands are not going to notice it ”. She does believe, however, that price increases will be something more common, linked to the cost of energy, logistics routes and the scarcity of raw materials. Of course, once again, it is a question of class: “For the so-called affordable luxury is going to be more obvious, the real luxury will hardly notice it.” The zippers are not going to be missing.