21/06/2022  |  Base
The impact of lockdown on the Luxury Market segment
The impact of lockdown on the Luxury Market segment

Since the beginning of April, a new wave of Covid-19 has been spreading among the city of Shanghai, causing the interruption of business activities and leading to one of the most severe containment measures imposed within the country since the epidemic outbreak. The restrictions implemented demanded supermarkets, physical stores, logistics, etc. to rapidly cease their daily operations, causing the upheaval of supplychains and the decline of brands’ revenue in the first quarter of 2022.

Since the 12% of China’s offline luxury retail is based in Shanghai, which consequences had the lockdown on the luxury industry? And how did luxury brands overcome the difficulties?

When it comes to luxury items, most consumers are more willing to purchase a certain product in store, instead of purchasing it online. This tendency strongly depends on the feeling of authenticity guaranteed by physical stores, but also to the high-level of customer experience offered. Therefore, since the lockdown demanded retail stores to shut down, many luxury brands attempted to find alternative solutions in order to maintain a strong relationship with their customers while being distant.

The common sentiment of discouragement, shared by Shanghai residents, was the starting point of brands communication strategy, which aimed to show customers their support through the creation of emotional connections.

Some of the innovative solutions adopted by luxury brands include:

01. Delivering fresh vegetables and desserts to affectionate clients:

With supermarkets and food deliveries’ activities being interrupted, and many citizens struggling to get food, brands like Gucci, Louis Vuitton and Porsche have been starting to deliver packages of fresh vegetables and other meals wrapped in fancy packages with brand colours and logo to many of their VICs (very important customers).

02. Organizing online classes:

While La Mer has taught their customers DIY facial massages through online sessions, Dior has offered its customers a 7-day pass for virtual classes at a premium yoga studio.

03. Launching virtual cultural clubs:

On April 23rd, Prada launched an online culture club on the social platforms WeChat and Xiaohongshu, inviting film directors, writers and singers to take part in it, recommending their favorite pieces while connecting with followers, as reported by Jing Daily.

While luxury brands worked to create special bounds with their customers in these difficult times, fashion lovers have been showing their social status by hanging outside their apartment doors shopping bags from luxury houses like Prada, Dior, and Chanel, and using them as a kit for antigen tests to be collected by health workers as part of efforts to minimize contact.

This phenomenon not only symbolizes the need of consumers to express themselves, but it also demonstrates the continuous interest towards the luxury sector which may have been suffering in terms of revenue, but still holds an important role among Chinese consumers.

This factor is an important element to consider when forecasting the market recovery and, consequently, luxury brands performance in the future months. Although the always-evolving nature of the epidemic and the measures undertaken makes it difficult to forecast specific tendencies in the near future, these proactive actions undertaken both from consumers and from brands, provide positive sentiment for the luxury market recovery.