Two years into the global pandemic has produced a startlingly hopeful outcome for certain businesses, according to luxury brand indicators worldwide. Once past the initial trauma of severe isolation, inventive minds behind prominent high-end companies have shown resilience and creativity in overcoming the obstacles of doing business face to face.
THE BIGGEST HIT
Of course, certain categories tanked immediately when a universal lockdown was called. The hospitality and travel industry came full stop. Restaurants, cruise lines, theme parks, cinemas, live events, and air travel struggled for their very existence. According to UN World Travel Organization (UNWTO), while international tourist arrivals in 2021 rose by 4% compared to 2020, they lag behind pre-pandemic levels at -72%. Real estate has also soared throughout the pandemic as people hunkered down at home—often establishing a new normal of working remotely. People also made decisive shifts in where they wanted to hunker down—moving south or to less densely populated regions that offered lower taxes.
SHIFT IN PARADIGM
As the months went on, a different scenario began to emerge, at least for some sectors. The need to pamper oneself and even reward oneself for “hanging in there” found its expression through buying luxury goods—even if one had nowhere to go to show off their treats.
Prognosticators would assert that certain items must be handled by a consumer in order to close the sale. When that possibility went out the window, shoppers quickly developed a new confidence in buying online. Safeguards like 30-day (or some length of time) money back if the buyer changed their mind or the product failed the customer’s expectations were there for the online shopper too.
It did not take that long for some high-end brands to report their customer’s new-found preference for shopping online. Simply put, the convenience of shopping 24 hours a day, often in one’s pajamas proved irresistible for shoppers and outweighed the need to see it before buying. Videos and Zoom presentations added a virtual in-store experience for consumers too.
WINNERS AND LOSERS
An overview of the state of luxury global brands in 2021 was reported in TBTL (The Bridge to Luxury) Luxury Industry Performance Index (LIPI). http://www.thebridgetoluxury.com/wp-content/uploads/2022/02/TBTL-LIPI-January-2022.pdf
Recapping the luxury business landscape of 2021 produced unimagined results. Turns out, unexpected industry changes occasionally occurred because of Covid-19, not in spite of it.
- The market cap of high-end stock-listed companies calculated by TBTL grew by 40% to US$ 2,585 billion in 2021 and by 142% compared to 2019.
- For the luxury industry of personal goods (fashion, jewellery, audio, etc.,) consulting firm Bain now sees a V-shaped economic recovery and estimates its volume for 2021 at EUR 283 billion (+1% vs 2019). Overall, Bain estimates the high-end industry at a volume of EUR 1.1 trillion.
- The real estate industry is among the winners of the pandemic. For example, the international broker Engel &Völkers reports transaction growth of +97% for 2021 in the segment of properties with a value between EUR 5 and EUR 10 million.
In the top segment (> EUR 10 million), transactions increased by +90%.
- The dependence of the luxury goods industry on consumption in China has continued to increase over the past two years and, according to estimates by TBTL, will be almost 30% for 2021. Europe's market share fell below 30% for the first time.
- While gold and silver prices fell as commodities (-3 and -11% respectively), diamonds rose (+14%).
CONTINUED DEMAND FOR LUXURY GOODS
Included in TBTL’s list of winners and losers in this unparalleled economy is LEIBISH, an early adopter of selling luxury jewels exclusively online.
Investments by luxury brands in e-commerce, which had already increased sharply in 2020, continued to gain momentum last year. Providers who had already diversified their distribution channels before the crisis benefited particularly. Some specialists, such as jeweler Leibish & Co. (USA/ISR), which has been operating exclusively online since 1998, have recorded sales growth of more than +100% p.a. in the last two years.
While operating as e-commerce is not a sure prescription for success—it has proven to be a wise strategy for LEIBISH since 1998, still operating as a family business. Staying true to his original vision and succeeding has earned Leibish Polnaur respect amongst his peers in Israel where LEIBISH is headquartered.
The Israel Diamond Industry Dignity Award 2021, held on December 15, 2021 in Ramat Gan, Israel acknowledges diamond leaders making significant contributions to the diamond trade. Among the recipients at this year’s prestigious event was Leibish Polnaur. His award was a tribute “In Recognition to His Outstanding Contribution to the Israel Diamond Industry.”
TBTL forecasts, “Strategically, market players will have to adapt to new competitive conditions. Companies ought to avoid stuck-in-the-middle positions by consistently focusing their business models either as prestige brands . . . or as true luxury providers in high-end niches,” a tactic which LEIBISH has refined.