European luxury brands are hoping for a financial pick-me-up as shoppers around the continent tighten their purse strings amid eventful times. The market for high-priced items has taken a noticeable dip, as evidenced by an overall slump in sales numbers for top-tier retailers. MarketWatch takes a closer look at how luxury brands are faring in the throes of a trying climate.
1. European Luxury Brand Sales Suffer Amid Economic Struggles
With the European economy as delicate as ever, luxury brands across the continent have had to face difficult times. The ever-growing unrest and macro instability in the regions have had a significant impact on luxury sales of all sorts, ranging from jewelry and apparel to luxury cars. From Italy to France and from Spain to Portugal, luxury goods have taken a hit.
The troubles start at taxes, where both local and international tourists see their purchasing power heavily curbed. Even with friendly tax policies, the political and economic scenario presents a very negative environment for luxury businesses. Consumers are reluctant to buy, and prices skyrocketing. It’s no wonder:
- The Eurozone crisis has led to uncertainties in all sectors.
- Unemployment continues to be an issue in several areas.
- Government austerity plans have forced a reduction in spending.
In spite of these challenges, European luxury brands are always trying to remain competitive, by introducing new products and technologies. In the past year, multiple exclusive initiatives have been launched to bring more tourists – and thus more sales – into the market.
2. European Shoppers Cautiously Reforming Shopping Habits
European shoppers have learnt to adapt to the changing times – slowly but surely, they have started to reform their shopping habits. Covid-19 has forced Europeans to look for innovative and less contact-intensive ways to shop so as to reduce their exposure to risk.
Today, more and more Europeans are prioritizing convenience over traditional shopping methods, with online shopping becoming increasingly popular. In an effort to limit physical contact, many shoppers are deciding to pick up their own groceries, opting for supermarket delivery or curbside pickup services for additional safety precautions. Additionally, contactless payments are becoming the norm due to health concerns – shoppers are now opting for digital wallets, contactless cards and mobile payment services to reduce face-to-face contact.
- Online Shopping
- Pickup/Delivery Services
- Contactless Payments
These shopping habits are not just practical, they are also beneficial to the environment – reducing the number of items that need to be transported from store to home drastically reduces the amount of carbon emissions associated with shopping trips. As the European economy continues to change, many shoppers are coming to terms with the fact that a permanent shift in their traditional shopping practices is necessary – one that benefits both themselves and the planet.
3. Luxury Industry Adapting to Consumer Preferences
As the luxury market floats in a sea of constant evolution, the preferences of modern consumers are dictating the direction of industry developments. Top-tier businesses are making the adjustment, understanding that incorporating consumer demands leads to increased revenue and growth.
The combination of digital advancements and increasing demands for personalization, convenience, and sustainability are some of the primary factors that luxury companies must contend with. To sidestep being left in the dust, they must become flexible enough to incorporate these modern necessities into their brand image.
- Personalization – Consumers no longer want to settle for pre-manufactured products, they seek out items specifically crafted for them.
- Convenience – The on-demand culture has pushed convenience to the forefront of user experience.
- Sustainability – Consumers are becoming increasingly aware of unethical production practices, championing ethically sourced raw materials.
Though making the necessary changes to become more customer driven can be challenging, it is imperative for businesses to ensure their services and products remain relevant in the current marketplace. The ones that have the foresight to recognize these modern changes can have an advantage over their competitors. Champagne anyone?
4. MarketWatch Assessment of the European Luxury Retailing Market
MarketWatch, one of the most respected and consulted sources for financial news, comments on the changes in the European luxury retailing space. This market includes some of the world’s most iconic industry players, with large global brands like Chanel, Louis Vuitton, and Gucci.
The European luxury retailing market has seen moderate yet positive growth over the past few years. A few performance indicators show that revenue from luxury retail sales has grown steadily since 2018. The impact of the pandemic on this sector has been varied, yet experts point to signs of improvement in the third-quarter of 2020 with increased online consumer spending and better inventory management.
- The report notes that the European luxury retail market is now in the latter stages of recovery, which is promising for the luxury goods industry.
- New and improved luxury channel partnerships have both helped stabilize and further develop the market.
- The future of the European luxury retail market remains bright, and with new strategies being implemented to capitalize on the resilience of the sector, it’s likely that the market will continue to grow in the upcoming years.
The current trend of European luxury sales slumping in 2018 is indicative of the wider changes in the global economy. Despite some innovative solutions from luxury brands, shoppers continue to tighten their purse strings and cut back on their spending. It remains to be seen how luxury brands will navigate the slumping economy and changing consumer tastes in 2019 and beyond.