If one looked back (and with luxury one can look really far back in time, as some brands have been around for more than 200 years) one would understand why the strongest luxury brands are sometimes the oldest ones. One could say that they have - among other things - developed some fascinating resilience over time.
Is it surprising? Not really. When a brand has survived two world wars, a number of recessions of different natures (political, economic, financial...). the emergence of new markets, globalization and digitalization, the rise and fall of retail, and so many other macro phenomenon, one could say that they have certainly learned a thing or two.
Indeed, with heritage comes experience and resilience.
So, in a way, I was not really surprised to read that, once again, as confirmed today by Bain & Company, Luxury was showing so much resilience and agility, just one year after the tremendous shock that the world went through with the Covid19 Pandemic.
The million-dollar question though is "was it predictable?". Well, it's always easy to say yes afterwards, isn't it?
And yet, at the same time - and I'm no scientist or statistician whatsoever, just a pragmatic person - there were some strong signs that could have given the industry the confidence boost it needed. Starting by looking back at previous crises. All different. All major. And yet, very often showing the same V-shape reaction.
A V-shape rebound describes a specific way an industry sometimes react when a crisis hits. In the case of the luxury industry, it starts with a plunge, usually before any other industry, almost overnight. There is a paralysis, wealthy consumers put everything on hold and focus on protecting their assets until the storm has passed. The below diagram shows the markets back in March 2020, dropping over night. It's the first phase of a V-shape reaction. Almost overnight, it hit a three-year bottom. And then, once again before any other industry, it will recover, showing its resilience. it's luxury's V-shape rebound.
The interesting question though was : had we seen that before? The answer is yes. We had, maybe a few times. At least one, as in the following example.
2014. Article from Business Insider titled "How The Global Wealthy Are Doing Better Than Everyone Else In One Chart. (post 2008 global financial and economic collapse). And here was the "one chart"...
Other signs could have been looked at : prices from major luxury brands before, during and after recent crises (think Hermes...) ; the effect of the many lockdowns on the wealth of the wealthiest individuals (when one wealthy individual can't shop, eat out, travel or indulge anymore.... well, disposable income sits somewhere, waiting to be spent out); the fact that this time there was no political origin (with HNWI hiding their wealth) or financial origin. To the opposite : once again, the pandemic increased inequalities in many different ways, with wealthiest people getting wealthier and poorest people getting poorer. Benefitting directly the luxury good industry.
Finally, if anything, the recent pandemic only accelerated changes that were much needed in the industry (think inclusiveness, sustainability, digitalization, retail transformation, to name just a few) and in a way, pushed the industry into a much stronger rebound.
If you want to read more on the topic, have a look at this article I wrote a while ago:
What do you think? Was it predictable?
Please feel free to share your answer in the comments.