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Translated by
Nicola Mira
Mar 27, 2020
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Yves Hanania of Lighthouse: We will witness a paradigm change in the luxury industry

Translated by
Nicola Mira
Mar 27, 2020

Yves Hanania, the founder of consulting firm Lighthouse, specialised in brand development strategy, and co-author of the book ‘Le luxe demain. Les nouvelles règles du jeu’ (the luxury industry of the future. The new rules), published by Dunod and written with Isabelle Musnik and Philippe Gaillochet, has analysed the shock waves reverberating through the luxury industry as a result of the Covid-19 pandemic’s impact on trade, and explained to FashionNetwork.com how this crisis will trigger profound transformations in the industry.

Yves Hanania - ©Artman-Agency

FashionNetwork.com: What will be the impact of the coronavirus emergency on the luxury goods market?
Yves Hanania: The luxury sector, like many others, will probably change permanently. Yet, for the time being, it’s hard to imagine the scope and nature of this transformation. We can’t quite compare it with the 2008 financial crisis, since the situation we are facing today is totally different. But, like in 2008, we are dealing with a major crisis. Twelve years ago, observers thought that it would change the way we consume, spelling the end of unbridled consumerism, but it wasn’t the case, because there will always be people willing to consume.
FNW: What are the possible scenarios?
YH: Consumers will either want to have fun as they did in the 1920s, or common sense and a return to authenticity will prevail. For example, never before have we had so much time to spend with our families or to ponder, as we have in these times of isolation. This experience will undoubtedly reorder our priorities. People will surely be encouraged to consume differently.

FNW: What will be the nature of this change?
YH: The market won’t change drastically. Even if this is an unprecedented global emergency, everything won’t be upended. The luxury industry may suffer a shock, but it won't collapse. However, the emergency will clearly accelerate the pace of some changes, there will be a growing awareness that we are rather superficial in the way we consume. This change is first of all likely to affect consumers. We are the first culprits, after all. We can’t ask brands to produce less, while continuing to consume as we have done until now. As a result, brands will adapt their output to the new levels of demand. It’s a truly unmissable opportunity for them.
FNW: What do you mean?
YH: The luxury industry will need to identify a more long-term strategy to exit the crisis, taking some key trends into account. We certainly didn’t need this crisis to understand that the machine was seizing up, weighed down by its increasingly frenetic pace. The industry had actually started to question itself, pledging to become more responsible. But brands will accelerate their transformation, something which will only be possible if consumer behaviour too will change. Brands will have to reinvent their business model, and the financial world its approach. It’ll need to evolve towards a new way of looking at things, no longer based on profitability alone.
FNW: Your book anticipates this transformation.
YH: The book introduces a series of arguments that are entirely relevant in the midst of the coronavirus emergency. In the wake of the Copenhagen summit, the leading luxury groups took the need to adopt a sustainable development approach to heart like never before. People were excited about it, and this may well turn into reality now. It's a crucial turning point, and brands mustn’t miss this opportunity of showing they are increasingly committed and responsible. But everything remains to be defined.
FNW: For example, the coronavirus emergency is highlighting how reliant brands are on countries like China.
YH: Production-wise, the luxury industry usually has an advantage, because most of its output comes from Europe. But sourcing is an issue for the more affordable brands, that buy more from Asia. Though the crisis has also hit Italy, where many luxury goods factories are located. A degree of rebalancing will surely occur, and there will be efforts to delocalise production. Labels will be assessing this not just in terms of reliance on a region, but of environmental impact too. Sourcing from far away means lengthy, polluting shipment routes, which are less and less acceptable.
FNW: Which other types of rebalancing will occur?
YH: Some brands have experienced first-hand how reliant they are on the Chinese market revenue-wise. New markets like India and Africa could gain the upper hand faster than forecast owing to the crisis. At any rate, companies will be driven to diversify their destination markets even further. We can also forecast that e-commerce will become even more influential, especially for those brands who were still reluctant to embrace it. This could be one aspect of how brands will respond to the emergency. It’s also the perfect opportunity for putting older products on the market, boosting the resale sector, which is bound to expand.
FNW: Who will be the winners and losers?
YH: This crisis will carry in its wake many collapsed businesses, especially from sections of the market where supply is more abundant. Perhaps those where there are more operators, some of them under-equipped and under-funded. The brands that will eventually emerge are the better-positioned ones in terms of values and commitment, those that already have the tools to harness this transformation. Within the luxury industry, we have the GAFAM set (web giants Google, Amazon, Facebook, Apple and Microsoft), and those we call KHOLC (KeringHermès, L’Oréal, LVMH and Chanel), all of them primed to recover and start a genuine, robust transformation. Rather than focusing on damage limitation, these luxury names will accelerate their evolution.
FNW: How?
YH: The current crisis will undoubtedly push companies to change the way the communicate, to become more ethical, to take a stance regarding their sourcing. Will the products become different? For sure. The industry ought to adopt a more ethical, less frenetic pace of product development. We can imagine brands will be under less pressure to produce more, or create scores of limited-edition collections. All these issues have been raised in the past. This is why I think we will witness a genuine change in paradigm, a change in culture and approach to consumption to which the luxury industry will adapt.
FNW: But how will leading labels accept the notion of producing less?
YH: The economic and financial challenges involved are extremely significant, because the world of luxury will have to accept to proceed at a slower speed. But it's not just a question of producing less. Of course, a balance will have to be struck. The industry employs thousands of people, there’s no call for approaching the issue radically.
FNW: Which solutions will allow this transformation to occur?
YH: New, different models can be adopted. A brand’s ecosystem isn’t limited to products alone. Labels will have to evolve by diversifying their range, for example embracing new types of activity like the restaurant business, or by driving demand by means of new consumer experiences. This kind of shock, by no means beneficial, can actually lead to a new paradigm, a new mode of consumption. And within this context, the luxury industry will surely be able to enhance its relevance and raison d’être.

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