Will luxury retail survive Covid?

Once a flurry of well-heeled tourists and attentive sales assistants, Chanel’s New Bond Street flagship shop sits empty during lockdown. Inside the 12,600-square-foot store, diamanté-encrusted deer sculptures and crystal chandeliers throw shadows across deserted sales floors.

The luxury brand snapped up 158-159 New Bond Street for around £310 million in October, reportedly fighting off competition from rivals including the Abu Dhabi royal family. The purchase was proof of the brand’s dedication to the idea of physical retail and a show of confidence in London’s premier luxury destination. But faced with a mass exodus of residents and dwindling prospects for summer tourism, can London’s luxury stores survive 2021?

Unlike Gucci and Louis Vuitton, Chanel has not compensated for the absence of in-store sales by pivoting to online retail during the pandemic. The brand sells its perfumes and beauty products on Chanel.com, but does not plan to make its clothing, handbags or watches available through e-commerce. “We remain convinced that in-person relationships between fashion adviser and client will remain central to the luxury experience,” said Philippe Blondiaux, Chanel’s chief financial officer.

Next door at 160-162 New Bond Street, Dior sales assistants are trying their best to maintain the store’s sales by blending its lavish customer service with an e-commerce approach. Dior’s e-boutique service offers free standard delivery, returns and “iconic Dior gift packaging accompanied by a personalised message”. There are also virtual shopping slots available – allowing customers to make in-store purchases from the comfort of their sofa while a Dior ambassador livestreams a tour of the boutique.

Fourth quarter results from LVMH, the luxury goods company behind Dior, show that this “omnichannel” approach kept sales of its collection of fashion brands buoyant during the final round of 2020 lockdowns. Sales at its fashion and leather goods division, where Louis Vuitton and Dior account for most of the revenue, soared 18 per cent in 2020. Its smaller brands were less successful; overall, company revenue for the year fell 17 per cent to €44.7 billion and net profit was down 34 per cent at €4.7 billion.

More interestingly perhaps, LVMH’s results show that demand for bricks-and-mortar luxury retail was not dampened by the pandemic. Louis Vuitton – the world’s top-selling luxury brand – Dior and Hermès all posted strong sales growth when boutiques were allowed to reopen after lockdowns in March and April. In Oxfordshire, Bicester Village, a luxury goods shopping centre, became so crowded when shops reopened during the summer that over 3,000 people signed a petition to close it.

LVMH did not reveal the share of its online sales last year, suggesting this rate would be unsustainable if the pandemic was bought under control and shoppers returned to physical stores. But LVMH’s chief financial officer Jean Jacques Guiony revealed that the share of online shopping in 2019 was 9 per cent and that he believed tourism would not disappear forever.

“We see no particular reason why we should be shutting down stores, particularly in Europe,” said Guiony in a conference call with analysts. “We think we can recover the lost business with tourists coming back and developing the local client base.”

But what would once have been New Bond Street’s “local client base” is starting to shift. A YouGov poll found that fewer than four in ten Britons want to leave their house to go to work after Covid-19, and figures from the Economic Statistics Centre of Excellence show that the capital has experienced an unprecedented exodus of people, with nearly 700,000 – just under 10 per cent of London’s population – fleeing the city in 2020. All of this means brands will have to work harder to attract customers to their city centre stores.

According to Patrizia Arienti and Giovanni Faccioli, leaders of Deloitte’s fashion and luxury team, luxury brands are reviewing and adapting their strategies to cater to these shifting customer demographics. “In general, there is a ‘going local’ approach in terms of assortment selection and targeting,” they said. “There is a focus on developing customer loyalty, with enhanced customer care and tailored concierge services, useful to enrich the store experience and strengthen the relationship with customers.”

In an attempt to take the ‘luxury experience’ to their local customers during quarantine, some London-based fashion brands including Roksanda, Salvatore Ferragamo and Me + Em are using Harper Concierge to deliver their clothes. Shoppers can pick a delivery time via SMS, and a Harper crew member will hand-deliver their purchases, wait outside their homes for them to try the outfits on and return anything they don’t want to keep.

As well as improving customer care, brands are increasingly turning to the so-called “retailtainment” trend, hoping to attract shoppers with unique in-store experiences when restrictions begin to lift. The New West End Company, a retail consortium, writes: “As ‘chore’ shopping moves online, consumers are looking for added value from the physical retail space. This could mean hosting events or art installations, or creating a hang-out space with comfy furnishings, free phone chargers and food trucks.” For inspiration, brands can look to companies like Snarkitecture, the boundary-bending architecture firm that creates headline-worthy retail installations. Most notably, the firm created a four-part suspended marble run totalling 1,300 feet in length for the opening of clothing company COS’s Seoul store in 2017.

Arienti and Faccioli also predict a rise in luxury brands using their retail stores to drive consumer engagement post-pandemic: “The store will develop its identity, becoming a place where the consumer could experience the essence and the philosophy of the brand in its totality.” A case in point is Timberland’s “purpose-led” flagship on Carnaby Street; the store, which was launched in 2019, was designed to bring the brand’s sustainable mission to life with living trees and a  living ‘green wall’.

As Britain’s most iconic high-street brands topple and are snapped up by fast-fashion retailers – most notably Debenhams, and then Topshop – the giants of Bond Street are holding their ground. “Up to now, unlike some fashion retailers that had to file for bankruptcy, luxury brands are retaining their stores,” said Arienti and Faccioli. “Flagship stores will continue to play a key role in luxury brands strategies, but they will not be just a place to shop.”

Asked about the future of e-commerce-resistant brands like Chanel, the Deloitte leaders said that “reliance on the store will continue to be crucial, but it could also work as a choice to preserve brands’ exclusivity”. The willingness of customers to put up with a four to 15 per cent price hike on some of Chanel’s items last year proves their point. Against all odds, Chanel’s resistance to e-commerce might just be the thing that ensures the bright and sparkly future of its New Bond Street store in the post-pandemic world.