Luxury: Seven Steps to Rise Again
GABRIELLA LOJACONO DESCRIBES THE STRATEGIC CHALLENGES COMPANIES ARE CALLED TO FACEThe luxury business is a typically “V-shaped” business, in which sharp downturns are followed by equally rapid recoveries. It is to be believed that this will be the case even after this pandemic, especially for those companies, which are not few, that have been responding to pandemic difficulties by containing losses and laying the foundations for a quick restart.
"Resilience is identified precisely in the ability to act quickly by identifying not only solutions to deal with the emergency, but a new medium-long term strategy as well,” summarizes Gabriella Lojacono, Professor in the Department of Management and Technology and Director of the Executive Master in Luxury Management (EMiLUX) of SDA Bocconi School of Management. “In the luxury industry, this is the attitude of companies which have been able to quickly move all inventory they had for sale on Asian markets, which were the first to reopen, or which have explored new digital strategies. In fact, it is in Asia that many have recouped the loss of turnover suffered in Western markets.”
The professor's many years of research will be distilled in a forthcoming book whose seven chapters mark the seven strategic challenges that luxury companies are called to overcome today. “The answers to these questions show the way forward for corporate resilience,” Lojacono summarizes. “One of the challenges that seems to us of particular relevance in a Covid-19 shock context is the one that forces companies to boost volumes to increase profitability. It is a difficult goal, but some luxury companies, such as Hermès, Ferrari or Gucci, have already overcome this dilemma by demonstrating that you can sail ahead with a larger size and new profit margins.”
Another question that the researcher poses to companies is how they strive to be timeless, that is, how they turn heritage into a strong asset rather than deadweight. Another is how to combine exclusivity with inclusiveness, by widening and differentiating the various gradations of customer experience, and how to balance the marketing need to have an outsize presence in communication with inherent scarcity in production and distribution. “The fifth step we invite companies to take is to integrate online and offline channels, also in terms of resources and investments, by developing digital channels not only for selling but also for developing contacts and conversations with customers”, continues the Bocconi professor. The latter two challenges concern the ability to be extraordinary in a context in which excellence is always expected (for example by transforming points of sale into entertainment venues, or entering related sectors such as hotellerie) and the ability to leverage country of origin distinctiveness while expanding globally and entering the culture of destination markets.
“Luxury companies have already shown that they have the ability to overcome this crisis by finding new business models”, concludes Lojacono. “I am thinking, for example, of the pre-order sales set up during the first lockdown to take advantage of still sustained demand at a time when it was production that was having difficulties.”
by Emanuele Elli
