Outlook for Luxury Goods Q2 2021: A frank chat with industry expert Carlo Pignataro
2021 . 09 . 17 |
Summer vacation has become a hazy memory. As soon as we hit mid-September it’s a quick slide into fourth quarter and the holiday season. I thought it would be the perfect time to catch up with Carlo Pignataro, author, entrepreneur, training specialist and luxury goods expert, who I had interviewed earlier in the year. We had a very frank discussion about the outlook for the second half of the year and the current state of the luxury market. What should we be aware of as we move into the end of 2021?
Karen Marin: How do you feel about Second Half 2021?
Carlo Pignataro: I’m positive due to several signs. There is a lot of money in the market and a lot of money being injected into companies. It’s a good sign – perhaps not for investors since they’re overpaying for the shares now - but for the market, meaning companies have the means and possibilities that allow them to invest in creation, communication, retail and other initiatives. And look at the concentration of capital: now you have LVMH, N°1 in the world in terms of cash availability, you have Richemont, you have Hermès, you have Swatch Group. I’m much more positive than I was only a few months ago.
What also makes me positive in a way is I see that, although the Delta Variant is spreading, the level of hospitalizations is decreasing worldwide. Of course, politicians and healthcare systems are very cautious, and we still need to focus on stopping the spread. But this is also a good sign.
KM: The press has described Fragrance as the 'unexpected star' of the pandemic. Did the fragrance industry's overall success within the last 12 months surprise you? Do you think it will continue to be a resilient category?
CP: I am extremely positive about the fragrance industry, especially in combination with beauty products. I believe these sectors will keep benefitting from the online wave, given their intrinsic characteristics of easy transportation and their relatively low cost.
Of course storytelling plays a large part. Beauty products can 100% leverage online communication tools, while fragrance is more subtle but I do think the closeness of the two categories, will help the latter.
KM: I think people will continue to shop online for beauty and fragrance out of convenience and certainly for replenishment. For discovery, I think they will still want to go in stores, especially since they can't smell online. The pandemic had an unexpected positive effect on fragrance due in part to anosmia - anyone who lost their sense of smell or taste now has a new appreciation for these senses. Fine fragrances are also getting more involved in well-being, in creating fragrances that have positive "feel-good" benefits. And for 4th Q, I think home fragrances will still be a great gift item as many people are still working at home, they’re renovating or remodeling, and they still want to make their homes into a calm and comfortable sanctuary.
CP: I love this idea of sanctuary Karen!
KM: What do you notice regarding the interaction between brands and consumers?
CP: Consumers want to speak their mind, and we see a flourishing of creativity from independent influencers and designers. This in the end will go back to where it was because, as social media are directing their algorithms towards making money, less visibility will be given to independents. You will still have some and they will have great ideas to make a fortune overnight, but these will become less frequent. The massive change I see is that the consumer wants to be more at the center – more than before. So if this cash reserve is used wisely it can open doors for brands to communicate with their community as long as they remember to be less top down and put consumers at the center. What I see now is that we are going through a very severe process of globalization. It’s clear what people want, it’s less clear what they don’t want. Gucci was very smart and not shy at giving people what they want. A t-shirt with Mickey Mouse for 400€ - why not? So give people what they want.
KM: People are quite vocal now. Brands need to be tuned in to what their consumers are asking for otherwise they’ll be left behind and someone else will take their place. And brands are listening, because if you look at a big brand like Guerlain, who has been kind of a sleepy brand worn by grandma – now they are supporting the bee culture, which positions them as sustainability minded and being eco-friendly which corresponds to what consumers are asking for now. You see in the cosmetics world that brands that aren’t inclusive, or where diversity is not something they are listening to – well they’re not thriving the way that they should be.
CP: Yes, certainly, those are clear trends: inclusivity, equality. The question is are these long-term trends and is this really happening or is it a façade and business is still going on as usual? This is another story as I see it. But if I were a company today I would hire more women, more ethnicities just from a pure marketing point of view. But we still have a white CEO making a thousand times more than everyone else, deciding everything….well, this isn’t going to change anytime soon. But we should take steps: more women in power – I cross my fingers. I do believe that will make a difference and probably a better world. We don’t have much proof yet, because we haven’t seen it yet on a large scale, and some of the few women who really do have positions of power act like men because that’s the way they got there, but I’m fully in favor of it.
KM: Do you think consumer demands have changed since last year?
CP: Let’s look back. In the beginning I had a lot of conversations with my inner circle. We thought people may change as human beings, may become more reflective, perhaps less superficial, less materialistic – but no way! There is a strong desire for enjoyment, entertainment, material pleasure. And the demand, to me, seems to be growing, unstoppable even. I don’t see significant changes in consumer attitudes. People want nice things; they want to show off and they want to enjoy life. This hasn’t changed at all.
KM: I wrote earlier this year that we still have the same human desires that we have had for centuries whether it’s to connect with people, to be social, to go out, to acquire beautiful things and it’s not going to change. It didn’t change with the plague; it didn’t change with Spanish Flu and it’s not going to change with Covid. As soon as they opened the doors on lockdown, we’re back out there so that’s just innate human behavior that you’re not going to change.
CP: When you think about it, we all changed lifestyle overnight, so now we are ready do what they tell us we should do – pretty much. If anything, people are becoming more controlled, more easy to manipulate, certainly not less. And one of the keys to manipulation is cash because you can buy consensus and support.
The only thing that may change, which is not necessarily bad for business, is the sense of ownership. People may consider renting or buying secondhand or finding other financial solutions to enjoy luxury goods or services. Imagine the opportunities for a category like jewelry which is gaining serious momentum now. Give consumers the possibility to own a million dollar necklace for a period of time without having to afford it entirely!
KM: What observations can you share about younger generations?
CP: Youngsters are becoming more interested in fashion and luxury but they may do it differently. They may be driven by what you might call “values”: being greener, gender balanced. They are very concerned and very active in imagining a different world but they are also fragile. So yes, they want a better world, yes, they want a greener world, they want a more equal world, but I don’t know how hard they are willing to fight for it. Companies are having a hard time hiring talent because young applicants say, ok, you want me, then you have to give me something back in addition to salary. It could be flexibility, equality, inclusivity, being green, etc. Right now the threat is, I’m not going to work for you because I have an alternative, but it has nothing to do with, I’m going to join you, fight for these causes, lose what I have and try my best to change things. For me, this is at odds with the young people who speak about causes then spend their free time dancing on Tick Toc and Instagram Reels. Because what you do in your free time defines who you are in terms of how capable you are to fight for your cause, how resistant you are to the challenges. For example, I remember forty years ago in Italy we had the strongest communist party in Western Europe, which was very popular amongst the young generation. The Communists had you believe that in your free time you would read Marx, you would spend hours on end discussing social topics, you would participate in riots. So changing the world required a physical and mental commitment and giving up something. You see what I mean? It’s hard to find the character and the strength today.
KM: But isn’t this why there can only be so many leaders: because the person with the cause will lead and will inspire others?
CP: But it’s hard to be the leader of an army of people who aren’t willing to die. But that said, in our perspective that is marketing and communication and product development in an industry that is globalized that targets middle to high class individuals, overall we have good news. We have an enlarging market of people who are easily influenced as long as we tell them what they want to hear.
KM: I’m glad to see that the outlook is very positive, that you see a good end of the year and that going into 2022 there will probably be even more recovery.
CP: Hopefully. The only threat we see at the moment is inflation. And supply chain which is still an issue and very complicated. These may also create disappointment in terms of performance at the end of the year if companies may not be able to deliver. That tends to effect other industries more than luxury but there is always a correlation.
For more information visit:
Carlo’s podcast LUX & TECH on Itunes:
Carlo’s Podcast LUX & TECH on Spotify : https://open.spotify.com/show/25eVndAiQ3DNqqtiuMMwmR?si=1_ioOrPCTxGArbOvW00q4A