Wealthy shoppers buy less, but better

One takeaway from the third-quarter earnings we've seen so far is that consumers are still spending and they're reaching for big, well-known brands for everything from food to face cream.

This has played out most dramatically in high-end retail, where in some cases wealthy shoppers are buying more expensive goods than they were a year ago.

There are a few reasons why this may be. As I have noted, some of the spending is coming from savings accumulated during lock-down, and affluent consumers want to get the most bang for their buck. If they're reaching outside their regular price range or making their first luxury purchase, that often means shelling out for a household name: Louis Vuitton, Christian Dior or Hermes all of which have seen strong sales recoveries.

Meanwhile, consumers want tried and tested styles, whether that's a Hermes Birkin bag or a Moncler puffer jacket. With fewer occasions to dress up, as well as an increasing awareness of fashion's environmental costs, shoppers may decide to buy less, but buy better.

All of this favors luxury houses steeped in heritage, such as Hermes, the first high-end group to return to sales growth in the third quarter. The handbag maker was also helped by the fact that it's less dependent on tourist spending, which accounts for about 20% of sales globally, than its competitors, which see 30% to 35% of sales come from tourists.

A strong recovery in demand for luxury is expected in 2021.

Of course, there is a possibility that consumer tastes pivot back toward experimentation when the world returns to some semblance of normality. But that future seems far away and far from certain. Even if shoppers do want less familiar, more edgy designs, companies will need to reach them online and through social media channels. Having the best retail locations and hottest designers will also remain crucial. That means continued investment for all groups, big and small.If life continues to get tougher for more niche brands.

Question:

What actions luxury brand retailer should take in terms of marketing mix to cater the customers, discuss?