What: First-half reports show a decline in gross margins for apparel brands in China.

Why it is important: The apparel sector is struggling in China, but international brands, DTC channels, and flexible product lines can help improve agility in this difficult first half of the year.

Throughout China’s apparel sector, companies with a high proportion of physical retail have been affected by factors such as lack of customer flow and weakened desire to shop in stores after repeated lockdowns. In addition, enterprises with more direct-to-consumer channels have better cost control in a market that is seeing ongoing declines, which helps to stabilize gross profit margins. At the same time, a flexible product line for large apparel groups is one way for them to grow even during adversity.

Firms have been squeezed between declining sales and rising costs of operation, supply chain and raw materials. A sharp drop in profits in the first half appears to be the inevitable result for apparel groups focused on physical stores, either in direct-to-consumer or in traditional retail business models. Looking at many apparel brands present in China; their net profit year-over-year shows a tremendous decline with some companies reporting 60-80% drops for the first half of 2022.

Despite these reports, some categories remain resilient, particularly the activewear segment.

International brands in China appear to be doing better than local apparel brands and retailers, leading to new market dynamics and a hopeful outlook for the second half of the year.

Apparel in China continues to struggle

What: An increasingly popular Web3 tool, “token-gating” limits access to certain spaces to blockchain token-holders, allowing brands to offer perks to select customers.

Why it is important: This can be a way for brands to move beyond the need for a log-in using email addresses or social media accounts; and for brands to provide special perks or features to select communities. Token-gating provides a more exclusive experience for clients and allows companies to manipulate who gets access to high-profile releases.

Some companies are looking to improve their customers’ experience by utilising token-gating, an emerging Web3 technology. Token-gating is most commonly done on desktop websites by connecting a crypto wallet to a site to verify ownership of the necessary token (NFT). To prevent people from using bots to resale products, each token-holder is limited in the number of items they can buy from each drop.

Brands can also target specific holders of different NFT collections to tailor the experience based on what’s in their digital wallet. Brands are largely leaning on these perks as a loyalty and retention strategy.

While some are concerned by the threatening anonymity meta-wallets pose towards big data, many brands like Gucci continue to gather emails and mailing addresses for token-holders who will receive physical products as part of their perks.

Brand exclusivity tied to “token-granted” websites

What: Retail success can be obtained through risk management from the weaknesses previously overlooked in modern global supply chains that were illuminated by the pandemic.

Why it is important: Business of Fashion compares the drop in cotton exports during the Civil War to the overlooked supply chain issues of today as a way of demonstrating how companies can avoid loss.

As it has been in the past, distributors continue to allow their economies and labour forces to be dependent on a single industry, commodity and/or source of supply. In today’s case, many retailers and brands rely heavily on the low costs provided by producing, sourcing, and manufacturing in China. 80% of Walmart’s non-food inventory is made in China. And 75% of Amazon’s new marketplace sellers, in its top four markets, are also based in China.

While low cost has been previously perceived as the optimal method for competitiveness, supply chain expert John Thorbeck warns of the extraordinary risks. It becomes increasingly more important to consider addressing risks as supply chain issues will become more frequent and profound as we become increasingly interconnected as a global community.

Thorbeck highlights the back-end costs that come with chasing the lowest fees. For example, massive orders and long lead times make responding to fluctuations in demand almost impossible. Consumer preference is shifting at an even faster rate with viral trends on social media platforms making products outdated before they even reach the rack. As a result, companies must face deep markdowns, slow turnover, write-offs and overflowing inventory in warehouses, much of which will end up in landfills. Changes in climate are disrupting seasonal weather which throws demand into chaos. And as the pandemic demonstrated, one issue at a single factory on the other side of the world can spur weeks of supply shortages.

Thorbeck attacks the very nature of supply chain structure criticizing the negotiations between companies as risking a cascade effect due to the loose connections between the parties involved, their planning and their motivations. Instead of simply shifting risk, Thorbeck recommends that brands should aggressively work to transform their supply chains into digital ecosystems where members share risk and work collectively to reduce it for everyone.

Part of this new supply chain ecosystem will require transparency between partners to avoid the risks generated from a lack of visibility regarding the suppliers’ suppliers. This can also help to address CSR which is becoming an ever more important expectation for consumers.

AI is also becoming increasingly important in the strategy of planning for supply chain issues. With AI,  companies can analyse weather patterns, industry sales projections, consumer trends, geopolitical strain and macro-economic indicators.

Finally, rebuilding one’s supply chain can lead to better company performance through collaboration, CSR, risk management, and trend projection that all help deliver the best offer to customers.

Retail’s new era of risk

What: Alicia Williams PhD enters Saks as VP of diversity, equity and inclusion (DEI) with 15 years of experience in talent and diversity.

Why it is important: Appointing Alicia Williams PhD demonstrates Saks’ commitment to its roadmap of achieving certain DEI goals outlined last year. These goals include growing BIPOC leadership, investing in black designers, diverse marketing and donating money to support underserved communities.

Having previously worked for US banks at Morgan Stanley in similar roles, Williams brings her 15 years of experience in launching and implementing DEI initiatives to the luxury e-commerce platform.

Saks names Alicia Williams VP of Equity & Inclusion

What: Luxury brands and startups are betting on the growth of pickleball, padel, rugby, boxing and skiing to inspire a new appetite for sportswear.

Why it is important: The activewear industry has seen tremendous growth over the past two decades. Brands like Lululemon or Gymshark have gained huge success through catering to emerging sports trends like yoga or strength training which allowed them to grow with the momentum of the once niche sport and helped them to compete with larger brands like Nike or Adidas who cater to multiple sports.

Today brands are looking at niche sports yet to be associated with established apparel companies. The sports that have been identified as having promising growth include pickleball and other racket-based sports, skiing, rugby, and boxing. Supporters of these emerging trends highlight the importance of community motivating consumers to buy sport-specific gear. Instead of reusing yoga or tennis gear, consumers are enticed by an in-group mentality.

The next big category for activewear

What: Innovation in catalogue-based search shopping has created a new application combining elements from Pinterest, Instagram, and Farfetch.

Why it is important: The goal of the app is to connect brands, shoppers, and tastemakers for a new kind of shopping experience.

Sept follows a fashion marketplace model similar to other digital shopping apps but lets users interact with each other by sharing their shopping baskets, purchases and wishlists. For now, Sept’s biggest demographic is the Middle East, a market that engages heavily on social media. Al Dhaen, the creator, focuses on building the brand by bringing together macro- and micro-influencers to connect with customers via special activations which are promoted on other social media platforms.

To date, Sept works with 70 different brands and includes vintage luxury products in partnership with The Luxury Shopper, a personal shopping and product sourcing service that’s available to all users.

New shopping app Sept

What: Repair platform Save Your Wardrobe secures 3 million USD in funding for European expansion.

Why it is important: The technology-driven circular fashion startup is scaling its B2B activities by using 3 million USD from its latest seed funding round to build its domestic UK operation; expand into Europe (specifically in Germany and France) and grow its product and technology teams.

Save Your Wardrobe helps users to access a range of on-demand local aftercare services such as alterations, repairs, eco-cleaning, customisation and upcycling of clothes. It also uses artificial intelligence to allow garments to be easily scanned, identified and stored in users’ virtual wardrobes. The combination of AI and aftercare services is responsible for reducing unnecessary repeat purchases and extending the life of garments, according to the company.

It launched a B2B offer in October 2021, in partnership with Zalando which launched a care and repair initiative, to help the retailer meet its 2023 goal to extend the life of 50 million garments. The service connects Zalando’s customers with a network of aftercare specialists across Berlin and provides the retailer with data and insights on customer behaviour and wardrobe preferences.

Save Your Wardrobe scales B2B services

What: Scrutiny on Amazon linked to its scaling back on the number of items sold under its private label.

Why it is important: Congressional investigators framed Amazon’s own brands as a conflict of interest for the company as its private labels are often in direct competition with others selling on its site.

Members of a House of Representatives subcommittee accused Amazon executives of lying about whether the company has used specific data from other brands on its platform in its own private label business, and whether it prioritizes its own brands in web search algorithms. However, Amazon’s private labels have not necessarily dominated its site. Marketplace Pulse has found that some categories of Amazon’s private labels represent less than 1% of sales. The biggest exception found apparel to represent 9% of Amazon’s sales.

Similarly to other retail giants, Walmart and Target, Amazon has been trying to refocus around its most popular private label products after the e-commerce specialist in past years worked to broaden and diversify its private label goods.

Amazon scales back private label business

What: Lifestyle retailer Fred Segal launches a private label brand under the name ‘Fred Segal.’

Why it is important: The launch of the private label brand reimagines the Fred Segal brand and logo to incorporate the retailer’s history by utilising the expertise of Alfredo Settimio who has developed products for Harley Davidson and Yeezy.

Settimio and Fred Segal CEO, Jeff Lotman, envision the debut collection of tees and hoodies as the first step to expanding the private label business and bringing the retailer up to date. Lotman boasts that the collection is created and produced entirely in Los Angeles using recycled cotton and a custom-fibre blend designed by Settimio.

In 2019, Lotman acquired the retailer and began heavily investing in e-commerce. The pandemic did not help Fred Segal’s digital performance like it did other companies, but the retailer plans to continue integrating e-commerce and building its omnichannel strategy.

Fred Segal is betting on the international awareness of the brand for a successful revival that will be developed through connecting customers in-store and digitally with the private label.

Fred Segal launches private label brand

What: Bath & Body Works is operating a 360 U turn on the return policy.

Why it is important: The days of liberal policies and generous returns are over. Will customers understand such a change or will that translate into a lower loyalty?

Bath & Body Works have decided to significantly restrict their once-liberal return policy: in a selection of stores, customers will be limited to returning $250 of non-receipted returns, within 90 days maximum, and customers will have to show an ID document.

This is quite a long way from their initial posture, part of the retailer brand’s promise, which allowed to return “anything, anytime and for any reason”. The system was probably too permissive: customers were able to return products that were mostly or completely used. Now, products showing wear and tear will not be accepted anymore.

Bath & Body Works change their return policy 

What: The Japanese conglomerate is finalizing its closure of overseas operations.

Why it is important: For the Japanese giant, China is no more a priority and the name of the game is to focus on national profitability.

Isetan Mitsukoshi will close its Chengdu Isetan store in December 2022, without plans to relocate the store. This will represent a write-off of USD 3.2m. The store was opened in 2007, followed by a supermarket in 2018. In total, the closed surface will represent 28.000 sqm. It is estimated that sales in the store represented EUR 50m in 2019, and plummeted by 50% in 2021.

The company is retreating from overseas operations, after having closed the Thai subsidiary in 2020 and the Italian one in 2021.

Isetan Mitsukoshi closes Chinese operations 

What: From weather to discovery, to social media analytics, to predicting a customer’s lifetime value, data can be a key factor in improving performance for retailers.

Why it is important: The benefits of AI technology and analytics can improve the offer retailers provide to customers, ultimately winning client retention and improving sales.

AI has shown that as little as one degree of Celsius difference between cities is enough to affect customer behaviour. Weather forecasts have been shown to be an important predictor of shopper behaviour before important retail events. For example, unseasonably warm weather near a winter sale could alter what customers will purchase and necessitate an adjustment to selling suggestions.

Additionally, the data retailers have can assist in improving the assortment offered by analysing what clients are searching for but don’t discover. The gaps for product discovery could be found in price points across the assortment or simply a lack of products within private labels. Looking to TikTok can also help identify trends that retailers use to determine their product offers. As influencers and trends vary across Instagram and TikTok, forecasting which trends to capitalize on will require observation of both platforms.

Finally, investing in the right customer can greatly benefit retailers. Mytheresa has identified the importance of a client’s first purchase as an indicator of loyalty. The more high-value and ready-to-wear the item is, the greater chance the client will return for another purchase. Aside from looking at the first purchase, analysing which emails are opened and which payment methods they use can help companies direct marketing to the right place. Improving communication targeting will deepen the relationship and loyalty of these high-value customers.

Direct and personalized engagement with clients through the help of data software analytics can lead to a better assortment and sell-through rates while mitigating unnecessary spending on untargeted marketing.

The best data uses for retailers

What: Influencers are unhappy with Nordstrom’s updated affiliate commission policy as the latest Anniversary Sale sees less influencer hype.

Why it is important: The benefits of Nordstrom’s influencer marketing adoption in the 2010s brought the Anniversary Sale to fame, yet now the influencers who once looked to the sale as their top money maker are downplaying the event.

Partly this is due to Nordstrom’s adjusted strategy to lean away from influencer marketing. This year they slashed the cut influencers get when followers make a purchase off their recommendation, dropping down 7%- 20% from last year. The department store narrowed the window where a link generates a commission to seven days. Influencers also won’t get paid until 270 days after a successful transaction.

Some influencers felt a sense of ownership over the event, believing their collective annual flood of posts helped turn Nordstrom’s online sale into a phenomenon. But Nordstrom’s pullback from influencer marketing was years in the making. The Anniversary Sale is still important to Nordstrom’s top and bottom line but it has suffered from overexposure in recent years with social media feeds flooded with creators discussing discounts or sharing products and hauls. Some found the assortment repetitive from year to year, adding to the fatigue. And other retailers followed Nordstrom’s lead creating their own grand holiday sales.

The overall timing of Nordstrom’s pullback can also be seen in the shifting timeline of the sale. In 2020, the sale was pushed back a few months due to the pandemic; when it eventually went live, it was on a smaller scale. Now being sold in early July, the adjusted timing has made it more difficult to sell the predominantly fall and winter merchandise that makes up the sale.

Influencers say the assortment includes more of Nordstrom’s own private labels and fewer items from brands their followers are interested in. Additional criticism centres around the same items being marked down every year.

Now that the sale is well known to customers, eliminating influencer marketing and cutting back on affiliate commissions will also help shore up margins as other costs rise. However, it should be noted that influencers are sharing less about Nordstrom’s Anniversary Sale but have invested more time in posting about Amazon’s Prime Day.

Nordstrom’s Anniversary Sale drops influencer marketing

What: Business of Fashion’s podcast ‘The Debrief ‘ covers navigating the return to wholesale.

Why it is important: Business of Fashion’s ‘The Debrief’ podcast reports that as shoppers return to stores, brands are seeing value in ramping up their partnerships with multi-brand retailers through wholesale models.

Department store bankruptcies, pandemic-induced store closures and the boom in online shopping pushed brands further towards their direct-to-consumer and e-commerce businesses to drive revenue and avoid the pitfalls of wholesale. However, there is a shift back towards wholesale models as customers return to in-store shopping looking for curated experiences in which they can discover new designers and brands.

Some other factors contributing to the return of wholesale include its ease as a means of entry for international brands looking to expand to the U.S. market. Brands are also having more of a say over how their products are marketed through retailers, like sharing campaign assets or designing shop-in-shop setups.

Both parties are also increasingly open to exploring other models like concession, consignment and drop-shipping, where the brands themselves are responsible for fulfilling orders made through retailer’s websites.

The wholesale model is returning post-pandemic

What: UK retail footfall continues to be well below the pre-pandemic period with no signs that this summer will get it back into positive territory.

Why it is important: Retail destinations are more dependent on visitors from abroad and from dedicated UK shoppers rather than their former key clients of local office workers.

The latest numbers from the Ipsos Retail Traffic Index show that in the week to 10 July, UK footfall dropped as much as 19.9% compared to 2019 in the non-food sector. Ipsos also said that in addition to the 20% fall compared to 2019, against the previous week, the seven days saw a 5.9% footfall drop.

Towns were better off with a drop of 16.8% compared to 2019 and 5.8% compared to the previous week. Retail parks remained the best performers on a three-year comparison with a drop of 17.3%, yet they performed the worst on a one-week basis with a 7.2% drop.

High streets were down 20.4% against 2019 but were only down 4.4% week on week. Shopping centres had the worst of both worlds with a 21.7% drop against three years ago and a 6.3% drop against the previous week.

UK footfall still below 2019 levels

What: Macy’s plans to bring a Toys”R”Us shop into all American locations in time for the holiday shopping season.

Why it is important: Macy’s exclusive online distribution partnership with Toys”R”Us is moving in-stores due to record sales of toys being 15 times higher than in the pre-partnership period.

Beginning late July and rolling out through October 15th, the in-store shops will range from 1,000 sq. feet and span up to 10,000 sq. feet in flagship locations in Atlanta, Chicago, Honolulu, Houston, Los Angeles, Miami, New York and San Francisco. The footprint of stores may increase an additional 500 to 3,000 sq. feet during the holiday season to offer an even wider assortment of products. Opening celebrations will feature in-store events that will include family-friendly activities and daily giveaways.

Toys represent a growth category for Macy’s stores. Macy’s plans to use the opportunity to lure in millennial parents and others with attachment to the Toys R Us brand, who might then shop other departments at Macy’s.

Macy’s Toys”R”Us shop-in-shops - Source 1

Macy’s Toys”R”Us shop-in-shops - Source 2

What: Big box retailers move in on the democratization of beauty.

Why it is important: As department stores invest in renovating their beauty floors, consumer spending habits shift again as big box retailers and drugstores strategize on becoming the new key locations for discovering new beauty brands and products.

Department stores lost their dominance in the prestige beauty market as Sephora and Ulta expanded their offerings and gained more relevance to the consumer. However, big-box retailers and drugstores are now seeing an opportunity to profit from the beauty industry’s democratization, with thousands of stores and plenty of space to house products, they too can be a place of discovery.

In beauty, it all comes down to where discovery actually takes place. Sephora in the past held great legitimacy for carrying unknown lines. As these products gained more than niche popularity, they trickled down to Ulta and then into the wider market but had rarely reached drugstores. Now, the consumer is less inclined to prioritize where they purchase those products. The mixing of high and low-priced items and dispelling the mindset that expensive means “better” made brands more willing to widen their distribution to mass channels.

Target has made the biggest inroads so far, after opening about 100 Ulta Target shop-in-shops last year with plans to open around 250 more in 2022.

Beauty buying habits change again

What: The Neiman Marcus Group is actualizing its revolutionized work philosophy by constructing corporate hubs around the world to improve flexibility for employees.

Why it is important: The Neiman Marcus Group is advancing its progressive plan for establishing corporate hubs around the world, enabling associates to work remotely while also fostering collaboration and providing more convenient locations for meetings.

There is a clear focus on combining technology and flexibility to deliver employees an enjoyable and collaborative work environment. Neiman Marcus Group is exploring additional corporate hubs across the country and abroad with plans to establish hubs in Texas, New York and India.

The company believes that associates’ homes can act as their own “individual working hubs.” The retailer also considers each of its stores and distribution centres as hubs. Within their existing and new hubs, digital and physical spaces, meeting rooms and workstations instead of permanent desks are expected to improve productivity and satisfaction.

With the rise of employee departures increasing across the US, improving the working conditions of employees is a great strategy for Neiman Marcus Group. The retailer is seeing great results from this strategy with retention up and time-to-hire down in the fiscal year 2022 compared to 2019.

NMG’s philosophy allows the best corporate talent to choose where they live and work, which is setting them apart from competitors.

Neiman Marcus Group’s international work hub initiative - Source 1

Neiman Marcus Group’s international work hub initiative - Source 2

What: Neiman Marcus Group is outperforming pre-pandemic sales levels, thanks to luxury demand boosting business.

Why it is important: Bergdorf Goodman reported that it saw comparable sales growth of over 30% compared to this period last year, surpassing pre-COVID benchmarks.

Strong full-price selling also contributed to a strong margin expansion of over 300 basis points. Healthy US luxury customers, a surge in occasion dressing, and a recovery in New York City and tourism have led to NMG’s Bergdorf Goodman beating 2019 sales numbers. NMG said it plans to invest in four specific arms to further its growth: Experimental store concepts and renovations, online performance, a loyal and new luxury customer base and its internal working culture.

At Neiman Marcus, sales of the top 20 brands grew 70% over pre-pandemic levels. Men’s growth exceeded 60%. Women’s shoes grew by over 50% and handbags grew by over 70%. Handbags were up almost 80% and shoes netted a 60% increase. Fine apparel up was over 30%.

Neiman Marcus is outperforming 2019 benchmarks

What: Inflation and a return to classrooms are causing an increase in back-to-school shopping that’s coming earlier than expected.

Why it is important: U.S. consumers are likely to spend more on back-to-school shopping this year due to fears that prices will continue to rise.

The National Retail Federation and Prosper Insights & Analytics as well as KPMG conducted surveys of U.S. consumers regarding their back-to-school shopping plans. NRF and Prosper reported that back-to-school spending is expected to match 2021’s record high of 37 billion USD with families planning to spend an average of 864 USD on school items.

The pandemic plays a significant role in the increased spending on school-related purchases. Adapting to virtual and hybrid classes had normalized families spending more on computer equipment, home furnishings, chairs, desks, and lighting, so their kids could attend classes online.

Back-to-college spending is also expected to reach the highest in NRF and Prosper’s survey history, projected at nearly 74 billion USD. Prosper and NRF indicate that the top five shopping destinations are: online (50%), department stores (45%), discount stores (29%), office supply stores (27%), and college bookstores (26%).

According to KPMG, U.S. consumers spending on back-to-school shopping will go up 20% compared with 2021. 56% of consumers that were surveyed plan to spend more on back-to-school in 2022 compared to 2021. And 82% said this is because of rising product costs.

Consumer fear of inflation has contributed to the increased spending as well.  As of early July, 56% of shoppers had already started shopping for school and college supplies, with consumers figuring the longer they wait, the higher the prices could get. KPMG emphasized consumers getting out and physically shopping to search for the best deals and stretch their budget.

Consumers are indicating a heightened sense of consciousness around what to wear as offices and schools reopen and live events resume. As such, apparel and footwear will likely rank lower on the list of categories seeing spending cuts from consumers during the back-to-school season.

Some consumers did indicate shifting their shopping to lower-priced channels. Many turning to off-price stores as their first choice for ‘brand agnostic’ items like notebooks and pens.

Increased spending for back-to-school shopping season - source 1

Increased spending for back-to-school shopping season - source 2

What: Neiman Marcus and Bergdorf Goodman owner seeks to revolutionise luxury experiences through digital innovation.

Why it is important: Fashion brands are leading the charge in boosting their investments in technology, estimated to grow from 1.6% and 1.8% of sales in 2021 to between 3 and 3.5% by 2030.

For brands and retailers, the focus of digital investments is revolving around technologies that offer the greatest impact to clienteling, their sustainability impact and back-of-house operations, to best position their businesses for the opportunities to come and see a measurable impact on their bottom line.

Recognising the significance of technological advancement within the industry, Neiman Marcus has dedicated over USD 200 million to digital innovations, with a focus on in-store and supply chain investments. To meet its customers’ expectations to access retail anywhere, any way they choose, the company is strategically advancing tech programmes across its stores, e-commerce platforms and digitally assisted remote experiences.

Neiman Marcus recently partnered with Farfetch Platform Solutions (FPS) to replatform the Bergdorf Goodman website and mobile app, and open it up to international expansion. Farfetch has also made a USD 200 million minority common equity investment in Neiman Marcus to further accelerate the company’s growth and innovation through investments in technology and digital capabilities.

Neiman Marcus has reimagined its technological approach from the bottom-up, doubling down on its commitment to integrated luxury retail by equipping its workforce on the shop floor with digital selling tools such as the “Connect” platform, powered by the SaaS programme Stylyze. Stylyze provides product attribution data, as well as digital outfit and room builders. Within its digital expansion strategy, Neiman Marcus has opened a hub in India to support the group’s daily operations.

Neiman Marcus is looking to plug in other external technologies that ultimately support the brand experience they are trying to create.

Neiman Marcus Group optimising its digital transformation

What:  A retail tech supplier shows a real world application of what a connected store looks like.

Why it is important: Such an equipment involves significant amounts of investments. However, it is interesting to see a fully fitted store live, rather than prototypes in suppliers’ showrooms, in order to evaluate the actual added value and ROI of said investments.

In 2017, just after its acquisition of Browns in London, Farfetch promised the retail world a new era with the “Store of the Future” concept, a place where everything would be connected for the customer’s sake. Since then however, this has remained a promise rather than a reality, as retailers embraced the tech by bits and pieces rather than investing full Capex on this topic.

The new COS store in Los Angeles (from the H&M group) could be a good example of what a connected store looks like:

• Touch-screen smart mirrors interact with the RFID chips included in every product, allowing to display more in-stock options, alternative proposals or alert salespersons that the customer is ready to leave with the product,
• Dedicated tablets allow store managers to monitor in real time what is going on in the store: inventory level, shelving situation, area management.
• The tablets also allow to train sales associates on a permanent basis whenever they have some free time
• Of course, the whole store is fully fitted for buy online, pick-up or ship from store, and other convenience options given to customers.

Retail tech applied, the LA COS store example 

What: Online beauty sales drop in 2022 as customers return to brick-and-mortar shopping.

Why it is important: The trend of wellness and beauty continues to rise as 1010Data reveals that the 14% drop in online beauty sales is connected to the return to in-store shopping.

The beauty industry remained resilient during the pandemic and likely will continue despite inflation, supply chain issues and tight labour markets. Retailers continue reporting positive year-over-year earnings showing growth in the beauty category.

Online beauty sales remain up 36.3% over pre-pandemic levels, per 1010Data’s findings.

Online beauty sales drop 14%

What: Agility gained through navigating pandemic-related complications has left luxury in a better position to face an upcoming recession.

Why it is important: Inflation and interest rates are soaring in Europe and North America, squeezing household budgets. Despite post-pandemic ‘revenge spending’ boosting performance, there is a visible decline in consumer splurging.

Historically, luxury companies are less affected by recessions as a decline in wealthy shopper spending has a less dramatic impact. Predictions that luxury will be even more resilient this time than in previous crises, compare the upcoming recession to that of 2008 which primarily hit lower-income and middle-class consumers.

However, the importance of middle-class and ‘aspirational’ shoppers continues to make up a significant number of sales. A damaging effect could be increased as luxury brands have increased their offerings in accessible categories in recent years.

LVMH and Hermès are likely to report positive numbers due to their focus on high-paying clients and strong brand DNA. Companies that prioritise aspirational customers are likely to suffer the most within the luxury sector.

Bain & Co. continues to expect luxury industry growth between 5 and 15 percent for 2022, depending on the recovery of the Chinese market and inflation pressure in the West. Overall, the pandemic has placed brands in a better position.  The increase in DTC has led to higher margins on each sale. And supply chain optimization during the pandemic has positioned brands better to react to current events and the impending recession.

The luxury industry and the impending recession