In the spotlight: Luxury & Corona Crisis – Commerzbank Column

If you are concerned about the importance of luxury goods, the question arises: Who actually needs luxury goods? Answer: Nobody! This is comparatively easy to explain, because the actual (additional) utility value is very low compared to the simpler substitute product without flair. The long-term success of the industry can therefore be explain that a luxury item conveys an aura of something special that at least is one of its secondary basic needs. Even the growing second-hand market, which one would actually assume could possibly damage the luxury brand, is now viewed rather positively. According to surveys, it opens up new classes of buyers who initially buy the entry into the world of luxury more cheaply and documents the value of the products. Despite the positive long-term prospects, why is restraint currently appropriate? For the second quarter, analysts expect luxury goods sales to decline by around 40%, as numerous stores have been closed (and some are still closed) over a long period. In some cases, the manufacturers even increased the prices (price reductions are taboo in the industry, which destroys the brand value). The quarter may have bottomed out. At least that’s what the stock valuations of luxury goods manufacturers suggest, which assume a quick return to normal. But even in this case we see little scope for evaluation. The risk of a second corona wave is also not taken into account. Travel (a very important driver) will remain limited for the foreseeable future, it will take a long time to return to normal. The thriving online trade helps, but it cannot replace the important shopping experience.


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