As the initial shock of Britain’s decision to leave the European Union subsides, new research reveals the ripple effect it has had on the global luxury retail industry so far, and what it may mean for the market’s future.
Since Britain voted to leave the EU almost two weeks ago, the global luxury market has had 48 percent fewer full-price sellouts online in the last week, year on year, according to new research by retail analytics company Edited, released Tuesday.
While analysts have been able to decipher Brexit’s e-commerce winners and losers so far — they say overseas shoppers and mobile commerce will come out on top, while overseas supply chains, big ticket items and European expansion could suffer — the path ahead for luxury brands remains hazy.
It’s not all bad news for brands, especially those based in Britain. Following the news of Brexit, the pound plummeted to record lows, driving tourists and shoppers to flock to the counters because of the favorable exchange rates.
The research pointed to Burberry as an example of a brand benefiting from Brexit. It increased its full-price sellouts by 50 percent in the last week, compared to a year ago, driven mostly by online sales of accessories, footwear and tops. It also said Burberry is likely to benefit from having most of its business costs in pounds, because the overseas dollars it earns will buy it more pounds.
Also enjoying the wake of Brexit is British luxury retailer, Matches, which saw its online full-price sellouts sky-rocket by 90 percent on last year, since the vote. Gucci, one of its best selling brands, shocked researchers by having a 154 percent increase on full price sellouts.
But for some brands, the news wasn’t so good, with share prices and online full-price sellouts plummeting. Louis Vuitton for example was among the brands hit hardest, with the steepest decline of 73 percent fewer online full-price sellouts, compared to the same period last year. Following closely behind, the Paris-based luxury goods group, Kering, whose share price dropped 9.3 percent three days after the vote, saw steep falls in some of its brands’ full price sellouts, including an 81 percent drop for Bottega Veneta, a 68 percent fall for Saint Laurent and 55 percent decline for Balenciaga.
The research said other threats looming over the industry include a risk of tariffs on luxury goods in and out of the U.K. from the EU, a cloud of doubt now hovering above U.K. retailers plans to internationalization, and a potential fall in consumer spending as confidence in the economy weakens and people’s mentality shifts towards saving.
Those points are echoed by Michael Wang, president and CEO of retail technology company, OneStop Internet, who said Brexit will no doubt impact prices for both brands and consumers. “A weaker pound means more expensive production of fashion materials in China, which will cause retailers to increase prices over time. With low consumer confidence, raising prices will be a potentially damaging effect to retailers.”
However, he said there are ways around that. If brands can invest in homegrown initiatives such as the Made in Britain campaign, which supports British made goods and identifies them with a logo, production may come back to the U.K., offsetting rising manufacturing costs associated with a weaker pound.
Looking ahead, the Edited research said there are a number of other silver linings for the luxury industry. For example, there’s potential growth for Italian and French brands who can take European market share, and a possible U.K. tourism boom as a result of the softer pound, but it does say U.K. brands need to strategize on how to capitalize on that.
But as luxury brands stare down the barrel of two years of uncertainty, Edited said one thing’s for sure: now more than ever, it’s vital for British brands to leverage off of their heritage and craftsmanship in order to stand out.
