Are You Ready For the Roaring 2020s?
(Bloomberg Opinion) - First we covered up in sweatpants, then we did DIY. Next we book a vacation and buy beach bags? It's not the most outrageous idea.
Since the introduction of a Covid vaccine, there has been a "big rotation" on the stock market. Investors have pulled out of safe haven stocks, such as B. Consumer Staples, and have moved into stocks that could benefit from a rebound such as banks and airlines.
Shift the focus to buyers, and we may see a big rotation in what people are buying too. Spending could move away from lockdown-inspired home improvement and back to travel and dining. Even as the pandemic and vacation restrictions become increasingly severe, tour operators, luxury groups and fashion retailers should be prepared for some future changes.
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Consumer behavior has already changed significantly this year. Those fortunate enough to keep their jobs and work from home saw their savings soar. When they decided to spend money, it wasn't for smart clothes, shoes, or vacations. Instead, they indulged in cashmere loungewear, pampering food and of course their apartments.
However, when bans and other restrictions are lifted, some of that expense is attributed back to "experience." TUI AG, the largest package tour operator, has already sold half of its vacations available for May 2021. French hotel group Accor SA recently reached an agreement to expand their position in the boutique hotel market in the hopes of getting a boost from their younger and more leisure-minded customers. These companies are betting that people will finally book long postponed vacations and dine in chi-chi restaurants.
For luxury goods brands, a renewed appetite for experiences about things will produce mixed results. They have benefited from Chinese, American, and European consumers who use some of their accumulated savings to indulge in premium products like Rolex watches and Christian Dior bags. That demand is likely to fade as a wider range of spending options become available.
However, a decline in domestic consumption should be offset by a gradual increase in tourist spending as people from China, the United States, and the Middle East return to travel. This is especially important for European luxury brands, including LVMH Moet Hennessy Louis Vuitton SE and Gucci owner Kering SA. According to Flavio Cereda, an analyst at Jefferies, an average of 50% of luxury sales in Europe come from overseas tourists.
The big unknown in consumer behavior is how an economic recovery will affect the apparel industry. According to GlobalData, global clothing spending will decrease by 16.7% this year starting in 2019. A decline of 25.7% is forecast in the USA. However, there is reason to believe that demand will increase in 2021.
A vaccine gives hope that at some point, at least for a few days a week, we will return to work. After nearly a year of not getting dressed for the office, people need to freshen up their wardrobes. While men probably don't buy as many suits (bad news for Hugo Boss AG) and women prefer comfort over chic, that doesn't mean we all continue to work in sweatpants.
Winser London, an online retailer specializing in quality workwear, has found that demand for its silk blouses remains strong during the pandemic (you still want to look good on Zoom) and has even intensified recently. The demand for dresses and blazers also recovered briefly in the fall when people returned to their offices. It makes sense when you think of the new world of work, where routine tasks are done at home while days in town have meetings and presentations - events that require more elaborate outfits.
Anita Balchandani, who heads McKinsey & Co.'s clothing and luxury operations in Europe, says the demand for glamor is "tremendously pent-up". According to Lyst, the fashion platform, the search for heels and dresses stopped even when people had nowhere to go. And trend forecaster WGSN sees a return to colors and prints in the face of increasing optimism about a post-pandemic future.
However, fashion often reacts to the prevailing conditions. Faith Popcorn, whose job it is to envision the future of large consumer groups, says this could manifest itself in what she calls "Roaring 2020s" - decorative clothing, high heels and lots of makeup could be a backlash against drab casual wear be the one that sets a lot apart of the year. This turnaround would be a relief for high-end sellers like Gucci, Chanel and Louis Vuitton, as well as for fast-fashion chains like Hennes & Mauritz AB and Zara from Inditex.
Regardless of which version of the future shows up - be it comfort chic or more zippy outfits - a wardrobe shift is going to be another big rotation to watch out for.
This column does not necessarily reflect the views of the editors or Bloomberg LP and its owners.
Andrea Felsted is a columnist for the Bloomberg Opinion covering the consumer and retail industries. She previously worked for the Financial Times.
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