The Luxury Closet: Post-Covid luxury sector seeing investment in items like handbags, jewellery, art & watches

Last year was a very challenging one for almost all sectors, forcing them to constantly evolve to stay relevant. With disrupted lifestyles and shopping behaviour, many luxury brands faltered and then pivoted to address urgent public health needs. Factories that produced scarves and perfumes started manufacturing face masks and hand sanitisers and even made monetary donations to hospitals and other needy organisations.

A 2020 McKinsey & Company report titled ‘A perspective for the luxury-goods industry during—and after—coronavirus’ reviews the 2020 inventory and rethinks 2021 collections. It suggests developing a plan for dealing with unprecedented levels of unsold 2020 inventory—without resorting to steep discounts which jeopardise brand equity—and to stay informed about wholesalers’ and e-retailers’ plans to clear extra inventory. One way to use the extra inventory could be to reward loyal customers, while also whetting their appetite to shop across categories.

But even as luxury retail looks at a long-term strategic plan in the global marketplace, there are evident signs of growth in exposure and interest among people eager to invest in retail items like bags, jewellery, art, watches, wine and classic cars. According to the recent Knight Frank’s Wealth Report 2021, Hermés handbags topped the Knight Frank Luxury Investment Index (KFLII), with prices increasing by 17% over the past 12-month period. Fine wines come in the second place, with a strong growth in 2020, up 13% compared to a year earlier. From the Indian ultra-high-net-worth individuals’ (UHNWI) vantage, jewellery is the most preferred passion-led investment, followed by art, watches, wine and classic cars.

In line with global trends, Indian UHNWIs, too, cited a higher preference for wine compared to rare whisky in 2020. “In the global context, the shift in consumer preference is a result of climate change, a bigger influence on the wine trade. Unlike the global financial crisis, the wine market has held its nerve throughout the pandemic, merchants did not mark down prices and the market has been stable. While Indian UHNWIs, too, revealed a preference for fine wine over rare whisky, it is actually jewellery, which is the most prized object of desire, topping both these and other passion-led investments,” says Shishir Baijal, chairman and managing director, Knight Frank India.

The Forevermark brand of De Beers Group continues to see an upward trajectory of demand. Sachin Jain, managing director, De Beers India, says, “Diamonds are a meaningful store of wealth, and we have seen a change in the purchasing power of women in the past few years. Today, women don’t need a reason to shop. They celebrate the small joys of life, aspire to own an exquisite, priceless piece of jewellery that connects at a deeper personal, emotional level and has been self-purchased… a trend witnessed during the pandemic.”

The year 2021 will follow one of significant changes, as the desire will be to invest in purchases that are meaningful and have enduring value. “Brands like ours will take precedence as consumers are moving towards the digital space, looking for transparency as well as the latest trends in the segment. Diamonds are not pure-play luxury, but they hold deep emotional, tangible value, offering a store of value for the consumer,” says Jain.

Passion investments like luxury handbags were the best-performing asset class. “The ever-increasing category of luxury handbags outperforms art, classic cars and even fine wine to claim the number one position on the index,” says Andrew Shirley, editor of The Wealth Report and the Knight Frank Luxury Investment Index.

Da Milano, an exclusive brand offering luxurious leather bags and accessories, saw events returning to normalcy last year, which shows how quickly people were willing to spend on luxury brands. Sahil Malik, managing director of the brand, believes the luxury sector wasn’t affected by the pandemic. “Brand value and trust have a vital role to play. Our sales resumed even at slight signs of the lockdown coming to an end. It wasn’t a usual fact, knowing the market would change post the pandemic. Passion-led and innovative people were looking for space and with the market being at an all-time low, those with a more secure and greater income were able to make investments. I think this is just the beginning for luxury shopping in India,” adds Malik.