Luxury brands can no longer ignore outdated supply chains. In the wake of the World Trade Organization’s director-general Ngozi Okonjo-Iweala's warning of continued supply chain bottlenecks, luxury brands have been increasing prices — a strategy that some would describe as ‘risky’.
It is, according to Robert Lockyer, founder of Delta Global — a luxury packaging supplier for brands including Tom Ford, Net-a-Porter and MATCHESFASHIO — "the final wakeup call” for the luxury fashion industry. “Brands that continue to rely on price increases, rather than supply chain monitoring and forecasting, are directing luxury consumers to their competitors.
“Customers will find superior products at better prices. In a market that is increasingly aggressive, this is a critical mistake. As the bottleneck continues, brands must be wiser than simply reverting to price-hikes," says Lockyer.
The collapse of the supply chain has lasted longer than industry experts forecast, and it is not certain when disruption will end.
Lockyer, however, believes the caution with which analysts predict a full recovery speaks of much deeper issues, saying, “The truth is, nobody knows if the supply chain will recover in a way that we recognize, let alone when. Without digital monitoring, data can be hard to retrieve, and where it can be retrieved, the process is far from timely.
“But what we do know cannot be ignored. Higher transaction costs mean the luxury consumer is continually being squeezed. This does not align with the values of modern consumers and the scrutiny of supply chains by consumers is already at an all-time high. That will only increase.”
However, with all of that in mind, increased costs within the supply chain aren’t always bad. Lockyer explains that when done appropriately, this can lead to an increase in return, brand experience and differentiation amongst competitors and the wider market.
It’s about finding the perfect balance of cost and updated supply chains. Brands need to pay just as much attention to updating their methods and supply chain as they do increasing the cost of products, ensuring they put their consumer first and foremost.
It's not surprising that the challenges of delays, for many luxury brands, has been met with a price increase.
Lockyer says, “If you look at Hublot, for example, LVMH (the luxury multinational holding company) has concluded that the luxury watch consumer will accept significant price increases. And, in luxury fashion, where the biggest lead, the rest quickly follow.
“When we consult with luxury brands, we tell them: look, ultimately, you face a business and ethical choice. You can find a solution to digitize the supply chain, you can use our innovation and technology to monitor, forecast and reduce waste, or you can continue to push exponential price hikes in an uncertain economy,” he continued.
“And, while brands waiting for the bottleneck to ease can only resort to price increases, the truly modernized luxury brand can withstand supply chain impacts much better — they are agile, flexible, and much more in control.”
Whilst the industry is inundated with price hikes, brands and businesses that sit within the industry of luxe can address both supply chain shortages and sustainability with Delta Global and its innovative packaging solutions.