Good news on the vaccine. Now what?

A vaccine for Covid-19 is in sight, but analysts do not expect a speedy return to normal.

Good news, at last, for the world: global stock markets rallied this week after Biontech and Pfizer announced preliminary results suggesting that their Covid-19 vaccine is 90 per cent effective.

The logistical challenges are steep and full data from the trial has yet to be released, but investors are optimistic that some degree of normality may soon resume in Western countries that have struggled to control the pandemic. Share prices of luxury brands including Kering, LVMH and Burberry all rose after the announcement on Monday, while those of Europe’s major e-commerce retailers Zalando and Asos both fell.

Some upbeat scientists predict that a return to normality may come as soon as the spring of 2021, though governments are considerably more cautious. Either way, brands are readying themselves for a number of scenarios and with them a resulting shift in consumer priorities and shopping behaviour. Brands have time to plan, but an agile, flexible mindset will be essential in the months ahead.

In a media call after the brand announced its latest set of results, Burberry CFO Julie Brown said the brand was “delighted” to hear the news about the vaccine and pointed to the company’s response to local demand increasing in China and Korea where Covid-19 cases are no longer as widespread. Localised campaigns have been organised, local influencers have been recruited as well as pop-up exhibitions of product ranges. “What it may open up is long-haul travel to return… so it may cause parts of the world that have previously been subdued, in particular I would say EMEIA [Europe, the Middle East, India and Africa] to open up.”

Life will not resume exactly as it was pre-pandemic even after a vaccine is rolled out, according to Jacqueline Windsor, partner in PwC UK’s retail, consumer and leisure strategy practice. Windsor’s team has been monitoring the attitudes of British shoppers since the pandemic began and discerns a significant swing towards personal wellbeing and nesting at the expense of other discretionary spending categories. Those priorities will not necessarily be eroded post-pandemic. “I think we are actually reevaluating what’s important to us, and therefore where we spend our money,” she says.

There’s broad agreement that consumers will want to return to stores when they can. A survey of shoppers spending less time in physical stores by GlobalData on behalf of Colliers International in September showed that 80 per cent missed the social interaction that physical retail provides. But the strong swing towards e-commerce is not likely to dissipate now the consumer has adjusted to ordering online. Kering saw e-commerce sales double from 6 to 13 per cent in the first nine months of this year, while LVMH has also reported a significant online boost.

Omnichannel capabilities like click and collect and kerbside pickup have been quickly added to luxury brands’ repertoires while stores have been shut. “I think brands need to look back and say, how much of that was cyclical? And how much of that is now just the way people shop?” says Windsor.

I think we are actually reevaluating what’s important to us, and therefore where we spend our money.

The European Commission has bought 300 million doses of the Pfizer/Biontech for European Union countries, while the UK has bought 40 million. Combined, that’s enough to vaccinate 170 million people, given two doses are required. Under a best-case scenario, according to Boston Consulting Group (BCG), leading countries will have the pandemic under control by Q3 2021.

That’s still a way off. It means that, whatever European customers’ priorities are post-vaccine, a significant proportion of tourists from outside the EU will not be shopping in London, Milan and Paris flagships until deep into next year. Brands can be optimistic about the outlook for the sector long term, but a reliance for growth in the Asia-Pacific economies will continue through 2021.

“For the time being, brands should continue to work in the way they should have adopted since the beginning of the pandemic,” says Felix Krueger, partner and associate director at the Boston Consulting Group. “Think in scenarios and have a really flexible approach towards buying, planning and inventory management, and continue to work with smaller order quantities, de-risked buys and lower initial allocations.”

Brands with a greater skew towards European or US sales may consider their inventory mix. The working-from-home trend is likely to continue: Facebook, Twitter and Slack, for example, have announced that the shift is permanent for those employees who do not ever want to return to office-based work patterns.

“Overall for wear-to-work clothes, the demand will be lower than it has been historically,” says Janet Kloppenburg, president of JJK Research Associates. She adds that consumers will be seeking versatility from clothes that can work in both casual and workwear settings.

Both Kloppenburg and Kreuger agree that occasionwear is likely to recover fast once a vaccine is rolled out. There will simply be more occasions to attend as governments lift restrictions. Kloppenburg says that some of this spend might come before full rollout as people prepare for forthcoming weddings or birthdays.

Whatever the timetable for a vaccine, resilient high-end brands with cash reserves will be better prepared for the various scenarios than they were at the start of 2020. “It may be another wave of Covid, it may be another financial crisis, it may be a supply chain shock. It doesn’t really matter what the event is,” says PwC’s Windsor. “I think we’ve just learned the hard way, by embedding resilience in our system.”

VOGUE BUSINESS 2020