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Reasons Why Luxury Brands Are Struggling Right Now

| Published on May 28, 2021

The Indian luxury industry, known for its supply chain management and lean inventory management systems, is bearing the brunt of the coronavirus pandemic. Riding on to the second wave of the pandemic in the country, the luxury brand industry is reeling under its effect and finding it tough to battle it out. At a growth rate of 18 to 20 % per annum since 2013, the pandemic has caused it to reach a standstill as basic necessities overpower the need for fulfilling one’s desires. Let us delve deeper in order to understand what’s causing this downturn.

Production Facilities

A well-known fact is that a large majority of luxury brands, work on a contractual basis and do not own their own production facilities. As a result, they source their materials across all parts of the world and assemble them in a facility before dispatching them for a sale. This movement has been disrupted owing to the covid-19 pandemic.

‘Utthan pact’

The goal of this pact was to uplift Indian art and embroidery which was signed by rather famous luxury brands existing in the country. This pact was established for a duration of 3 years but did not have any legal binding. However, when journalists went down to factories where karigars worked, they found out that these karigars were expected to complete orders at facilities that were unregulated and by no means met Indian factory safety laws. As they were unaware of labour laws, no ruckus ensued. However, these matters were not addressed by the brands that were signatories of the pact and the focus was given to issues that constituted the big picture. This also caused dissatisfaction and fallacies in the processes that went into manufacturing luxury products.

Supply Chain Fallacies

80% of the businesses that fall in the supply chain processes have been shut and do not seem to open up in the near future. Since they have been operating under financial constraints, their survival looks bleak and as a result, the luxury industry has been seeing a diminishing graph.

Although the labour available in the country is cheap, the pandemic has wiped all businesses clean of their processes with the labour force choosing to return to their home towns. The pandemic has created a ripple effect and the after-effect of the same has been felt far and wide, across borders. The luxury industry is bound to witness a lull before it picks up momentum once the pandemic subsides. However, there is no precedented time frame that one can ascertain for the same.

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