Marcus Richards
The luxury goods market has been thrown for a loop by the global pandemic of 2020. Of course, virtually every aspect of economic life was changed in profound ways, but high-end consumer products often take unusually hard hits during tough times. One of the other things that happens when the financial markets suffer a general downturn is an increased interest in precious metals. For investors who typically hold about five or ten percent of their portfolios in gold and silver, the payoff could be yet to come. That’s because there’s no end in sight for the COVID virus, which means stability likely won’t return anytime soon.
Looking ahead, if you think about gold trading as a way to soften the financial blow of a volatile marketplace, 2021 could be a good time to increase holdings of safe assets like gold, silver, platinum, and palladium. For anyone who is giving serious thought to increasing their holdings of the famed yellow metal or any others, here’s a quick summary of what you need to know about how luxury trends changed in 2020, and what the near future might look like for consumers of high-priced items.
Gold Investing is Often Immune from Crisis
Anyone who invests in gold bullion, stocks, mining companies, exchange-traded funds (ETF’s), and index funds understands how the metal is at least partially immune from many types of financial downturns. In fact, even amid the recent viral pandemic, the jewelry sector has held steady worldwide. That’s very good news for precious metals investors because the jewelry market accounts for at least half of the global consumption of the metal. Looking ahead to perhaps another full year of restricted personal movement, low employment, even lower household income, and related long-term effects of the coronavirus situation, gold might be one of the few assets that can not only withstand the negative economic effects but actually perform well.
Counterfeit Products are a Major Concern for Many Consumers
One trend that becomes more apparent as so much buying moves to online stores, is fraud. Specifically in the form of fake or counterfeit products, fraud serves as a sort of roadblock for prospective customers who are afraid of getting cheap knock-offs rather than the real thing. The upmarket industry, another name for the group of companies that manufacture and sell high-priced items, is working hard to change public perceptions and reduce fears of being cheated. They’re not only adding visible brand marks to everything they sell, but shoring up website security, authentication methods, and more. Some sellers assure their online clients by asking buyers to phone the company’s main office to verify that a particular item did in fact come from the real manufacturer and not an imposter.
Trends are Transforming the Segment
In addition to more online purchases by stuck at home shoppers, the luxury market is undergoing several other changes as the virus year comes to a close. For starters, China is now set to become the primary global producer in the segment within four years. Already a major consumer, China has jumped headlong into the specialty, high-end field with a determination to dominate. Even amid the virus restrictions, Chinese citizens plunked their cash down on more jewelry, specialty wines, and leather apparel than in any year to date.
At least two of the largest, most well-known sellers in the retail portion of the upmarket segment have faced major financial challenges. Namely, Lord & Taylor and Neiman Marcus have either filed for bankruptcy or are on the verge of doing so. It is the brick-and-mortar sellers that are enduring the worst of the downturn, while e-commerce entrepreneurs, jewelry retailers, and many others are holding up quite well.
It appears that when consumers are stuck in their homes for months on end, they attempt to create some semblance of normal life by shopping via their computer connections to the outside world. For speculators, traders, and investors who have gold on their minds, these facts are highly relevant. The bottom line is that as an ornamental product, it is shielded from sluggish economies. Second, as a safe haven alternative to traditional stocks and bonds, it serves an important second purpose.
There are Two Sides of the Lux Market
Experiential high-end products like vacations, spa services, fine wines, gourmet foods, and similar upmarket services and products that are typically used up quickly or consumed as specialty food and drink. The other sub-category, personal products like bags, dresses, and pricey watches, last longer and are often sold by companies with famous names at specialty stores. During the first several months of the COVID-19 crisis, the personal segment took a bigger hit than the experiential. However, with continued lockdowns and the very real possibility of even more restrictions on movement, the experiential category could end up suffering just as much.
