Supply Chains and Business Models in the Covid-19 era: Insights from the luxury industry

This research deals with how luxury companies adapted their supply chains and business models to address the impact of the Covid-19 pandemic. The luxury industry is different from other industries and has many peculiarities such as high profitability margins and great reliance on personal selling experience. On the one hand, luxury customers may not suffer, in the short term, from lower buying power, but on the other hand lockdowns and shop closures can hinder the direct contact to customers. Consequently, the luxury industry seems vulnerable to disruptions and is, therefore, an interesting field of investigation. However, little is known about how luxury companies have addressed the negative effects of the pandemic. As such, our research fills this gap by identifying the actions undertaken by the luxury sector to cope with the pandemic, while taking supply chain and business model perspectives. Our research starts with a literature background that specifies the main characteristics of luxury supply chains and business models. To gain insights into how luxury companies adjusted their operations and businesses to deal with the pandemic, we conduct 24 semi-structured interviews with national and international industry experts, luxury companies’ managers and consultants. We found that luxury companies, did not considerably change their supply chain structures, but to improve the coordination along the supply chain, they increasingly digitized their supply chain processes and adapted money flows with upstream and downstream supply chain partners to support them in overcoming liquidity issues. Regarding business models, luxury companies did not alter their initial value propositions, but increasingly leveraged the online channel to serve their customers, embarked more on vertical and horizontal relationships, and changed their profit formula, sometimes even by increasing their prices to compensate for the higher logistics costs due to home delivery.