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Increasing customer demand and global uncertainties creating supply chain challenges for luxury brands, report finds


Following a pandemic-related slump, the luxury goods industry has regained its former strength but is now faced with supply chain management concerns, according to a recent study.

Arvato Supply Chain Solutions, in cooperation with the international strategy consultancy Roland Berger, found the combination of online and offline channels has become an important growth engine for luxury brands.

However, the study Personal luxury: Supply chain challenges & how to prepare for the future highlighted that buyers of luxury demand seamless interactions between the channels coupled with the ability to contact the brand directly online. With the move to increased online sales, expectations for short delivery times and highly flexible shipping options are also increasing.

The partnership also stressed that luxury brands must navigate new market uncertainties. Geopolitical and pandemic crises have already led to instabilities in the business environment, and these have had a strong impact on sales processes in various regions or have put a strain on existing logistical processes.

“These complex and multidimensional developments pose major challenges for luxury brands and retailers,” explained Abbas Tolouee, who worked on the study as a senior consultant at Arvato Supply Chain Solutions.

“We have identified four critical points that companies must turn into factors of success in order to remain competitive in the long term.”

Luxury brands and retailers face the challenge of offering a luxurious customer experience embodying the brand’s DNA across increasing numbers of sales channels – from initial customer contact, through order placement and including after-sales service.

They must have control over all customer touch points within the supply chain, which is only possible when there is end-to-end integration of all IT systems and corresponding interfaces. Particularly an online shop must have real-time product availability, provide order status information, and offer several shipping options.

Additionally, speed and punctuality in last mile delivery are essential. The second challenge is inventory management across different regions and channels. To accomplish this, luxury brands and retailers must synchronise all data in real time and invest in intelligent inventory optimisation technologies and forecasting tools to anticipate demand, plan supply and detect fraud.

To get a handle on rising operating costs, luxury goods manufacturers should increase their operational efficiencies through automation and digitalisation, the report stated. Warehouse services solutions should include a cloud-based IT infrastructure with fully integrated and automated supply chain processes that ensure high operational efficiency. This also ensures that errors and product losses are minimised, and inventory control is optimised.

Transparency surrounding the CO2 footprint is also extremely important, especially for the younger target group. It is not enough to know the origin of the product and to measure its impact on the environment. Companies must monitor sustainability throughout the entire supply chain and define a company-wide framework to meet the expectations of their customers.

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