Sitting atop the CEO’s desk at every business, large or small, is the “five-year plan” – the profit goals to be met, the new products launched, the markets to be opened. More importantly, it’s the ruler against which management’s bonuses will be measured.
The late David Mahoney, then the chairman of the New York City-based company which then owned Max Factor and Halston, told me when I was writing a speech for him during the Sixties fuel crisis, “A five-year plan doesn’t do much good when the Arabs double the price of oil.”
The same is said for the scourge of COVID 19. In what feels like a century ago (but was only April), Forbes and Fortune were sagely predicting that the pandemic would permanently change consumer behavior. Consumer behavior has become modified with people more attuned to working remotely, buying locally sourced products, and becoming more socially conscious.
Along the same lines, my Dutchess County neighbor complains that his wife, a post office rural route delivery person, works 10 hours a day because of the load package deliveries from items bought on the internet. The New York Times says there is a boom in property sales in Westchester and Long island from those anxious to escape the city and work remotely. Buy shares in Zoom, (Stock Symbol “ZM”), grab the house in Purchase before priced out of the market. The future is not in plastics but backyard swimming pool construction.
But those kinds of promises are like New Year’s resolutions, 80% of which fail. You don’t have to wait until the pandemic wanes to see how people quickly revert to their old ways.
Illustrating how difficult it is to change behavioral patterns: 20% of millennials during the pandemic, fully aware of the risks, broke lockdown to canoodle with their significant other. Princess Beatrice just now abandoned her William and Harry-like royal wedding plans but still went ahead for a small ceremony with a socially distanced portrait of the Queen. On Sunday, the online New York Times had scores of wedding reports with the services often consecrated via Zoom. Eros.com still lists 309 “escorts” in New York City. Jaguar sales in New York were up 32% in June.
The 1918-1919 influenza pandemic (known as the Spanish flu) was until now the most devastating in recent history, where at least 20 million died. In the United States, about 675,000 lives — among them those of my paternal grandparents — were lost with an estimated mean case fatality rate of 2%. But by the next decade, behavioral studies showed that life was back to normal — the “Roaring Twenties.” The reason for my grandparents’ deaths quickly forgotten until I discovered it as an adult.
However, there’s a body of thought that says American consumer attitude isn’t crucial to the sales of luxury goods. McKinsey, the management consultant guru, notes that 20 to 30 percent of luxury industry revenues are generated by consumers making luxury purchases outside their home countries.
In 2018, McKinsey said Chinese consumers took over 150 million trips abroad, and purchases outside the mainland accounted for more than half of China’s luxury spending that year. The United Nations World Tourism Agency forecasts there will be 1.1 billion fewer trips abroad in 2020, so it’s not just the Chinese who will be missing from the store. Pre-COVID, you’d see busloads of them at Woodbury Commons.
Asian shoppers buy luxury goods outside their home countries to benefit from lower prices outside their countries, and because shopping has become an integral part of the travel experience — buying a brand in its country of origin comes with a sense of authenticity excitement. That works for Americans, too, and is why my Turnbull and Asser shirts bought from Jermyn Street are somehow better than those from Bergdorf.
With the recent travel restrictions, luxury spending has come to a halt, and McKinsey sees only a gradual ramp-up in international travel, even after the restrictions are lifted.
Today the most honest business magazine forecaster may be Kian Bakhtiari, who wrote in Forbes: “In truth, we have no real comparison point in modern history. For the first time in a long time — no one knows what the future holds, not even the experts.” A White Plains-based surgeon I consider a polymath, Dr. Herbert Gould, said to me, “You’ll get as sound wisdom from stories in the Decameron (set in the great plague) as you will be any business journal, because, frankly, nobody knows.”
It now brings us back to the question of post-COVID consumer behavior patterns, consumer confidence, and the Five Year Plan. I have my own Luxury Goods Purchase Index. It is the price of the fake gold Rolex watches ads that flood my e-mail inbox every day. The timepieces look great but will turn green on your wrist.
The price yo-yos from $85 (when the sellers feel the market is strong) to $25 from street vendors on Fifth Avenue when confidence was at its nadir. This fluctuation in price reflects two things: consumer confidence in a micro view, and the supposed pro-COVID change in consumer attitudes towards flashy junk, which is supposedly passé.
I realize it is an unreliable index but is probably as good as any other. Today the asking price is $35.