The Future of Luxury
This article is part of a mini-series on the future of luxury. Discover how digital is transforming the world of luxury and shaping new consumer expectations.
1. The Year In Review: The Best Of Luxury In 2018. A curated selection of the best stories of 2018.
2. The Future Edition: 6 Critical Luxury Trends To Stay Ahead In 2019. An opinionated take on the most important trends to engage affluent consumers.
2018 was another year of solid growth for the luxury industry. Most high-end brands saw significant sales as their investments in digital started to pay off. The brands that are most forward-looking are indeed dominating our ranking of the most sought-after luxury brands in the world. They are well on track to reach our projection for 2025 with at least 20% of their total sales estimated to take place online.
By 2025, nearly one-fifth of personal luxury sales will take place online.
2019 won’t be as bright, however. Macroeconomic uncertainties loom over the year. With China being such an important driver of global luxury goods sales, the industry will be among the first victims of a deteriorating global trade environment.
Furthermore, a widening earning disparity in the West combined with a generational shift among luxury consumers is causing affluent customers to seek a new and different approach to luxury.
We need to recognize the fact that at a certain point we’re going to slow down, we cannot keep on growing 50-60% per month, it’s impossible.”
– Marco Bizzarri, CEO of Gucci
Wealthy consumers will indeed favour privacy and security through 2019. Bain & Company also found that nearly half of all consumers, and crucially a majority of Millennials, are buying fewer goods and more experiences. Case in point, Euromonitor expects the experience economy, which includes leisure, recreation, travel and food services, to grow from $5.8tn in 2016 to $8tn in 2030.
Luxury brands will need to deliver a new range of services and experiences to answer the industry’s new expectations.
6 critical trends to stay ahead in 2019
So what should luxury brands focus on in 2019 to stay relevant and engage with their affluent consumers? We look at the six most critical trends that will separate the winners from the losers in the coming years.
1. New players, new playbook
Luxury is no longer restricted to legacy brands. We see instead a proliferation of new digital born players and niche brands that are taking the luxury industry by storm. These innovative digital native brands tend to be more capable to meet the changing expectations of the modern affluent consumers. We expect to see the emergence of new luxury brands specifically targeted to various tribes of consumers. Legacy luxury brands will thus need to pivot from ultra-exclusivity to a new flavour of inclusivity to align with this social shift. These digital-first luxury brands indeed don’t have legacy systems and processes holding them back which means they can innovate fast. The rise of these luxury challengers promises to further shaken the once bulletproof traditional luxury market. For luxury brands, it is makeover time, or else.
2. Beyond brand purity
It will be interesting in 2019 to pay close attention to cross-industry ‘contamination’ (collaborations or new offerings that magnify the brand’s DNA rather than distort it) and deep cultural changes and how they are affecting the most traditional luxury houses. Silos are breaking down. This in part why you see luxury retailers such as Net-a-Porter, Saks Fifth Avenue, or Neiman Marcus selling wellness products. Luxury brands will increasingly be reaching outside of their sector from capsule collaborations to strategic creative talent appointments and new business models.
Affluent consumers also are no longer “absolute luxury shoppers”. Instead, they increasingly mix and match the high with the low. This trend appears to fulfil modern affluent consumers’ need to express their own style, over the traditional markers of luxury.
It also means that we will continue to see more collaborations outside of the luxury traditional frontier. Another interesting point to note is the growth of luxury for rent (Like Rent the Runway which is offering access to luxury clothes and accessories on a subscription basis).
3. Millennial minded
To stay relevant in the modern context, luxury brands will further focus on individual consumer and embrace progressive interpretations of the idea of luxury. More than simply a demographic change, luxury brands that will go beyond generationally-targeted efforts to fully understand the new modern luxury consumers’ mindset will be rewarded. Millennial minded consumers are the new driving forces of luxury. Their influence, motivations, behaviours and values will continue to redefine luxury at every touchpoint in their complex purchasing journey – from the brand positioning to sustainable product development, business operations, and marketing strategy.
4. Personalisation at scale
Luxury brands will become ever-more personalised and convenient. Luxury shoppers seek seamless digital and physical experiences. They expect their online interactions with a brand to match their first class offline experience. As a result, luxury brands have to design an impeccable omnichannel ecosystem. In 2019, this will include more experimentation with connective technologies such as Augmented Reality (AR) and Artificial Intelligence (AI). Social media will also continue to play a key role in value-generating, crowdsourced consumer inputs and creative inspirations.
5. Sustainable is core
The stories luxury brands tell will also go beyond the aspirational lifestyle of their consumers. They will be more grounded in authenticity and social responsibility. This emphasis on value-led experiences creates new opportunities to engage with affluent consumers by making a meaningful contribution to their lifestyles while driving positive change in the world. More brands will be investing in sustainable and ethical practices to satisfy the demand from their affluent consumers. This why we have seen a growing number of luxury brands like Gucci, Michael Kors and Diane Von Furstenberg announcing their recent commitment to more ethical fashion practices, including going fur-free. Modern affluent consumers increasingly shop with purpose. They are driven by a commitment to sustainability, they demand traceability and transparency in their purchases and choose brands that drive positive change. Affluent consumers want luxury brands with meaningful backstories. As a result, luxury brands will need to become more vocal about their commitments to sustainability and ethical practices.
6. Inclusive diversity
Finally, diversity and gender fluidity are gaining momentum. We expect to see more luxury brands to experiment outside of the traditional confines of what is ‘for men’ and what is ‘for women’ and celebrate diversity. Luxury fashion houses such as Louis Vuitton, Burberry and Dior have already started to embrace that philosophy. Chanel also just debuted its men’s makeup line, Boy de Chanel, which will likely be followed by the rest of the industry.
- How Europe has become a powerhouse in luxury, by Rachel Sanderson, Financial Times, October 15, 2018.
- 4 Mega-Trends Ahead For The Luxury Market In 2019: Expect Turmoil And Slowing Sales, by Pamela N. Danziger, Forbes, December 18, 2018.
- Established firms try dancing to a millennial tune, The Economist, October 4, 2018.
- Megatrend: Experience More, Euromonitor Research, November 2, 2017.