Luxury is back in fashion. With an overall growth of 5% of the luxury market in 2017, to an estimated €1.2 trillion global worth and most luxury segments experiencing positive growth, it can be said that luxury goods are definitely at a high request. Shoes, jewelry and handbags ranked as the three fastest-growing product categories, increasing by 10%, 10% and 7%, respectively, at current exchange rates. Clothes, grooming products and handbags still make up the largest part of global luxury purchases, amounting to €61 billion, €54 billion and €48 billion, respectively — and collectively representing 62% of the personal luxury goods market. In 2017, almost two-thirds of all luxury brands (65%) experienced growth, up from only 50% in 2016. This is definitely the mark of a growing trend: luxury is sought, which means that companies need to create new, exciting products and experiences and to walk the fine line between the timeless quality and the modern edge that characterizes luxury goods.
Digital vs. physical
One of the strongest trends in the luxury market is the growth of digital experiences. This has more significances than one. Firstly, there’s a steady growth of online sales; in 2017, online sales for luxury goods have increased by 24%. However, most luxury shopping is still done in person and the people who order things online often want to see and touch their products before committing to them.
However, the shopping experience is not the only thing that defines the digital luxury. This can also mean a whole digital platform where people can learn about their products. For example, traceability, where a customer can see who made their product and where is a big trend. Whether a product is genuine or not is also a major concern for luxury buyers.
Also, the motivations for owning luxury products, their backstories and cultural meaning are also supported by digital endeavors. In a world where quality is more and more common and accessible, people want products with strong backstories and social importance.
Standardization vs. personalization
Luxury today is not just about having top quality clothes, bags or other products, but it’s also a lot about making it your own. Some brands are going to the extreme where they offer 100% customized products, but many shoppers don’t want something completely individual, but a personalized version of something made with the knowledge and taste of the designer and that has a personal touch. Thus, inscribing your name on your bag for example is something many people want and will want to do.
Home vs. travel
The luxury market is a global market, but it is segmented strongly into domestic shopping and abroad shopping. Countries like France, Italy, the UK, the US, etc. are still the major players in the luxury market and will remain so for the upcoming seasons. However, there is a strong focus placed on shopping while traveling or abroad, even for those who live in these countries. For example, when it comes to British luxury customers, half of the products they buy are while traveling. UK-incorporated multinational professional services network Deloitte published a report according to which, 15% of luxury goods are bought at an airport. When it comes to consumers from emerging markets, the proportions for shopping abroad or while traveling (meaning in airports) rises to 60%.
Selling at airports is also a very easy task. You can basically predict the flow of customers. For example, at Heathrow, World Duty Free Group uses flight data to make sure speakers of the right languages are available along with the right goods for the market. Also, according to the Economist, Courvoisier and Hennessy are heavily displayed for flights to Barbados in the morning, only to be replaced by cheaper brands for afternoon flights to countries like the USA and Norway.
L’Oreal places a very high emphasis on their airport retail too. Their airport sales are so important to their bottom line that they refer to airports as the “6th continent”.
The place where one buys luxury goods is also relevant. Asian markets are at the moment more expensive; even though the Hong Kong and mainland China markets are seeing a small slowdown in luxury sales.
Prices in the UK have also gone up a little, after the big news of Brexit; which lead to a slight devaluation of the sterling.
The Middle East also continues to be a strong contender on the luxury market. Places like Dubai and Abu Dhabi are very attractive for luxury brands and, due to the heavy tourism in the region, they perform very well. The economic changes and uncertainties of the region however have generated a slight slowdown in luxury shopping, but nevertheless, these places have a strong standing in the luxury market.
Upcoming markets such as Russia or Latin America, who have a luxury sector that is rather small are still making efforts to maintain themselves in the game. Russia is a more stable market, while Latin American consumers are becoming more conservative with their purchases. The decline of the Mexican peso for example has determined many consumers to be less outgoing in their luxury purchases.
Other markets where luxury brands are not represented or where they are very little represented, such as Eastern Europe, Africa or certain parts of Asia do not seem to enter the flow of luxury shops soon, since there is still not a strong local market for such goods in those countries. Luxury shoppers from these countries usually travel to places like France, Germany, Switzerland or the US to make their luxury shopping.
Blockchain
Blockchain technologies are on the rise in all sectors of culture and the luxury market won’t go unaffected. We’re expecting to see an increase in blockchain authentication for luxury goods. It’s very likely that over the next seasons, we’ll see more and more brands hand out QR codes along with their products. These codes will contain a digital certificate of authenticity. Thus, the buyer will not only get a story of the product but will also have a reliable audit trail and evidence that the product is original.
Thus, blockchain technologies can help fight fraud not only in domains such as banking, but also in fashion.
Moreover, since blockchain is the technology on which cryptocurrencies such as bitcoin are based, we’re most likely going to observe an increase in fashion-related cryptocurrencies, or, in general, decentralized currencies connected to the luxury market.
According to the 16th edition of the Bain Luxury Study, published by Bain & Company for Fondazione Altagamma, we can expect the growth of the luxury market to continue at an estimated 4%–5% compound annual rate over the next three years (at constant exchange rates), with the market for personal luxury goods reaching €295–€305 billion by 2020.
Fraquoh and Franchomme
Further reading:
Dream brands: Which one’s yours?
What differentiates luxury goods?
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