Six consumer trends that will affect the personal luxury goods sector into the 2020s
An AltoPartners Global White Paper showcasing the changes, and challenges, within the Luxury Goods sector
You can get it here.
1. Less flash, more cash.
Middle class aspirational spending power means that “flashing some Louis” as the Gen Zees would say, is no longer the status indicator of ultra-high net worth individuals are favouring more discreet ways to signal wealth. As a result, in 2017, spend on experiential luxury (furniture, food, wine, and hotels and exclusive vacations) accounted for 64% of total luxury spend in Europe. Increasingly the biggest luxury is being able to enjoy your wealth in secure, non-judgmental surroundings, which accounts for the appeal of by-invitation only private clubs, where a luxury villa or yacht or exclusive destination is part of the membership fee. The emphasis is not on ownership, but access to a secure, exclusive network. This extends the First-Class experience to wilderness retreats, golf courses, waterways and ski slopes, where queues, crowded parking lots and canteen food are banished in favour of lift attendants who greet you by name. The most famous examples of these include the Cimarron Mountain Club and Yellowstone Club in the US, and ultra-elite private game reserves such as Thanda Safari Private Game Reserve and The Royal Thanda Club in South Africa.
“We are masters at crafting experiences. We do not only sell bottles of champagne – we sell luxury moments of togetherness and special celebrations.” Moet Hennessey
2. Zen and the art of luxury – which is not to say that consumers are abandoning luxury.
What has changed, is the move from hedonistic self-indulgence to a political act of self-care. From “you’re worth it”, to “you need this to grow as a person”. The rise in meaningful materialism is a gift to luxury brands who know what to do with it.
3. From ownership to access – cheaper and greener
Oxfam’s Second-Hand September is a direct consequence of the fashion industry failing to heed the sustainability cry, leaving retailers scrambling to become eco-friendlier. Growing awareness of the environmental risks posed by a throw away economy has seen a rise in the popularity of rental agencies as well as resale platforms such as The RealReal, selling everything from pre-owned clothing to jewellery, watches, fine art and home décor. Previously restricted to the high import tariff environments of emerging and frontier markets, second-hand retailers are gaining ground in the high street - growing 21 times faster than the wider retail market over the past three years, according to research complied by GlobalData for online retailer Thredup.
4. Getting Woke: sustainability gets a makeover
Shareholders and consumers are demanding accountability from their favourite brands, from disclosures on animal testing to ethical supply chain practices to sweat shop labour and carbon footprints. Expect to see more sustainability reports (Chanel published its first sustainability report at the end of June 2018) as luxury brands appreciate the need to communicate their values to stakeholders in clear and unambiguous ways. Big opportunities exist for brands who can embrace the circular economy, a system that endeavours to protect resources by using less, wasting less, and recycling more; as well as those prepared to leverage their considerable brand power to make a positive impact on society through active support for social and environmental issues all along the value chain.
“Clients expectations have changed – it’s all about transparency - they want to know how cosmetics are produced. Do the brands we sell try things on animals? Are the ingredients sustainably sourced?” Sephora
5. Data protection – how safe are your Cookies?
Consumers expect brands to represent the best of the best, not only in terms of craftsmanship and quality but in terms of ethical decisions around creative integrity and data protection. For transgressors, social media retribution is often swift and brutal. As the push to mobile and e-commerce intensifies, so too do the risks associated with managing and protecting personal data. Brands will need to be more transparent about how they manage, use and protect data, requiring unprecedented levels of transparency from an industry notorious for its reluctance to share trade secrets.
6. The power of the flawed influencers
It’s no secret that consumers (millennials in particular) prefer third party endorsement of a product or brand, hence the meteoric rise of the social media influencer. What’s new though is the overwhelming consumer preference for authenticity over perfection (think Kim Kardashian and the Duchess of Cambridge). The best influencers are unashamedly true to themselves, no matter how provocative their views or actions. It’s a risky all or nothing strategy that can have brand managers on a Twitter knife edge, but the numbers speak for themselves.