How luxury brands evolving to meet modern customers' needs
Luxury players will need to think boldly to rewrite the rules of the game, transforming their operations and redefining their purpose to meet new customer demands and retain their relevance
image for illustrative purpose
Genuine luxury is something that survives and is able to be passed on to the next generations. Luxury brands are naturally more sustainable and have long set the standard in design, quality of materials, craftsmanship, and processes that stand the test of time. The luxury industry has the power to make positive differences and play an exemplary role in building a circular model that benefits business, consumers and the environment.
Modern luxury brands are evolving their offer to meet the changing tastes of consumers around the world. In some markets the heritage and timelessness of a product represents the ultimate hallmarks of luxury, while in others the focus is on the experience or exclusivity of the service.
After contracting in 2020 due to the pandemic, the market grew by 13 per cent to 15 per cent in 2021 to €1.14 trillion, according to our estimates. However, this is still 9 per cent to 11 per cent below 2019 levels.
The Middle East was another bright spot, with Dubai and Saudi Arabia leading the growth. Europe, Japan, and the rest of Asia only partially recovered during 2021 and have still not reached pre-Covid levels. Their comeback is inherently linked to the resumption of global travel (particularly of tourism out of China). Japan is expected to be back to pre-pandemic levels by 2023 and Europe by 2024.
Overall, online and monobrand stores were the key channels for 2021's recovery and should lead growth in the medium term. After a 50 per cent jump from 2019 to 2020, online continued to power on, thanks to accelerated adoption during Covid-19. Websites devoted to a single brand gained ground on other types of online platforms and now make up 40 per cent of the online segment, up from 30 per cent in 2019.
Bain estimates that the second-hand luxury market soared to €33 billion in 2021, driven by surging demand and an increasingly competitive offer.
Online is set to become the leading channel for luxury purchases by 2025, fuelling the omnichannel transformation.
Luxury brands have faced a year of tremendous shifts, but the industry should come out of the crisis with more purpose and dynamism than before. By 2030, the industry should be drastically transformed. Luxury players will need to think boldly to rewrite the rules of the game, transforming their operations and redefining their purpose to meet new customer demands and retain their relevance, especially for younger generations, who are set to drive 180 per cent of the growth in the market from 2019 to 2025.
The research finds the more a brand is perceived to have an established story, the stronger the perception is of it being a luxury brand. Furthermore, brands known for using quality materials, craftsmanship or for consistently delivering a service that exceeds expectations are also more likely to have a high luxury score.
According to forecasts, shoes grew by 11 per cent compared with 2019 to reach €23 billion, thanks to a switch to casual footwear (although there are signs that women are now snapping up shoes fit for more extrovert occasions). Accessories remained the largest personal luxury goods category in 2021 and grew by 8 per cent, relative to 2019, to reach €62 billion. Strong demand for luxury belts proved not everyone wore sweatpants in 2021 (at least not all the time).
Jewelry reached €22 billion, up 7 per cent from 2019, as the appeal of branded luxury jewelry continued to grow in traditionally noncore markets. Unisex jewels became popular, and the online channel played a key role for entry-level-priced goods and custom pieces.
Watches and beauty grew back to their 2019 levels. The luxury watch market regained its record €40 billion valuation, reflecting solid demand for "über-luxury" and iconic pieces, as well as genderless watches. Beauty recovered to €60 billion, just 1 per cent below its 2019 levels. Skin care was boosted by a wave of pampering, although the weak performance of travel retail is still holding beauty back.
The apparel category grew in 2021, but not sufficiently to close the gap with 2019. The desire for comfort was a theme again, but big-occasion dressing is making a comeback, giving womenswear more of a spark than menswear. As in accessories, logos are back in fashion.
Globally, the data shows the car industry is considered the most luxurious, followed by jewellery, watches, airlines, fashion, hotels and alcohol.
Luxury brands will continue to redefine themselves over the next 20 years by expanding their historical mission beyond creativity and excellence, generating economic growth in a networked economy, contributing to cultural development, and fostering social progress. New keywords and phrases—such as metaverse, personalization at scale, and tech stack—will come to the fore as the industry grows and evolves.
