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Luxury: Progressive values shape traditional category

Luxury

Progressive values shape traditional category

Sustainability becomes the new luxury

The influence of young consumers continued to shape the luxury category, even the very definition of luxury. Although attributes of luxury—design, materials, workmanship, exclusivity—remained essential, their expression evolved to meet the growing desire for products created with respect for people, the earth, and principles of sustainability.

The major luxury brands continued to cater to the limited audience of people whose lives include occasions when haute couture is de rigueur. But they produced more luxury items to meet the needs of people’s everyday lives. Brand heritage resonated most when it was presented with contemporary relevance.

Products displayed logos, but the intended message varied. Some people used logos not to flaunt wealth—this is what I can afford—but rather to express individuality—this is who I am. The sharing economy expanded access to luxury with options more affordable than ownership. At the same time, up-leveling continued as people aspired to reach the next standard of luxury.

Luxury integrated deeper into society as illustrated by the Louis Vuitton partnership with the streetwear brand Supreme, and the creation of the Fenty brand by LVMH and the singer Rihanna.

The expansion of athleisure as affordable luxury also demonstrated this phenomenon.

Chinese luxury shoppers drove a substantial portion of luxury sales worldwide, which declined sharply during the travel restrictions, store shutdowns, and home quarantines of Covid-19. Luxury sales in China surged when the country emerged from the pandemic. The luxury category increased 3 percent in value, compared with a 29 percent increase a year ago.

Sustainability and ownership

Sustainability has become creative territory, as some customers have become less comfortable with products made with exotic leathers or furs. Stella McCartney is introducing apparel made from biodegradable denim. Loewe, an LVMH brand, launched an organic range.

The desire for products crafted with sustainable materials and presented with minimal packaging makes sustainability the new luxury. During the G7 Summit, 32 fashion and luxury brand signed a commitment to reduce their environmental footprint. Among the brands were Burberry, Chanel, the Prada Group, and the Kering Group, with brands including Gucci and Saint Laurent.

To be more sustainable and accessible, luxury brands introduced ways for people to obtain luxury products without owning them. This trend in part responds to the needs and values of younger consumers. The rental model is appealing because it enables people to keep up with trends without a huge investment of money and allocation of limited closet space.

New York’s Bloomingdale’s opened a subscription service called myList that enables people to rent a rotating wardrobe for a monthly subscription fee. Meanwhile, Rent the Runway, one of the original subscription services is opening physical stores.

In a different approach, Selfridges, the London department store, opened a second-hand clothing department in partnership with a resale website. The luxury shoe brand JM Weston created a program called Weston Vintage for refurbishing and reselling its shoes.

As luxury goods pass along to multiple owners, blockchain technology offers a way to authenticate luxury items and limit the risk of counterfeiting, To assure supply chain transparency, LVMH partnered with Microsoft and ConsenSys, a blockchain company, to create a tracking and tracing platform for the luxury industry.

Luxury as experience

Brands instituted new experiential ways to balance access with exclusivity and introduce the brand to younger generations of potential customers. The Gucci store in Florence charged a minimal entrance fee. Similarly, the Dior exhibition, launched in Paris, has appeared a several venues, including London’s renowned center of design and art, the Victoria and Albert Museum.

Because a long brand history alone may not impress younger customers, Brands attempted to present heritage in ways that are relevant to modern consumers, something Burberry did well with stories about founder Thomas Burberry.

Louis Vuitton and Hermès run craft workshops where the public can meet the artists who design and create the branded products. This approach challenges brands to balance accessibility to craftsmanship with protection of intellectual property.

To appeal to new generations of shoppers, Louis Vuitton collaborated with online video e-sport game League of Legends. Gucci created arcade games and Chanel opened pop-up stores called the Coco Game Center in Hong Kong and other Asian locations.

With the acquisition of the travel business Belmond, LVMH added several exclusive hotel chains and fabled railroads, including the Orient Express, all of which aligns with the heritage of the Louis Vuitton brand as a crafter of luxury luggage and travel accessories. Based on the notion that luxury is about appreciating life with the five sense, Louis Vuitton, Prada, and Gucci opened restaurants, linking luxury and food. These venues and luxury stores are designed to be “Instagramable.”

Beyond seeking celebrity endorsements, brands looked for long-term partnerships with individuals who aligned with the brand ideals and projected a presence that was both relatable and aspirational. Kristin Stewart represents Chanel and Charlize Theron represents Dior. Stella McCartney partnered with Taylor Swift.

Meanwhile, the consolidation of the luxury business continued with the acquisition of Tiffany by LVMH. The change in ownership was expected to help Tiffany reinforce its market position and increase the presence of LVMH in the US.

And the possibilities of luxury continued to widen. Louis Vuitton signed a partnership deal with the NBA. And many luxury brands lined up with athleisure partners: Balman with Puma, Prada with Adidas, Dior with Nike. A limited edition of a Dior Nike Air Jordan model was expected to retail for over $2,000.

Covid-19 Impact

Brand equity, China

influence value rise

Luxury is not among the essentials people spent money on while quarantined during the pandemic. Still, of the 14 categories ranked in 2020 BrandZ™ Top 100 report, luxury was among the six that rose in value—not surprisingly, by a more moderate 3 percent compared with the 29 percent increase a year ago. Two primary factors influenced luxury’s continued value growth. Factor one is the power of brand. Luxury brands, compared with brands in other categories, tend enjoy strong brand equity. And strong brand equity adds resilience. The second factor is China. Chinese shoppers account for an estimated one-third of luxury purchases worldwide. Although luxury brand sales declined precipitously in China during the height of the pandemic, when China reopened luxury brands experienced a surge of pent-up demand. And because of travel restrictions, Chinese luxury shoppers purchased in China rather than abroad. As the rest of the world emerges from the peak of the pandemic, two ongoing luxury category trends may accelerate: consolidation and e-commerce.

Brand Building Action Points

  1. Leverage heritage

Unlike many categories in which a long history can be disadvantageous when competing against innovative upstart brands, heritage is fundamental to the luxury category. But heritage is not static. The fundamentals of a brands heritage need to be protected, even revered, but interpreted for each new generation.

  1. Meet the motivation

People desire luxury for a variety of reasons—to appreciate beauty and craftsmanship, to display status, or to express individuality, a motivation for many younger consumers.

  1. Expand experience

Increasingly, customers are engaging more of their senses to experience luxury. They want to see, touch, taste, smell, and hear luxury, which opens brand opportunities in entertainment, restaurants, hotels, transportation, and beyond.

  1. Pursue sustainability

Achieve levels of exclusivity and desirability that define luxury by applying the same high level of craftsmanship and attention to detail to create products made from sustainable materials. This signals the brand’s values and is likely to widen its appeal to a younger audience.