It is a truth universally acknowledged that the sales of luxury goods have always been based on the heritage aspect that several brands carry, with consumers valuing the history behind each brand and how they evolved during the years.
Luxury sales are still influenced by this feature but even those who consume luxury goods are changing their positioning towards purchases of such items.
Today, the values of a brand are just as important as the tradition upheld by luxury brands. Millennials have helped influence this new approach, with consumers now assessing brands according to their positioning on subjects such as environmental care or inclusive efforts promoting cultural diversity.
Moreover, the shift towards experiences over ownership of products has also been challenging luxury brands on how to proper target consumers and keep them consuming its products and services.
With this in mind, we analyse the trends that affect consumer behaviour across several different industries, looking at the impacts of some of those trends under the luxury goods industry.
Millennials are leading this change, with 48 percent of this generation citing experiences as being more important than things. Under luxury goods, such behaviour has already started being noticeable, with many consumers already opting to spend more on experience rather than products.
From 2013 to 2018, experiential luxury posted an average growth rate globally that was more than twice of that of personal luxury, (4 percent and 1.4 percent respectively in current prices), according to data from Euromonitor. Little wonder that established brands and companies are starting to invest in ventures to take advantage of such trends. For instance, LVMH is following its customers into the world of experience rather than goods, with its acquisition of hotel and leisure company Belmond, increasing its presence in the hospitality industry where experiences remain key.
Luxury car companies are also shifting investments towards providing personal experiences to its consumers instead of focusing on traditional marketing strategies. A number of brands are promoting small adventures to its customers, such as private rallies on exotic locations, so consumers can experience their latest products releases.
Companies are expected to continue increasing their offerings on services and experiences to attract consumers who avoid spending money on physical products and keep them under their pool of clients. The emotional bond resulting from the exclusive products, events and services proposed by some luxury brands represent a “money can't buy” experience that is very unlikely to be provided by ordinary brands.
Consumers are increasingly demanding corporations to become more sustainable and transparent when doing business. Under luxury goods, this trend has already affected many of the companies’ offerings to final customers.
The recent announcement by Prada to stop using fur in its collections reflects this change, with the Italian brand joining other important names in the move such as Burberry and Gucci.
Prada's sustainable line of bags made with Econyl regenerated yarn. Source: Courtesy.
Despite adopting more ethical practices in its business, the luxury goods industry still faces challenges when pursuing for more sustainable materials. The main one may be related to leather. Leather goods sales in 2018 were of $55 billion (€49 billion) globally, representing one of the largest and most iconic segments in the industry. Luxury companies are struggling to find a high-quality material as good as leather. Leather offers versatility, durability and an apparent status that a synthetic material is yet to project.
As consumers become more demanding towards ethical practices, the seek for substitute materials should increase as well, posting challenges for companies to introduce raw materials as good as the existing ones that are primarily sourced from animals. With the current challenges being faced by the fashion industry regarding the reports of unhealthy and underpaid workforce, luxury brands can stand out positively due to their highly qualified specialists working along the whole supply chain and within small factories, that produce few artisanal products that represent relatively low environmental impacts.
Authenticity is an implicit quality when talking about luxury goods. Sales of luxury goods are mostly based on the exclusivity of the brands, since few consumers can actually purchase items under this positioning.
However, even within a restricted group of consumers, brands are challenged to maintain such aspect without sacrificing sales. Some consumers decide not to purchase items from brands that may be considered too accessible or others go after products that are known for being even more exclusive, explaining the success of launching capsule collections or lines made of exquisite materials.
Part of the search for authenticity is also explored through services, with brands providing options of personalisation that result in unique items receiving customised paintings or applications.
As authenticity continues to be valued by several consumers, brands are set to continue offering innovative solutions to enhance such aspect even within an industry where exclusivity is already an inherent characteristic.
In a global market where brands certainly find different definitions of what can be considered authentic, depending on each region’s peculiarities, it is becoming increasingly common that luxury brands divide their creative direction at least between Asian and Western markets, challenging their brand equities in order to adapt portfolios and exceed consumers’ expectations.