As we near the end of our report, we take a more detailed look into the data behind our findings, looking at the trends and insights that emerge from the numbers. In this part of The Deep Dive, we look at the results from our community survey, taking into account the perspectives and insights from you, our loyal readers in the luxury industry, to help confirm whether luxury’s rebound will last in the long term or not.
With 2021 ending on an uncertain note, due to the ongoing challenges thrown up yet again by another variant of COVID-19, many of our respondents who took part in the survey at the end of the December and early January helped portray a positive picture for the outlook of the luxury industry.
The most recent set of company earnings from luxury groups earlier this month, also showed that demand from consumers is on the rise. In an unscheduled trading update on January 18, Prada said its group sales in 2021 grew by 41 percent at constant exchange rates to €3.4 billion, 8 percent above the levels seen in 2019. LVMH which posted revenue of €64.2 billion for the full year ended December 31, up 44 percent and Richemont said strong demand for its jewellery and watches in the Americas and Europe, helped it record a 32 percent rise in sales to €5.66 billion in the third quarter ended December 31.
The results amplify the sentiment of our respondents, where more than 85 percent of 112 people answered that they felt either optimistic or cautiously optimistic about the long-term prospects of the luxury market, with 49.5 percent answering they were optimistic about the long-term growth of luxury, and 36 percent of respondents who answered that they were cautiously optimistic.
On a scale of 1 to 10, 38 percent of those surveyed said that they felt positively about 2022, slightly above the average rating of 7.7, with an additional 17.1 percent and 10.8 percent answering higher on the scale.
When it comes to the growth drivers of the luxury market in the long-term, 74.5 percent of those who answered ranked digital innovation as the most important, followed by local customers as the second with 60 percent, sustainability came third with 52.7 percent, second-hand luxury fourth with 47.3 percent, travel and tourism came fifth with 32.7 percent and the positive macroeconomic environment in last place with 30.9 percent.
As one of our respondents succinctly wrote: “Luxury brands will always find a way to adapt to the ever-changing market fluctuations as long as they continue to listen to their customers’ needs. They have the means to use different, innovative tools to reach and inspire their fans, be it digital or in-store, communicational or interactive… as long as they are fast to adapt.”
It is important however to note that on the other side of the coin, as another respondent wrote, “the rebound we have seen from 2021 has been very strong, which may make it difficult to add further growth to what we have seen posted so far in the financial results.”
Looking at geographies, many of the respondents believe China will remain the key driver for the luxury market, with 88 percent ranking the nation as the top country for growth, followed by the United States at 63 percent, the United Arab Emirates at 58.3 percent, France at 24.1 percent, Italy at 18.5 percent, Russia at 18.5 percent and the United Kingdom 16.7 percent.
“The focus on the domestic consumer makes for healthy brands, with strong customer understanding and relationships,” wrote a respondent. “When tourism does return in the next 1-2 years, this will be the icing on the cake to push the recovery further.”
On a brand level, Louis Vuitton was ranked the highest out of 18 brands listed on the survey, followed by Chanel, Hermès, Gucci, Balenciaga, Cartier, Christian Dior, Bottega Veneta, Burberry and Rolex.
The majority of those surveyed said they believed that creativity was key to their success, with 71.2 percent citing it as the key reason behind the success of these leading brands. Agility to react was voted second most important to success with 67.6 percent, followed by ability to invest at 51.4 percent, understanding of customer data at 48.6 percent, company mindset at 45.9 percent and a focus on local customers at 23.4 percent.
The past year has seen consumers turn to leading luxury brands as listed in our survey, and their iconic products. Exclusive data from DLG conducted for The Deep Dive found that interest in iconic products is at an all-time high, with Google searches for “Cartier Love Bracelet” up by 27 percent (3,404,000 searches in 2021) or by 20 percent for “Louis Vuitton Neverfull” iconic bag (1,655,000 searches for this query in 2021).
Of the challenges that some luxury brands face, 71.8 percent of respondents answered that being slow to react to market changes was one of the main challenges faced by brands in the industry, followed by being slow to embrace digital (64.5 percent), a lack of creativity (5.1.8 percent), company culture (47.3 percent), company mindset (44.5 percent), lack of investment (31.8 percent), and internal infrastructure (26.4 percent).
In spite of the uncertainty that 2022 may bring, our respondents believe that demand for luxury will remain constant, citing younger consumers, a rise in disposable income due to limited travel, and a thirst to connect and engage with brands in new and different ways.
Our survey helped us to discover how optimistic many of you, our readers, are about the future of luxury, where you believe growth will be driven from, and what lies ahead in the coming year.
The majority of respondents answered that brands that have responded to the crisis with creativity and agility have clearly benefitted from the digital revolution that accelerated further during the beginning of the global COVID-19 pandemic.
And for those that have continued to invest in different areas where they believe growth will come from: be that on local customers, or internal infrastructure, or for the more daring: the metaverse, the opportunities remain abundant.
So, what lies ahead for the luxury industry in 2022? What can we learn from luxury’s rebound last year and how can brands plan for the future?
Stay tuned for last instalment of The Deep Dive and the full downloadable report here on Luxury Society.
Welcome back to The Deep Dive, a new series from Luxury Society that takes an in-depth look at the big issues and topics affecting the luxury market, and how the industry has responded to them.
Through a series of interviews, exclusive data, and market analysis, we hope to provide a comprehensive view of each topic explored, adding to the wider discussions with our own expertise and that of others in the industry.