Our latest Luxury Sector report 2021 provides an in-depth analysis of the luxury industry, including a sharp focus on its development following a turbulent year for retail (and well, everyone); including the pivotal drivers for growth and where the sector is headed.
Today, we will take a look at some of the prime reasons for growth in the luxury sector in 2020 and beyond. Download the full report here for the complete list of growth drivers, as well as further insight into all aspects of this up-and-coming sector.
1. Social media & influencers
Content-driven marketing has, like with many other sectors across retail, become a significant catalyst for growth in the luxury industry. In particular, social media influencers and celebrities have played a leading role in encouraging potential customers to finalise their purchases, through product placement in Insta-posts, Facebook ads, boomerangs – you name it!
Social media sites, including TikTok, Instagram, and Youtube have all started to become platforms for selling rather than just marketing, meaning users can now buy advertised items from the social platform, without having to redirect to a marketplace, retailer, etc.
Luxury sellers should be aware of this fundamental change to mainstream retail and ensure products are being represented not only on their main website(s) but also across major social media – as these platforms transition towards becoming central to ecommerce sales.
2. Partnerships and collaborations
Partnerships are known to create a new buzz around product, alongside experiences and lifestyle-orientation for its brands. Luxury has been moving towards this trend over the years, often collaborating with travel companies – the most extreme example being 2018 when LVMH agreed to buy Belmond, including its signature hotels, ships and trains.
This fusion of luxury fashion and travel brands was accelerating in 2019, with Armani, Bulgari, Fendi and Ferragamo all putting their brands to work in the hotel sector. 2020 was expected to see the same trend, until of course, the coronavirus came and ruined all our holiday plans (I’m still mad). Surprisingly, this has not halted luxury partnerships, often creating multibrand companies from two or more monobrands seeking to make bigger waves in the market.
As illustrated by the chart above, almost half (46%) of respondents in China most enjoyed that luxury product collaborations involve the release of new styles, while 22% said uniqueness was a key selling point for them. In fact, Chinese cross-cultural agency, TONG found that Gen Z and millennial customers in China look for novel products that stand out from the crowd. At the same time, the research showed that this same age-group are placing an increasing importance on heritage/made in China goods, leveraging current tastes for “national trend” (guochao) products, “cultural creations” (wenchuang) and consumer nostalgia.
Pssst! International luxury brands – you should consider partnering up with local Chinese brands and retailers if you want to be successful in this booming B2C market.
In recent years, one of the biggest growth vectors for the luxury market, particularly around apparel, jewellery, accessories and objet d’art, has been the burgeoning market for used, second-hand and pre-loved items online.
This interest in recommerce is forecast to grow significantly over the next few years – reaching a market value of $64bn by 2024. We can link this back to the increased desire to be unique and express individuality, driven by millennials and continued by Gen Z and Gen Y shoppers. Reusing products is also highly sustainable – an issue which has been spotlighted more than ever against the backdrop of the coronavirus crisis.
With this embrace by these demographics, recommerce offers a great deal of growth potential for the luxury market and online recommerce players have started to draw investor attention.