Like many industries worldwide, the luxury goods market has had its hands full. Many brands are still adjusting alongside the coronavirus, yet the social concerns of customers continue to evolve as well. Here, we’ll take a look at some of the changes taking place in the market and what luxury brands are doing different to meet the needs of consumers right now.
We’ll also contrast how the luxury market looks today versus back in February when we released our 2020 Luxury Brands Industry Report before COVID had sunk its teeth into U.S. and European luxury markets.
Specifically, we’ll take a look at:
- The new look of the luxury market.
- What luxury consumers really want from brands.
- 5 top luxury brands and what they’re doing different.
Before we get going though, here are a few stats we uncovered surrounding the luxury goods market that we think you’ll find interesting:
- According to the Bain & Company Luxury Study 2020, the global luxury market is forecast to contract 20-35% by year end.
- Finishing 2019 with a brand value of $47.2 billion, Louis Vuitton is the world’s most valuable luxury brand.
- The luxury goods market lags in ecommerce with only 10% of watches and 5% of eyewear/jewelry sold online. Prior to the pandemic, luxury ecommerce accounted for only 10-12% of global sales.
- 81% of U.S. consumers believe luxury brands should engage in manufacturing practices that are environmentally friendly.
Luxury’s New Look
With a nearly nonexistent ecommerce footprint by retail standards, luxury brands are in the hunt to figure out how to take luxury online while still giving the consumer the feeling of exclusivity long inherent in the industry. Here’s a look at the online conversation around luxury brands right now.
With a business model that for years was doggedly entrenched in a brick and mortar business model, luxury brands are feeling the pinch from both coronavirus travel restrictions and shifting consumer purchasing trends. How deep luxury brands go into the projected 20-35% decline this year may heavily depend on their success in taking the luxury buying experience online.
However, while social media has opened a window into fashion houses over the past few years, some luxury brands are embracing online in new and creative ways to strengthen those connections with consumers during the pandemic.
For instance, in April Prada introduced its Possible Conversations series via Instagram as one such opportunity to enhance consumer engagement online. By bringing together thought leaders, cultural mediators and fashion figures for dialogues on fashion and the larger cultural conversation, Prada’s new initiative is meant as a “digital iteration and evolution of Prada’s international live event programs.”
By engaging with consumers with content relevant to underlying social and political strains, while supporting UNESCO in the process is a win-win for sure.
These types of heightened connections coupled with a strong industry push to adopt “granular data and advanced analytical tools” shows that luxury brand leaders understand that going online is nonnegotiable.
It feels like it’s been years since February and luxury’s new look is digital like never before.
What Luxury Consumers Want – What They Really, Really Want
In terms of retail purchasing power, Gen Z and Millennials are increasingly steering the ship – and luxury goods are no exception. Being digital natives, they are fluent in ecommerce and social media so as luxury brands branch out virtually, they’ll find them not as hesitant to buy online versus in-store as older generations when it comes to luxury retail.
However, brand loyalty isn’t their specialty, as they know how to find brands that’ll give them what they really want. And increasingly what they want is transparency and sustainability.
Environmental and ethical concerns are on the top of the list and consumers will increasingly eschew a product or brand that doesn’t measure up. And it’s not just a matter of the product itself but an increasing top-down assessment of brands including not only the materials, but the whole supply line itself from sourcing to manufacturing.
Brands that take pains in transparency will fare far better than those that don’t. And what better way to kick off your brand’s social media campaign than engaging consumers on the sustainable practices you’ve put in place to get that shiny new product in their hands.
That said, let’s take a look at five luxury brands that are getting it right.
Back in 2018 Estée Lauder signed the Renewable Energy 100 (RE100) making a commitment to pursue 100% renewable electricity and net zero carbon emissions by the end of 2020. On Earth Day in April they announced that they had already reached their goal in the U.S. and Canada ahead of schedule. And they continue to be vocal on social media to let consumers know about their progress.
Additionally, Estée Lauder is deepening connections with their audience online with live self-care videos on Instagram with top spokesmodels and team members.
Lexus is vocal in its commitment to the environment and sustainability practices. It was the first auto manufacturer to introduce a hybrid vehicle into the luxury space when it released its 2006 RX 400h showing its forward thinking in what matters to consumers.
They’ve continued their commitment to sustainability with initiatives in recycling and programs such as the Lexus Eco Challenge that confronts environmental issues through grants and scholarships to students that submit environmental action plans.
And by touching areas of concern close to the hearts of consumers, it’s earned the jackpot of online love – consumer generated content.
Beauty giant L’Oréal is making moves online and connecting with consumers announcing their plans to achieve full sustainability by 2030. It’s a smart move that will certainly produce ripple effects throughout the industry. Especially since 81% of U.S. consumers say that luxury brands should engage in sustainable manufacturing
L’Oréal also provides a great example of transparency in action – like how subsidiary company Garnier is not only moving in a more sustainable direction with sourcing, packaging and renewables … they’re backing it up those claims with their externally audited Sustainable Progress Report.
It’s a bold move in both transparency and sustainability. And they’re keeping their customers in the loop via social media.
Currently the undisputed heavyweight of the luxury market, Louis Vuitton has instituted broad reaching sustainability measures ranging from CO2 reduction to granular product traceability down to the farm level.
And they’re keeping things interesting online too. Instead of unveiling their 2021 men’s spring/summer collection at Paris Fashion Week, Louis Vuitton created and released a series of videos online entitled Message in a Bottle to do so.
Hugo Boss is another example of a brand that’s on top of its transparency game. Case in point they’ve released their Hugo Boss Sustainability Report yearly since 2013. In it they cover their vision and strategies concerning environmental impacts, employee/partner relationships, products and social responsibility – all through the lens of increased sustainability.
And they are certainly a brand to watch as they’ve made the Dow Jones Sustainability Index three years running. Not only that, they’re among the best-in-class players named to the index from the fashion industry.
As far as online moves, Hugo Boss has tapped into Movado Group’s partnership with Norbreeze, to further its ecommerce footprint and regional reach into the Singapore and Malaysian watch and jewelry markets.
It’s a smart move since prior to the pandemic only 10% of luxury watches and 5% of jewelry and luxury eyewear were sold through ecommerce channels. And they haven’t neglected it on their social media – which is getting a lot of social traction.
There’s certainly a lot more online ground to cover for luxury brands, and top brands won’t stay there by not paying attention. There are balance sheets to consider and the luxury market is being coaxed into the ecommerce realm to put the brakes on forces at play from the global pandemic.
Back in February it was business as usual in a bull market; but today it’s a whole different ballgame in the luxury space.
And the brands that stay on top as they move online will be the ones that embrace next generation artificial intelligence (AI) to build their online strategies. Make sure that your brand stays ahead of the conversation with rock solid market intelligence. Reach out for a personalized demo and we’ll show you how!