Five trends shaping the global luxury landscape
The luxury industry has been among the hardest hit by the COVID-19 pandemic. As the global economy shrank by more than 3% in 2020, luxury sales were hit hard, with overall value dropping 14%. However, almost three years later, and the outlook is more optimistic, the latest data from Euromonitor International on luxury goods reveals that the industry is expected to register growth in real terms of just under 6% compared to to 2021, to reach $1.2 trillion in sales by the end. of 2022. Overall, the global outlook also remains positive, with the latest forecast data from Euromonitor International suggesting that luxury goods will surpass pre-pandemic levels by 2023.
This is hugely impressive against a backdrop of continued political and economic instability and the lingering effects of the pandemic. However, with the recovery unfolding faster than expected, the industry is now facing further headwinds related to uncertainty in Ukraine and runaway inflation rates, leading to higher production costs and new problems. in the supply chain, not to mention weakening consumer spending as the cost of living crisis takes shape.
Improving supply chain resilience is the priority for luxury players
The pandemic has exposed the vulnerability and limitations of the globalized luxury goods supply chain. The disruptions caused by the pandemic and shifts in consumer behavior have forced players to rethink almost every aspect of logistics and routes to market. Among other things, major disruptions have been caused by factory closures, raw material and shipping costs, overly concentrated supply chains, a lack of a strong digital presence, and problems reaching the consumer at home.
Over 40% of companies in Euromonitor International’s Voice of the Industry survey (conducted in February 2022) agreed that investing in supply chain automation and new technologies was key to preventing risk future. In the same survey, more than two-thirds of fashion and luxury respondents plan to increase supply chain investment and one-third plan to work on localized production. To put this in a global context, China currently accounts for almost half of the world’s production of textiles and leather products, but this is expected to fall to a third by 2030. Going forward, supply chains ‘supply of luxury goods should be shorter, greener, more diverse and digitized.
Planned 5-year corporate investment initiatives 2022
Source: Euromonitor International
Industry plans to invest more in localized production
Source: Euromonitor International
The need to unleash the full potential of omnichannel strategies is accelerating
While the pandemic has permanently changed how, when and where we work, it has also changed how, when and where we shop. There was already a huge digital shift before the pandemic emerged. However, the need to unlock the full potential of an omnichannel strategy has simply accelerated. According to the latest data from Euromonitor International, online sales of personal luxury goods accounted for just 11% of all sales in 2019, but as consumer habits change, this figure is expected to reach 20% by the end of the year. end of 2022.
Beyond e-commerce, technology is reshaping the world on almost every level. More and more consumers are joining the Metaverse movement, online gaming is on the rise, and lives will shift more between the physical and virtual worlds. Luxury companies need to understand their role in how to increase brand recognition and revenue in the metaverse. Indeed, the next fashion retail revolution is set to move from D2C (Direct to Consumer) to D2A.
Luxury hospitality and retail return to focus on affluent tourists again
After a long hiatus, attitudes towards travel are expected to normalize in the medium term and luxury hospitality and retail will once again turn their attention to the affluent international tourist.
Indeed, experiential luxury (which includes luxury hotels and luxury dining) is the fastest growing category among luxury goods in 2022. This category is expected to benefit from the lifting of travel restrictions, pent-up consumer demand and the expected return of affluent tourists. This marks a major turning point for living with the virus and it would seem that society is gradually heading towards an endemic phase. However, the mass tourism model which saw record sales in 2019 has been heavily exposed during the pandemic. In a post-pandemic world, an increasing number of consumers are demanding value-driven, purpose-driven offerings, and they’re taking fewer vacations, but spending more time and more money. Decarbonizing luxury travel and hospitality will be key to protecting the ecosystems and communities that rely so heavily on luxury tourism.
Nevertheless, the recovery there remains uneven and nearly three years later, the effects of the pandemic remain visible. Tourist spending on personal luxury is still down across all markets and according to Euromonitor International’s latest travel date, global inbound spending is still just 45% of pre-pandemic levels. The outlook has been clouded by the war in Ukraine.
Importance of Holistic Health Fuels Demand for Luxury Wellness Proposals
In the context of a pandemic, the focus on health and well-being is now integrated into all aspects of consumer lifestyles. Growing awareness of the importance of holistic health is fueling demand for luxury wellness propositions, with many luxury companies already benefiting from the more health-centric consumer.
According to Euromonitor International’s latest Consumer Lifestyles Survey (2022), 37% of respondents globally plan to increase their health and wellness spending over the next year and 63% of respondents worldwide exercise at least once a week. A shift in socio-economic, behavioral and consumption patterns will encourage more luxury brands to focus on the physical, emotional, mental and spiritual well-being of consumers.
Luxury products must join the dynamic of ethical and social responsibility or be left behind
Environmental, social and corporate governance (ESG) has entered the corporate lexicon, and investors in luxury goods companies are holding CEOs accountable to ESG goals. The impact of the pandemic has led many brands to resist returning to the volume-driven model and companies are looking for ways to operate more sustainably, but there is still much to be done.
Today, a growing number of consumers buy from companies that share their ESG goals and are quick to hold companies accountable for ESG missteps. However, although the pressure on companies to act is there, less than a fifth of industry experts in Euromonitor International’s Voice of the Industry survey (2022) say they have a net zero strategy in place. .
Diversity, Equity and Inclusiveness (DEI) is also now high on the agenda. Young consumers, in particular, are challenging commercial standards for luxury goods and, above all, demanding equal opportunity, diversity and social inclusion. There is a clear focus on luxury goods to determine how the move to DEI aligns with ESG. Today, it is no longer about exclusivity (not limited to its buyers) but also about awareness of supply chains and how brands are marketed to ensure representation in content delivery and l ‘imagery, but as competitors become more goal-oriented, luxury brands must get on board or fall behind. The Black Pound, Pink Pound and Purple Pound are more important than ever to ensure inclusivity in luxury goods to appeal to these consumers.