×
Advertisements
Translated by
Nicola Mira
Published
Nov 26, 2021
Reading time
5 minutes
Share
Download
Download the article
Print
Click here to print
Text size
aA+ aA-

Luxury: how can sector deal with radical rejuvenation of clientèle?

Translated by
Nicola Mira
Published
Nov 26, 2021

The luxury goods market is facing a profound demographic change, and is compelled to reinvent itself. Baby-boomers are on the wane, Gen X consumers are fewer in number, and the sector’s customer base is undergoing a radical transformation, with younger generations surging. Luxury labels therefore need to change the way they listen to, communicate and engage with the market, compared to the recent past. Above all, they need to embrace a new role, according to the latest report by consultancy firm Bain & Company, carried out in partnership with Altagamma, the association of Italy’s top luxury brands.


Young consumers are severely disrupting the luxury sector's strategies - photo by Anthony Fomin on Unsplash


The market share of Gen Z consumers, born between 1996 and 2015, will grow from 8% in 2019 to 20% in 2025; that of Gen Y consumers, born between 1981 and 1995, will rise from 36% to 50% in the same period. In four years, 70% of luxury consumers will be aged below 40, and this cohort will have contributed, over this time period, to 180% of the luxury market's growth.

“We are witnessing a radical rejuvenation of the consumer base. In 2021, 50% of the market's [revenue] was generated by people who had never bought luxury goods before 2019. Nowadays, this clientèle is increasingly diverse, and strongly influenced by its cultural attitudes. It’s becoming tougher and tougher to cater to. It's a challenge for the industry, because demand is extremely diversified,” said Federica Levato, one of the study’s authors.

Digital tools have become hugely influential, and the younger generations are constantly using them, so that the luxury industry’s business model has evolved into an ecosystem comprising multiple points of contact between consumers and labels. In each instance, labels need to feature specific content, and present a consistent brand image. In Levato’s words: “The role of shop assistant no longer exists, and has been replaced by that of a consultant that guides the customer through each of these points of contact.”

Moncler’s boss Remo Ruffini, speaking at the debate organised by Altagamma for the study's presentation, said: “It means we must work in a very different way. Sometimes, I have the impression I’m a DJ! In the past, we focused on a single sales channel, and we worked on a seasonal basis. Nowadays, everything is magnified: the pace, geographical reach, distribution networks. We must chase after consumers to offer them experiences, we no longer rush to the shop to sell them a jacket, while these experiences must be as captivating online as they are in-store.”

Twenty years ago, the luxury market was shaped like a classic pyramid, segmented according to price bracket and consumer target: at the base lay affordable luxury, while the tip was reserved to the highest, most exclusive luxury products. Nowadays, the market is oval-shaped, and has fluid boundaries, through which customers enter and exit from all sides, the study argued. Indeed, the traditional market segments and the various product categories do not have the same significance any more. “They are no longer representative of luxury labels’ strategies, and they are no longer the only means to generate profitability,” said Claudia D’Arpizio, partner at Bain & Company and co-author of the study.
  

The new personas the luxury industry needs to target - Bain & Company - Altagamma


“These days, consumers are attracted by brands that inspire them, within which they find a kind of giant matrix of motivations, including product categories, prices and more. The products’ functional aspect is only of relative importance. Consumers buy them for other reasons, through emotional engagement, and they can all be equally profitable for companies, whether apparel, accessories or footwear,” said D’Arpizio.

Proof of this, according to D’Arpizio, lies in the huge success of what she defined as hero products. “Certain iconic articles, whether a prestigious handbag or a pair of statement sneakers, can single-handedly account for sales worth €1 billion or even €2 billion. They are fully fledged brands within the brand. In this case, it's not the footwear category as a whole that generates business, but a specific shoe model. Equally, it's not the handbag category that does so, but one single signature article,” she added.
 
Besides this, sustainable development is increasingly an essential driver in the choices consumers make, in favour of one specific label they regard as more environmentally friendly than others. Respect for the environment is becoming key in the luxury sector, as shown by the boom in the resale market, which Bain & Co. estimates is worth €33 billion.
 
In this context, a brand’s logo remains a strong marker of belonging. Not as a symbol of status and wealth but because, through the logo, consumers are able to define their choices and signal their association to a brand that embodies their values. “Consumers wear brand logos with pride, because they convey a label’s message or its creative director’s attitudes. There is a very powerful osmosis between consumers and brands,” said D’Arpizio.

According to her, this trend will prompt the luxury industry to morph into a “broader cultural sector.” Initially mere manufacturers of luxury goods, then retailers, then gradually evolving into multimedia companies, luxe labels are now akin to “platforms with an increasingly extensive range of content, harbouring creativity and consumers, linked together by co-design.” D’Arpizio added that “labels are becoming cultural players in the true sense of the word, able to promote values within civil society, taking on a quasi-political role.”


Cultural relevance and values are crucial in influencing luxury goods purchases - Bain & Company - Altagamma


This new role is not an easy one to embrace. Until now, the luxury market’s growth has gone hand in hand with the distribution of wealth, as the purchasing power of the middle and affluent classes has steadily increased. “Wealth is extremely polarised nowadays. This is becoming an element that ought to concern luxury corporations, because it pits those who can afford certain purchases against those who can’t,” warned D’Arpizio.

“The sector has survived unscathed the epochal crisis triggered by the pandemic, but question marks remain on the horizon. Surely, the [luxury] industry will need to tackle the issue of social inequality. It won’t be easy to solve the dichotomy between luxury purchases as symbols of social success, and the new philosophy of brands that put social ethics and culture at the core of their strategies,” she concluded.

Copyright © 2022 FashionNetwork.com All rights reserved.