The top luxury trends worth monitoring in 2023….
Throughout the turbulence of the last few years, the luxury sector has remained resilient and shows no signs of slowing down as we move towards 2023. A union of societal transparency, digital innovation and changes in distribution has not only enticed a younger clientele but altered the persona of luxury retail for the masses.
According to the latest Bain & Company report, luxury goods brands are not only showing exceptional growth but are also ‘a leading role in the world’s ongoing sustainable and digital transformation’.
Though 2021 was a tough year for many sectors, the luxury market bounced back quickly and efficiently throughout 2022, possibly more so than any other sector. But while the fundamentals of the market look brighter than ever, luxury brands are not exempt from the global challenges which face us all. From consumer expectations and a cost-of-living crisis through to our collective concerns for the planet, these challenges will profoundly alter the face of luxury in the coming months.
In a bid to overcome these challenges and thrive in the years to come, luxury brands have begun to rewrite the story of who they are and how they appeal to a modern consumer. At the heart of this change is a relinquishing of control, with luxury brands taking a step back from complete ownership, allowing their consumer base to influence product ranges, marketing campaigns and conversations.
We delve further into the market in our Luxury Retail 2023 whitepaper but let's take a quick look at the trends worth monitoring as we enter a new year...
The New Consumer
While traditionally recognised as a status-symbol or an exclusive club for the wealthy, the recent success of the luxury market could not be further from this. In fact, true luxury now has little to do with the ownership of a logo and everything to do with value – or more strictly, value over belonging. And while quality still plays an important role in the luxury market, the new definition of ‘value’ is now closely linked to purpose, richness in experience, environmental responsibility and community. And not only do these trends define the value of a product, but they also determine the overarching success of luxury brands in this modern era.
And it is, without a doubt, a younger generation of consumers who are leading this shift in purpose. As digital natives with a disposable income, their purchasing power is somewhat enviable. However, these millennial and gen-z shoppers are not satisfied with building a collection of exclusive logos. Instead, they have been deemed ‘value-based shoppers’, choosing to pursue luxury brands who inspire creativity, lead sustainable ideologies and promote inclusivity from their very core.
These affluent next-gen consumers the largest segment of luxury buyers and it is expected that “70% of luxury sales will be made by Gen-Z and Millennials by 2025”. But most importantly, these consumers have the power to determine what constitutes luxury, harnessing the power of social media to elevate - or potentially cancel - a brand. To avoid stagnating and promote growth, luxury brands must realise that the importance of these younger generations and adapt their rulebooks to seamlessly engage with this new wave of consumers.
Changes in Distribution
The pandemic quite literally closed the doors in physical retail in 2020 and while most stores have fully reopened, we’ve witnessed significant changes in the distribution of luxury goods. However, the measurement of footfall vs online sales in no longer enough to determine the success of a luxury brand. Instead, we must consider the consumer demand for a seamless experience – to be able to shop anywhere, anytime. It is not a question of physical vs digital retail; it is ultimately both. This shift towards a fully seamless experience lies a complex discussion surrounded distribution.
First, we consider the power of online shopping. Bain & Company forecasts that online sales will become the most effective channel for luxury goods by 2023, ‘accounting for 30% of the global market’. The objective is simple: create an enviable social media experience, drawing consumers into the heart of your luxury brand before seamlessly transitioning them to your e-commerce platform for a sleek, uncomplicated purchasing experience. When this is achieved, there is no question that a third of all sales could be attributed to digital media in 2025.
Secondly, we look at the current state of physical luxury retail. Not only did stores reopen post-pandemic, but the same Bain & Company report above predicts that physical retail will continue to account for 28% of luxury sales moving forwards. Luxury retailers are continuing to invest in the most important aspect of all: an unforgettable and unique in-store in-store. See our Luxury Retail Report 2023 for our selection of best in class luxury stores. Across Europe, a large quantity of these experiences take place in department stores such as Harrods, Selfridges, Galeries Lafayette and Liberty London to name a few. However, there is a change on the horizon for these department stores. Steve Sadove, former CEO of Saks, predicts that high-end brands will demand more control over their own destiny and ‘rather than sell into stores wholesale and lose margin, power brands are going to pay rent instead.” This revolution will not see us move away from department stores, but change the economic relationship brands have with them and ultimately create a deeper bond between shopper and brand.
As well as these more permanent locations, we can’t forget the power of the pop-up store - but more on that later. Across a variety of formats, it’s clear that the importance of physical retail remains undisputed in the luxury market. To conclude, the changes in distribution are ultimately decided by the consumer. While Instagram and TikTok dominate the social stratosphere right now, 2025 could be witness to an entirely new model of social commerce; navigating a new path for luxury brands striking to reach their younger clientele. However, with a high percentage of luxury transactions still occurring in-store, it is clear to see that the dual desire of shoppers is still strong. Therefore, the success of the luxury goods market in the future is very much rested on a unified experience across multiple channels, delivering on expectations both digitally and physically.
Future Forecast: Luxury Retail Report 2023
We continue our Defining Luxury forecast in 2023, delving deeper into the top trends worth monitoring in the new year. Including:
Gamification and the Metaverse
The Power of Pop-ups
The Future of Luxury Brands
For more insight into the latest trends impacting brands, retailers, grocers and more, email firstname.lastname@example.org.