We have looked through the literature on the topic of Digital Luxury from some of the leading research companies to bring you a condensed insight into the future of the luxury retail market.
e-Luxury is on the up. According to Luxe Digital, online luxury sales, as part of the total global luxury market, are set to triple by 2025 to an estimated 91 billion USD. The digital luxury market is and has always been defined by continual change and interconnectivity – between real-world and online channels, and brands and customers – obliging retailers to be agile, tech-savvy and always one step ahead of the game if they want to maintain their share of the market.
This constantly evolving landscape makes predicting future trends a somewhat perilous task, however, we’re putting our cards out on the table, to share what we expect to see in the coming years.
The ever-growing importance of digital interactions
Online channels will continue to play an increasingly important role in purchase decisions. McKinsey predicts nearly a fifth of global luxury sales will be online by 2025 while Bain believes nearly all luxury purchases will be influenced by online interactions by the same date.
The emergence of the Chinese market
Both McKinsey and Bain & Co agree that Asia is emerging as a new growth engine for e-luxury. Chinese consumers are leading this upwards trend, with a 33% share of global luxury spending (up from 32% in 2017).
The Chinese market will continue to drive growth in the luxury segment.
[Source: Bain & Company]
New ways of accessing luxury goods
Though in their early days, disruptive services are redefining luxury fashion. Renting exclusive ready-to-wear and accessories, companies like Drexcode and Rent the Runway are proving a popular way for consumers to experience luxury fashion goods.
The second-hand market is also on the up, growing 9% since 2015. These disruptive trends are set to grow.
Greater inclusivity & diversity
To remain relevant now and in the future, brands will need to recognize cultural and size preferences. Modest fashion for Muslim consumers represented approximately 40% of luxury women’s ready-to-wear in 2018, while plus-size fashion accounted for about 20%.
Luxury fashion consumers are also getting younger with 33% of total luxury purchased by generations Y and Z in 2018. This segment has strong values which shape their purchase decisions: a Drapers report found that 48% of generations Y and Z had abandoned a purchase because a brand or retailer did not fit with their values. We believe this will transform into greater inclusivity and diversity and more ethical, sustainable philosophies.
The evolution of the C2C economy
e-luxury is increasingly becoming a customer-to-customer (C2C) economy according to McKinsey and Bain & Co. As luxury shoppers share their purchases on social media, they are evolving into a marketing channel in their own right. Brands will need to find ways to optimize this content, which is essentially co-created with their customers, rather than managed by their marketing department. Moreover, driven by aspirational consumers as well as environmental concerns, there is increasing activity in the “second-hand market”, which is consolidating through a plethora of platforms designed to enable such transactions. This may have implications for how consumers experience brands – i.e. not directly, but rather through the products themselves. We are yet to see what kind of impact this will have on brand value over the longer-term.
Take-away: For brands to weather the vicissitudes of the future and stay on top, they need to get even closer to their customers, understand their perpetually changing needs and bridge the gaps between the real and digital worlds with new and disruptive technologies that reconceptualize the current status quo.
To discover more and take part in the discussions about the future of the sector, we invite you to take a look at the eLuxury Summit: an event by Netcomm Suisse focused on the future of the Luxury world. See here for more.
McKinsey: Digital Luxury Experience 2017