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According to the American firm Bain & Co, it was already predicted that the world luxury market would contract by 20 to 35% in 2020. But the persistent health risk in many parts of the world and the continuing slowdown of international tourism raise the question of the sector’s future. In France, the luxury industry has not escaped the major changes caused by the crisis, but also by the digital acceleration, the upheavals in consumption trends and the claims for sustainable and ethical luxury. So what are the perspectives for French luxury values? Here are some thoughts on the new aspects of tomorrow’s luxury.
A luxury that will be increasingly dependent on China
China is expected to continue to play a key role in the growth of the luxury sector in the post-Covid-19 era. “By 2025, half of all luxury purchases are expected to be made by Chinese clients, and 28% of the global turnover of luxury groups will be generated in China, compared to 11% today,” says John Plassard, investment specialist at Mirabaud.
Growth will be driven in particular by the middle class, mainly in Asia. “Tourists represent 40% of the luxury business, 60% of the purchases made by Chinese consumers are made during their trips out of China” says Frédéric Ponchon, manager at Sycomore AM.
But still according to him, “it is a part of the activity that will take a long time to recover“. Indeed, the persistence of the health risk in China and a potential second wave, but also the renewed tensions in Hong Kong and in the United States, raise fears of a new closure of luxury boutiques and thus a sharp drop in sales in the second half of the year.
China may therefore be as much a player in the revival of French luxury as it is in its downfall.
A luxury that will be increasingly digital
The current situation has forced the luxury industry to reinvent its retail models and find new growth opportunities via the online channel. While the sector was considered to be lagging behind with only 11% of the sector’s turnover in 2019, containment has been an accelerator and has allowed the most advanced brands to make the most of the opportunity.
This is the case for L’Oréal, which, by developing its digital platforms, saw its e-commerce grow by +52.6% in the first quarter of 2020, and now represents almost 20% of its turnover.
In its first quarter results announcement, LVMH also mentioned the “rapid progression” of its online sales during the period of isolation, but did not communicate the figures.
Luxury brands also sought to maintain their presence via social networks by engaging with stars and influencers throughout the lockdown period, such as Chanel who invited singer Angèle to give a live performance on its Instagram page.
Some estimates even indicate that, by 2025, the channel should weigh 30% of the industry: luxury brands will then be forced to position themselves more strongly on digital in the post-coronavirus era. The appointment of Jean Liu, the president of the Chinese platform Didi Chuxing to the board of directors of Kering a few days ago is not trivial.
A luxury increasingly influenced by generations Y and Z
Luxury brands know that young people are an important source of growth: Millenials or Generation Y already represented 35% of the market in 2019. The generation following them, Generation Z, should generate 40% of luxury goods purchases by 2035, according to a survey published by Bain & Company.
These young shoppers do not have the same consumer codes and reflexes as their elders and are much quicker to make a purchase, hence the interest in offering them the most efficient digital platforms.
To seduce them, brands will therefore have to differentiate themselves even more by using technology, ultra-personalization, more creativity and a return to an age-old craft. This renewed exclusivity, which will also be achieved through increasingly limited series, will make luxury even rarer and more desirable, but also and above all more experiential and engaging.
A luxury that is more and more committed and responsible
The Covid-19 put a brutal stop to a system that many thought was obsolete.
Indeed, if luxury has been engaged for several years in a race for profitability that goes against its foundations, the crisis has highlighted new requirements: produce less but better, give priority to heritage and creativity, the work of craftsmen, uniqueness and sustainability.
This is the reason why many major houses such as Gucci and Saint Laurent have decided to leave the official fashion weeks calendar to set their own pace, a calmer and less hectic schedule, and to refocus on quality.
The taste of post-crisis consumers also seems to be evolving towards a slower, more “digestible” luxury, with a less colossal rhythm and which resists the fads.
Thus, Hermès’ very classic and timeless image is a good omen for the brand, while a brand like Gucci, which is committed to the fashion side of things and therefore versatile, fluctuating and dependent on current trends, is likely to experience a significant slowdown in its business.
However, the outlook for luxury industry will remain dependent on the evolution of the health situation and the recovery of economic activity as a whole. The extent of the recovery will depend on the evolution of the outbreak and post-crisis consumer behaviour until a vaccine against Covid-19 is found.
Read also > Chanel predicts the end of the luxury crisis in 2022
Featured photo : © Chanel
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According to the American firm Bain & Co, it was already predicted that the world luxury market would contract by 20 to 35% in 2020. But the persistent health risk in many parts of the world and the continuing slowdown of international tourism raise the question of the sector’s future. In France, the luxury industry has not escaped the major changes caused by the crisis, but also by the digital acceleration, the upheavals in consumption trends and the claims for sustainable and ethical luxury. So what are the perspectives for French luxury values? Here are some thoughts on the new aspects of tomorrow’s luxury.
A luxury that will be increasingly dependent on China
China is expected to continue to play a key role in the growth of the luxury sector in the post-Covid-19 era. “By 2025, half of all luxury purchases are expected to be made by Chinese clients, and 28% of the global turnover of luxury groups will be generated in China, compared to 11% today,” says John Plassard, investment specialist at Mirabaud.
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According to the American firm Bain & Co, it was already predicted that the world luxury market would contract by 20 to 35% in 2020. But the persistent health risk in many parts of the world and the continuing slowdown of international tourism raise the question of the sector’s future. In France, the luxury industry has not escaped the major changes caused by the crisis, but also by the digital acceleration, the upheavals in consumption trends and the claims for sustainable and ethical luxury. So what are the perspectives for French luxury values? Here are some thoughts on the new aspects of tomorrow’s luxury.
A luxury that will be increasingly dependent on China
China is expected to continue to play a key role in the growth of the luxury sector in the post-Covid-19 era. “By 2025, half of all luxury purchases are expected to be made by Chinese clients, and 28% of the global turnover of luxury groups will be generated in China, compared to 11% today,” says John Plassard, investment specialist at Mirabaud.
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