At a press conference this morning in Paris addressing the luxury market from a French and Italian brand perspective, Kantar gathered experts from the field to take a closer look at the changing luxury consumer and how brands should adapt to meet these new demands.
Crisis no more? According to Kantar’s BrandZ 2021 study, the world’s top-10 luxury players* saw their brand value grow by 34% this year, compared to 2020. The top 100 brands, meanwhile, reported 42% growth versus 2020. Although comparisons with 2020 must take into account the dramatic fall in sales due to the health crisis, this upward dynamic nonetheless shows the luxury sector’s resilience. Growth is back, but the luxury landscape is seeing significant shifts and brands are having to adapt their culture to new geographies and changing consumer demographics and mores.
Balancing scarcity & demand
“One of the biggest challenges facing luxury today is the question of demand,” noted Jean-Noël Kapferer, Professor Emeritus at HEC business school. “The major players are all looking to breach the €1bn mark – some already have – but it’s complex for a brand to maintain an identity based on craftsmanship and what is perceived as a small, traditional operation, while transforming into a global behemoth.” In other words, can luxury’s notions of quality and selectivity fit with ambitious growth in the consumer’s mind?”
Indeed, the idea of luxury being equated to scarcity and rarity is, in large part, a thing of the past. This has been further accelerated by the rise of e-commerce resulting from the health pandemic, and the popularity of digital platforms. Rather than scarcity, brands are instead focusing on “exclusivity” within their larger offer, as illustrated by limited-edition products or capsule collections or collabs with artists and celebrities.
Asia looms large
China, now the world’s biggest luxury market, is indisputably the growth driver today and for the foreseeable future. Bain’s 2020 Luxury Goods Worldwide Market study notes that Mainland China was the only market to see growth in 2020, with sales up 45% to €44 bn. “European luxury brands need to absorb the fact that the market is now ‘somewhere else’, notably in China, and adapt their positioning accordingly,” advises Kapferer. “Chinese culture is one of materialism; success is measured on what you own, and this is especially true among younger consumers,” he notes. As a result, luxury players need to target their message to “first buyers”, who look to others (friends, influencers and to a lesser extent celebrities) to guide their purchasing decisions. This, he concludes, puts enormous pressure on brands to create a buzz and be at the forefront on social media channels.
Measuring the impact of ‘good’ on luxury
Another sea change in luxury concerns the increasing importance of social and environmental responsibility in the eyes of the consumer. Cristina Colombo, Client Impact Director, Sustainable Transformation Practice at Kantar Insights, highlighted the relationship between “corporate reputation and brand power” noting that the total effects of “reputation elements” can impact a brand by 8.9%. The leading factor in corporate reputation, as defined by Kantar, is “responsibility”, which accounts for 49% and is further broken down into brand actions towards the environment (34%), social responsibility (31%), how they treat their staff (21%) and how they deal with their suppliers (14%). “Luxury has entered into a new marketing era,” said Nathalie Rozborski, Deputy CEO at Nelly Rodi, “where actions are stronger than words, so a company’s behavior matters.”
These environmental and social concerns are contributing to the rise of a host of new business models, including digital platforms for the purchase of second-hand luxury goods, or those letting the consumer rent them for a day.