Companies are becoming more responsive, improving governance to meet formal requisites although deeper and more substantial changes are more difficult to implement in a fast-paced, fashion-driven and materialistic industry. No brand has yet achieved real sustainability. Those brands that will be able to incorporate newness with sustainability are the likely winners.
Challenges create opportunities and in this sense new business models in the second-hand luxury market and rental industry are rapidly growing, satisfying both the need for newness and the move to more sustainable practices. Millennials, particularly in France, Italy and Japan, are leading the charge. 68% of Gen Z and millennials surveyed have bought in the second-hand luxury market, and 50% have rented luxury in the last 12 months. Although this is potentially disruptive to luxury brands, impacting price elasticity of demand and markdown control if care is not taken to protect brand equity.
Growth in the industry continues to be skewed, with most of the growth coming from Chinese consumers and China. Chinese consumers are a cluster on their own: while most of the other nationalities gave similar responses to our questions, in our survey it emerges that trends in China diverged from the rest. Chinese consumers are young, mobile, always connected and very self and fashion conscious. Sustainability is less of a focus in this market where newness and freshness are key, and as a result the second hand market is less penetrated. There is demand for locally produced luxury goods in the Chinese market and consumers also want more product customisation versus other countries. Luxury companies are mindful and pay special attention in carving out effective product, marketing, distribution, communication, branding strategies in China.
With many consumer brands striving to connect to consumers, being woke is more important than ever. Consumers follow their hearts and convictions. Luxury brands cannot maintain a neutral stance on social and political issues: they cannot be complacent to their social stance as the fallout can be significant. This is true everywhere, including in China. Despite ranking low in China, 57% of Chinese consumers said that social/political stance had become more important to them over the last 12 months. Indeed social media now plays a critical role in rapidly changing brand perception.
This is an extract from ‘Luxury Goods: What consumers want’. To read the full report click here
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