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Products rather than brands to drive future growth in luxury market

 

Products rather than brands to drive future growth in luxuryThe global online luxury market was the first to recover from the impact of COVID-19 pandemic. As per Bain & Luxury Study 2021 Spring Update report, driven by China’s growing appetite for luxury goods coupled with robust online business and recovery of the US market, the online luxury market returned to growth in the first quarter of 2021, reporting a flat to 1 per cent gain in revenues compared with 2019.

However, the market’s outlook for 2021 mainly depends on two possible scenarios. As a per a Women’s Wear Daily report, the market is either expected to grow by 5 per cent and record €280-€295 billion sales or is expected to fully recover in 2022 only. In 2021, the market is expected to record sales between €250 billion and €265 billion.

New trends shaping the market

The pandemic has forced luxury brands to innovate rapidly and switch to digital platforms, says Claudia D’Arpizio, Partner, Bain & Company. The analystProducts rather than brands to drive future growth in luxury market estimates 85 per cent luxury purchases in 2021 were digitally influenced. The rise in digital literacy of luxury customers is leading to a sales spike, explains Federica Levato, Partner, Bain & Company. The rise of new shopping hubs is impacting retail channel mix with most department stores reorganizing their operations. Levato advises brands to be aware of emerging trends and also stay connected to their roots.

Levato expects China to lead the growth in online luxury market. More activity in the apparel market is expected as people start dressing up for work again. However, future growth will be determined more by products than brands, Levato opines. A strong product can help attract consumers more than the brand itself. Consumers may have the best brands but they are missing out if they don’t have the bestselling product in the market, Levato adds.

Growing emphasis on brand ethics

To increase customer base, brands are also widening their price range. They are including entry-level products as well as high-end items and new categories in their portfolio, says Levato.

This has increased the importance of brand customer’s ethics. They are opting for brands upholding the values of sustainability, affiliation and belonging. They are evaluating brands for behavior towards workers and the environment. Consumers are also curbing waste by opting for secondhand goods. Bain & Company Report estimates, the online second-hand luxury market grew from €26 billion in 2019 to €28 billion in 2020. The growth was driven by both entry-level younger consumers and high-end shoppers, it adds.

 
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