2020 Luxury Trends That Will Reshape the Industry
(NEW YORK) January 7, 2020 – To generate the trends likely to affect the luxury industry in 2020, Luxury Institute conducted a crowdsourcing project with its Global Luxury Expert Network at the end of 2019. The Global Luxury Expert Network (GLEN) is a growing network of hundreds of luxury goods and services experts who form the core of Luxury Institute’s research, training, and business solutions teams. The network is made up of the best minds in the industry who have a minimum of 12-years of operating experience and are current and/or former C-level, VP or Director executives at top-tier luxury brands with proven track records of high-performance. Their expertise spans over dozens of luxury and premium goods and services categories. Their real-time intelligence, diverse perspectives, strategic and tactical analysis, innovations, recommendations and solutions are critical to the success of all clients.
Here are seven key trends that Luxury Institute’s elite Global Luxury Expert Network members predict will reshape the luxury industry in 2020:
1. Chinese affluent consumers determine global luxury goods brand winners and losers
Chinese luxury consumers are diplomatically, yet unflinchingly, asserting their influence on luxury goods and services brands like never before. Confident in their intellectual, economic and cultural place in the world, Chinese urban elites are making their voices heard through their social media activities and purchasing decisions. If 2019 was the year when Chinese consumers demanded respect, and no longer tolerated cultural luxury brand insensitivity, 2020 is the year where their sheer numbers, and unmatched sophistication, will command the ultimate respect. Collectively, they will determine which brands meet their standards of true compelling luxury in 2020 and will strongly influence which brands deserve the attention and the loyalty of the global luxury consumer.
2. California Consumer Privacy Act (CCPA) triggers US federal privacy legislation that leads to innovation in privacy and personalization, with luxury leading the way
While Europeans have led in consumer privacy protection, the tipping point for innovation in the personal data economy will be triggered by the California Consumer Privacy Act’s (CCPA) impact on the world’s largest free economy. In order to standardize privacy laws, the US government will address privacy in 2020. At first, brands that are led by their conservative lawyers and short-sighted advisors, will assume, due to legislation, that less personal data will be shared. However, just as auto safety laws enabled greater distances at much faster speeds, data privacy legislation will accelerate the scope and velocity of personal data sharing, especially between trusted luxury goods and services brands and their consumers. There will be a slow build at first, as the world reluctantly recognizes that data is a personal asset whose substantial power can only be unleashed when individuals control and share their rich personal data with consent. From there, look for a personal data economy gold rush as entrepreneurs and investors pile on and invent innovative new business models to help consumers aggregate, store, manage, mine, share, sell, and exchange their data. The evolution will take several years, but look for innovative luxury goods and services brands to begin the journey in 2020. This is due to the fact that luxury brands are among the most socially responsible on the planet, and they need to build long-term, deep, trusted relationships with affluent consumers. Look for this life-changing trend to radically transform the global economy in the 2020’s for the better.
3. Luxury retail recognizes that technology alone is not effective without emotional intelligence education and enhancing the employee experience
Luxury retail brands continued to focus on technology and analytics in 2019, enchanted with all the new AI toys from supply chain to in-store customer experience. Technology is definitely one critical element of success. However, the return on investment of technology remains elusive due to dire lack of integration with the human beings who use it daily. This is one major reason some top-tier luxury CEOs exited in 2019. Enamored with technology rather than investing in their people, their financial results disintegrated. Many more will exit in 2020. Luxury Institute field research and inquiries show that a growing number of brands now recognize that to retain their store talent, given low traffic, store closings, faster growth in e-commerce, and added laborious work to support omni-channel integration, they must rethink employee emotional intelligence education while creating store environments that make employees feel special too. Call centers and online teams will have to do the same. Look for many more brands to focus on emotional intelligence education and employee experience optimization projects in order to retain their best talent in 2020.
4. Luxury health and wellness evolve into luxury medicine
A great deal of the growth in the nascent premium health and wellness industry has been focused on basics such as exercise classes, personal training, yoga and meditation, massages and skincare treatments. In 2020, look for new offerings that are rooted in luxury lifestyle medicine such as innovative diet concepts, effective nutraceuticals, medical treatments such as hyperbaric oxygen therapy, etc. While many have been around for some time, they are now being embraced and enhanced by hospitals and clinics and are finding new applications at scale. With an aging population looking for solutions to deteriorating health, and a younger population looking to avoid the long-term effects of aging, look for the luxury health care industry to begin its meteoric growth in 2020. Coming right behind these are evidence-based drugs, treatments, and therapies that will have a more profound impact on health and wellness, and, finally, healthy life extension.
5. Online luxury marketplaces face their moment of truth
Uber, WeWork, Peloton and other digital pretenders triggered a major reality check in 2019 by demanding to be valued like software companies, despite the fact that they are simply selling commodity products or services. They face intense competition, poor economics, and razor-thin margins. The online luxury marketplaces will face similar circumstances in 2020. They all sell the same products, face intense competition, have low-margin business models, depend on discounting luxury brands to acquire/retain customers, all while accumulating losses. The model is broken. Even mighty Amazon teaches us that were it not for its massively profitable server services business, its online retail business would be a low margin business, even at scale. As the largest top-tier luxury brands complete their e-commerce maturation, and face their own challenges with sustainability, store rationalization, and other issues in 2020, expect them to de-emphasize luxury online marketplaces. Slowly but surely, the top brands will realize that they must control the customer relationship, optimize supply chains, and control pricing and distribution. Most online luxury marketplaces will have to come up with new and profitable growth opportunities, or face irrelevance. 2020 is the year when all luxury retail marketplaces will face the fact that business model is destiny.
6. Luxury goods consolidation becomes more surgical as the number of great acquisition targets dwindle
While luxury consolidation will continue, major buyers will become even more selective in 2020. The brilliant acquisition of Tiffany & Co by LVMH has inspired the speculation that the luxury goods industry will continue to consolidate rapidly. However, this acquisition is a unique event. Few stellar luxury goods brands exist with strong control of their production, distribution, pricing, and customer relationships, and can command a price of 4X revenues. There are very few entities that can afford to pay that much in the luxury industry, and even fewer that have the confidence in their skills to make the investment pay. American luxury retail groups have yet to demonstrate that they can grow their acquisitions profitably. Most of the independent candidates that are left are smaller brands whose earnings have stalled, and many have management teams that lack the skills to reinvent themselves in the new luxury world. The risk for buyers is acquiring brands that are beyond repair in this treacherous market. The risk of overpayment is huge. Instead, look for smart global luxury goods buyers to diversify into faster-growing, higher-margin, futuristic luxury services. LVMH has diversified into hospitality with Belmond and Cheval Blanc, and Francois-Henri Pinault’s Groupe Artemis has nurtured Christie’s and Ponant skillfully. Health and wellness are examples of profitable, growing categories in which to diversify. There will be many new categories of luxury services where luxury groups can apply their customer relationship skills. We will see the smart money begin to diversify into these categories in 2020.
7. The business of fashion confronts irrelevancy head on
Fashion has always seen itself at the vanguard of all luxury goods and services categories. That has been the case until recently. However, fashion is still self-focused and product-centric, not customer-centric. In 2020, other luxury experiences such as technology, beauty, travel, gastronomy, wines and spirits, health and wellness are deemed by all generations, and especially the affluent, as far more important to invest their precious time and formidable purchasing power. The fashion industry is confronting major issues such as inclusivity, radically changing consumer tastes, intense competition, massive discounting, overproduction, labor treatment, talent retention, and major sustainability challenges. With a few major exceptions, primarily within the brands that belong to the groups, most fashion brands, and their fashion media promoters, are seen as far less relevant by consumers. In 2020, the long tail of luxury fashion brands must address the needs of affluent consumers head on. The empty and half-baked storytelling that fashion agencies invent to try to placate the demands of demanding consumers are no longer enough. Luxury fashion brands must reinvent their business models with a clear difference, and optimize their value proposition through compelling customer experiences and emotionally intelligent service that complement their innovative products in order to thrive in 2020.
“Most luxury goods and services brands continue to operate as if they are still living in a world that is fairly predictable and moves at a reasonable pace,” said Milton Pedraza, CEO of the Luxury Institute. “They need to remember that they are dealing with the most educated, sophisticated, mobile, and demanding clients on the planet. Fortunately, the vast majority of affluent clients continue to evolve in their purpose and values toward a more humanistic, sustainable and equitable world. They are driving rapid change with their innovations, investments, and behaviors. The luxury brands that will succeed in the new roaring 20’s will match, or exceed, those values. They will become so agile that they can use their creativity and innovation to address the stated and unstated needs of the affluent, and society at large, in real time.”
About Luxury Institute and the Global Luxury Expert Network (GLEN)
Luxury Institute is the world’s most trusted research, training, and elite business solutions partner for luxury and premium goods and services brands. With the largest global network of luxury executives and experts, Luxury Institute has the ability to provide its clients with high-performance, leading-edge business solutions developed by the best, most successful minds in the industry. Over the last 16 years, Luxury Institute has served over 1,100 luxury and premium goods and services brands. Luxury Institute has conducted more quantitative and qualitative research with affluent, wealthy and uber-wealthy consumers than any other entity. This knowledge has led to the development of its scientifically proven high-performance, emotional intelligence-based education system that dramatically improves brand culture and financial performance. To learn more about Luxury Institute, the Global Luxury Expert Network (GLEN), or to become an expert member, please visit https://www.luxuryinstitute.com.
Jim Nowakowski, President of Interline Creative Group, Inc. and frequent presenter in the design community, spoke at the 2019 KBIS Show and wrote an interesting piece on luxury. Called What Does Luxury Really Mean in Design, the article he wrote discussed what he learned after listening to Greg Rohl, VP of Marketing at Rohl speak on the topic of luxury. The title of Rohl’s presentation was “Understanding What Makes Authentic Luxury for the Kitchen & Bath.” While he based his presentation on research done by Pam Danziger, one of the recognized marketers in this channel, the whole session was worth it because he tackled one of the primary problems in our world today: the effects of disruption on terms like luxury. It is worth your time to read it.
The Global Luxury Expert Network (GLEN) itself is one of those organizations that really tries to understand luxury. The seven key trends discussed in this opinion verify some of the things that Nowakowski heard in covering this topic last year and what we continue to hear. For example, the Business of Fashion, one of our favorite sources of information, reported that “A profound shift is underway in the country’s [China’s]$115 billion luxury market. A growing number of luxury brands are more enthusiastic about WeChat commerce than selling through China’s top B2C e-tailers Tmall and JD.com, despite these platforms’ vigorous efforts to attract top-tier labels.” In another piece, “How retail Analysts Measure Store Performance in an Online World,” BoF reported, “A record number of U.S. consumers spending more online, coupled with a condensed holiday shopping season and year-round discount wars among retailers, has forced analysts to get creative, with many shifting away from old-school tactics to measure a company’s overall performance.” These types of stories underscore point three in the Institute’s analysis.
And finally, point five of the Institute’s analysis – the online luxury marketplaces facing the moment of truth — reflects the turmoil of every e-commerce start-up dreaming of emulating Amazon. At WeWork, for example, with its experiments into preschools and wave pools, they demonstrated the disruption going on and that luxury or no luxury, businesses need to show they must get fundamentals right before branching out. What’s the saying: “A man’s reach must exceed his grasp else what’s a heaven for?” Well, exceeding your grasp can lead to disaster if you’re not careful or haven’t thought it through. there are plenty of stories about luxury here on KB-Resource, too. Just search “luxury” and read some of them, including: The AXOR Brand Introduces Luxury AXOR MyEdition Collection, Bringing Customization to Faucet Bodies and Cover Plates, New 30-Inch Full-Size Perlick Refrigerator Puts Luxury First, Luxury Shower Drains: California Faucets Introduces Mulholland StyleDrain by Designer Christopher Grubb , Luxury Locks: Baldwin® Hardware Unlocks Future Of Luxury Technology with TouchScreen Collection and more! Let us hear from you!