growth and customer aspirations, technology plays a crucial role in transforming customer relations in the luxury market. In a recent interview with Joëlle de Montgolfier, ULTIMZ Journal explores the findings of Bain & Company’s study “Rerouting the Future” and delves into the analysis of the luxury market’s growth and its future direction.
When asked about the unprecedented growth of the luxury industry in the first half of 2022, Montgolfier attributes it to a catch-up phenomenon compared to the sales decline experienced during the Covid-19 pandemic. She explains that the crisis was more of a distribution capacity issue rather than a lack of demand for luxury products. With the majority of distribution channels closed, the market suffered. However, once conditions returned to normal, demand surged and exceeded historical levels. In 2021, there was a 31% increase compared to 2020, surpassing the 2019 record. The first quarter of 2022 also showed strong performance, and the momentum continued in the second quarter. This sales curve demonstrates the luxury sector’s resilience and its ability to quickly rebound to record levels.
The study is titled “Rerouting the Future” because the luxury market is currently at a turning point in its historical development. The Covid-19 pandemic accelerated certain changes, and the industry will not return to its pre-pandemic state. Montgolfier highlights the new challenges and areas of development that luxury brands are facing, such as evolving geographical growth pockets, transformation of distribution channels, changing customer relations, and the impact of new technologies like Web 3.0. Uncertainties also loom, such as the reopening of the Chinese market, the return of international tourists, and the potential impact of inflation on demand and profits in the luxury sector. The decisions made in 2022 will shape the future of luxury and determine its new direction.
The center of gravity in the luxury world is shifting back to the United States, which is great news for the industry. The American market is the largest luxury market globally, and reigniting growth in this market was crucial. Montgolfier highlights the unlocking power of diversity prevailing in the USA. The rise of Ultra High Net Worth Individuals (UHNWIs) and the emergence of luxury consumption among previously marginalized ethnic groups are visible trends. Additionally, the younger generations, such as Generations Y and Z, are becoming significant buyers of luxury products. The geographical map of the market is also being reshaped, with cities on the West Coast and in the Midwest developing more rapidly than East Coast cities.
The “Beyond Product” diagram discussed in the study explores the concept of “Elements of Value.” It suggests that luxury brands can go beyond the product itself and offer emotional experiences, a sense of belonging, sustainability, heritage, shared values, and more to attract and retain customers. The expansion into virtual and digitized experiences enables the development of new products and services, new sales and engagement channels, and the targeting of new customer segments.
When asked about the impact of Web 3.0 on the luxury business, Montgolfier views it as a revolution in customer engagement, experience, interaction, loyalty, and asset valuation. Web 3.0 allows for increased creativity through collaborative relationships. It presents opportunities for luxury brands to utilize technologies like metaverses, NFT platforms, and digital twins to create new experiences, engage with customers, and cater to emerging customer segments such as Gen Alpha and gamers.
In conclusion, Bain & Company’s study “Rerouting the Future” sheds light on the growth and future direction of the luxury market. The luxury industry has bounced back from the challenges posed by the Covid-19 pandemic and is now facing new opportunities and challenges. By embracing new technologies, understanding changing customer aspirations, and redefining customer relations, luxury brands can navigate this turning point and shape the future of the industry.
Useful links:
– Bain & Company’s study “Rerouting the Future”
– NFT platforms
