The luxury report 2023: experiential retail, sustainability, and luxe travel

In the past luxury was a simple proposition. It centred around exclusive products and services with limited distribution channels. Luxury was designer handbags, reservations at the best restaurants, a ticket on Concorde. It was the elegant in-store experience, a sense of exclusivity, acquiring a quality item that would endure and confer status.

Brands were in control of what they produced and how we bought these aspirational items. Luxury was more standardised: think of large hotel chains with their version of the ultimate stay, one singular experience. Historically, brands sold us their version of luxury and we as consumers embraced it.

But today’s luxury marketplace has evolved into something entirely different. In many ways, it is unrecognisable from what it was just a couple of decades ago. Underpinning this transformation is the technological revolution and online retail. Heritage luxury brands have been slow to embrace Ecommerce, concerned that online retailing would dilute the brand’s image, depriving it of its high-end position and sense of exclusivity. However, it is now firmly established that affluent shoppers are willing to purchase premium goods online with reliable and global supply chains.

The sheer size of the market today tells of expansion and an elevated offering. The luxury market was estimated to be worth around €1.15 trillion in 2021 in the latest Bain and Company Luxury Goods Worldwide Market Study. This comprised nine segments, led by luxury cars, luxury hospitality and personal goods which together account for more than 80 per cent of the total market.

The same report predicts that the consumer base for luxury products and services will expand to 500 million by 2030 up from 400 million in 2020. In addition, the advent of social media and influencer culture has made luxury highly visible and more accessible, reaching a far wider and younger group of eager consumers. Luxury is growing and shows no signs of slowing.

However, consumer behaviour is changing. Buyers now favour brands with purpose, and those which show increased social responsibility. To meet the needs of today’s digital world, brands must think creatively about making lifelong connections to create loyalty in an increasingly crowded and demanding market. Today, we as consumers are active participants in designing and shaping what luxury is.

Luxury starts to embrace sustainable and circular business models

The buying public’s interest in sustainability has never been greater, with more than three in five consumers citing environmental impact as an important factor in making purchasing decisions, according to McKinsey.

It’s hard to imagine ten years ago that we would see luxury houses embracing secondhand, rental or repairs, yet we are witnessing enormous growth in these segments of the market. According to the 2023 Resale Report by thredUP, the global secondhand market is expected to nearly double by 2027, reaching $350 billion. Resale is set to grow three times faster than the global apparel market with more than half of Gen Z more likely to shop with a brand that offers secondhand items alongside new.

Brown Thomas has introduced its Full Circle service whereby customers can sell their pre-loved bags in exchange for a Brown Thomas gift card, promoting the service as an exciting new way to refresh your style, declutter and close the loop on unnecessary waste. It also has a rental service with a selection of luxury ready-to-wear, bags and accessories. At Selfridges in London, it offers a repairs service whereby customers book a virtual or in-store consultation offering repairs across electronics, furniture and fashion to make your love-worn purchases as good as new.

The fashion industry is at the start of this sustainable journey as it is slow to tackle global inequality and the climate crisis according to Fashion Revolution, the world’s largest fashion activism movement. But there is reason to be cautiously optimistic with global luxury conglomerates investing in various methods to address sustainability issues.

The Fashion Pact is one such initiative, committed to key environmental goals in three areas of climate, biodiversity and oceans. Presented to heads of state at the G7 Summit in Biarritz in 2019, it now has the participation of over 200 brands in the fashion and textile industry (ready-to-wear, sport, lifestyle and luxury) including their suppliers and distributors aimed at aligning the fashion industry with the UN Sustainable Development Goals.

Transparency is something the luxury market is not known for. With the market shrouded in mystery, luxury producers keep supply chains and production numbers a highly guarded secret. This adds to the perception of scarcity, fuelling demand and keeping prices high. But this, too, is starting to change to meet the demands of evolving legislation and consumer preferences.

The 2023 Fashion Transparency Index ranks 250 of the world’s largest fashion brands and retailers based on their public disclosure of human rights and environmental policies, practices and impacts, across their operations and supply chains. Gucci is the its “commitment to generating positive change for people and our planet”, visible on its website and Instagram account @gucciequilibrium. Granting access to such information, from environmental reporting to plastic-free and circular-economy initiatives, helps consumers feel empowered to make an informed choice. Transparency helps to build trust.

Experiences that connect

As consumers seek meaningful connections and authentic experiences, retail leaders are creating exclusive spaces that allow people to linger and deepen their relationships with brands and like-minded people. The new face of luxury represents artist and designer collaborations, customisation and personalisation, and visually stunning spaces merging retail with modern cultural experiences, akin to a museum or gallery.

Brands are more focused than ever on creating unique omnichannel, high-touch experiences for their highest-spending clients and young luxury shoppers. Prada group marketing director Lorenzo Bertelli explains: “We believe the future of our luxury brands will be defined by the experiences we create for our customers.” Prada’s dressing rooms can read the electronic tags found on each item of the brand for available colours, sizes, complementary items and more.

We are seeing an increase in traditional luxury brands, providing customers with something new, exciting and different. Take for example Louis Vuitton and Yayoi Kusama’s 2023 partnership, transforming Harrods’ façade into an installation of Kusama’s work. The collaboration continued in-store with the Japanese artist’s multicoloured and immersive vision inhabiting the department store with limited edition pieces and surprise-and-delight moments on offer.

The rise of the younger luxury buyer is also reshaping the luxury industry. Gen Z and millennials are transforming luxury retail with distinct preferences on how and where they shop. Millennials are the fastest growing consumer group and a large part of their spending is on fashion. It’s all about the outfit that they are wearing to a festival or event and what this tells others about their values and who they are. Luxury used to be about status, telling the world about our wealth. Luxury is now being used as a way of telling the world who we are as individuals. In the era of Instagram and TikTok, it’s equally personal and public for this consumer group.

To reach this new generation of luxury consumers in a meaningful way, brands are following their customers, wherever they may be, providing shopping experiences that connect. Threads Styling is at the forefront of social commerce, communicating via WhatsApp with its most valuable clients and relying on social media and live streaming to showcase its luxury pieces.

Threads has no physical retail store, instead, it offers its digital native clients access to a virtual stylist, delivering a carefully curated selection of luxury fashion items and accessories, all over the world. This one-on-one, online customer service offers a deeper connection, taking pain points out of transactions. It’s fun, easy and changing the way we shop. Most successful brands are reimagining the luxury experience, merging content and commerce, and getting to know their clients digitally allowing them to tailor their offering based on insights into preferences and tastes.

Luxury travel: the future is elevated

Travel is taking a larger portion of the luxury portfolio across accommodation, cruises and airlines as we witness increased demands on luxury services rather than products alone. Airlines such as Etihad, Singapore Airlines and Emirates are reinventing the idea of luxury travel with spaces that are more like hotel suites with “flying chefs”, private spaces and customised offerings. Louis Vuitton, long associated with elevated travel, recently opened a lounge in Doha’s Hamad International Airport with Chef Yannick Alléno, who oversees numerous Michelin-star restaurants around the globe.

As the world becomes increasingly homogenous, authentic local experiences have become the new definition of luxury, reducing the negative impact and giving back to the community. The rise of the ‘growth mindset’ among the affluent has led them to seek out tailored itineraries with unparalleled access offering elements of personal transformation.

Knowledge and learning are becoming a new currency. Unlocking the adventurer, romantic or explorer within us, venturing to extraordinary destinations, we seek that which feels unique and enhances lives. From virtually untouched nature escapes and eco-tourism to the return of nostalgia crossing Europe on the Venice Simplon-Orient-Express. This is the resurgence of low-impact travel delivered with elevated service and expertise. Luxury is less about what you have and more about what you do with it. Time is irreplaceable, so we are making it count. The luxury manifesto is changing.

Dee Bowman is a co-founder of Lux-BE Consulting, specialising in luxury brand engagement, marketing and communications for premium brands.