This fourth annual State of Luxury report produced by Luxury Daily, The Home Trust International and Unity Marketing reveals:
- Trends measuring the pulse of the luxury business from four years of consecutive surveys among luxury insiders from the luxury goods, services/experiences sectors and companies that provide advertising, marketing, consulting and other support services to luxury companies.
- Enhanced perspective from luxury services and experiential companies, adding insights from those at the forefront of the market’s fastest-growing sector: Luxury Experiences. A total of ~900 luxury insiders were surveyed this year, as compared with ~600 in the past three years.
- How insiders feel about the state of the luxury market in general and their business, in particular, including a new question about the prospects of U.S./China trade war.
- Details about distribution challenges, Internet ecommerce strategies, social media and its surprising ineffectiveness, advertising and marketing strategies, and future trends impacting the luxury market.
A rising tide of uncertainty is challenging industry insiders and the people who work alongside luxury companies in supporting roles such as advertising and tech, according to Luxury Daily, The Home Trust International and Unity Marketing’s fourth annual State of Luxury survey.
“In a study this rich in data – the final report is 99-pages in easy-to-read and digest powerpoint format – it is hard to identify just one chief finding, but if forced to do so, I would say that the consensus has turned markedly less optimistic about prospects for the luxury market in 2020,” says Pamela N. Danziger, president of Unity Marketing and author of the new study.
Luxury insiders see the glass half-empty, rather than half-full
Most striking is the drop in the number of insiders who expect business conditions to improve in 2020. It has declined by more than half in this year’s survey. Last year, 52 percent expected business conditions in 2019 to improve, whereas this year only 21 percent expect business conditions to improve in 2020.
“This year’s Luxury Daily word of the year is ‘Sustainability,’ and that applies to both the products and services we deliver, as well as our businesses. Rising uncertainty among luxury industry insiders makes ‘sustainability’ of their businesses and business models a primary concern for 2020,” Danziger continues.
Causing the greatest challenge for luxury insiders this year is the changing ways consumers shop. While finding new customers continues to challenge luxury companies, they are also facing a consumer who is less willing to trade up to luxury. Part of the reason is millennials have an appetite for luxury but less willingness to pay for it.
Further luxury insiders are challenged as to how to appeal to new customers coming into the luxury market who may define luxury in different ways than previous generations of consumers. The changing definition of luxury may be the reason why insiders also feel that their advertising and marketing messages are becoming less effective.
Luxury under assault
A widely shared concern among luxury insiders is that luxury has lost its meaning: “There are too many companies peddling so-called ‘luxury goods.’ The market has been watered down by accessibility because companies slap together a product, label it as luxury, and off they go.”
With the meaning of luxury not well understood by many consumers, or even among luxury companies, the opportunity is to return to the key pillars of luxury – quality, craftsmanship, design, attention to detail, uniqueness, and authenticity.
“We need to reinterpret luxury from labels and conspicuous consumption to a quest for goods and services that are personal, authentic and unique. Many successful companies are returning to this definition,” expressed an insider.
The challenge for luxury brands is how to communicate their true luxury values.
Watch Words for 2020
For 2020 the opportunities look bright for brands that lean into the many challenges they will face this year, rather than try to run and hide from them.
With the China market for luxury threatening to stall, all eyes are returning to the U.S. market where the number of millionaires far outnumber those in China, 18.6 million as compared with 4.4 million.
The still-strong U.S. economy offers opportunity for entrepreneurs and dreamers to create new expressions of luxury in both goods and services and explore new business models that will turn their creativity into profits.
The opportunity keywords revealed in the 2020 State of Luxury report are:
- Collaborations – Some 50% of insiders identify this as a growing trend in 2020 and it doesn’t just apply to streetwear brands, but to true-luxury collaborations, like Armani and Ferarri.
- Sustainability – The luxury resale and rental markets, as well as lab-grown diamonds, illustrate opportunities for companies to create sustainable new business models that address the growing concern for sustainability among consumers.
- Personalized Experience – Every luxury consumer is an individual who deserves to be treated in a way that acknowledges their specialness. Bespoke and made-to-order, as well hands-on customized design, travel and other services, are the highest expression of it. “Consumers have a quest for experience and luxury that delivers a story. They find it in handmade, artisanal products and personalized services,” said an insider.
- Craftsmanship and Quality – The future for luxury is to return to its roots of craftsmanship and quality, after too long letting those slide in the search for sales growth. The idea of craftsmanship doesn’t just apply to luxury goods either, because the best luxury service and experience brands take a craftsman approach to the professional services they provide, whether in the home or on the road. That craftsmanship guarantees the quality.
This luxury insider sums up the opportunities for 2020 and beyond: “Broad cultural/societal diversity will challenge brands to attract and provide voice to diverse creative audiences. The ones that get it will stand out and create more interesting and differentiated products and services. This is a great opportunity for new, emerging brands.”
About State of Luxury report
The report provides the results of survey among 900-plus luxury industry insiders compared with those from the past three years. It reveals the trends year-to-year and provides actionable research takeaways to power competitive and marketing strategies for 2020 and beyond.
This year’s survey was enhanced with the addition of a greater number of services/experiential luxury marketers, as well as additional questions surrounding the luxury insiders’ marketing and advertising perspectives, with particular emphasis on digital and social media marketing.