New Book Reports Favorable Forecast for Luxury

RAPAPORT... Erwan Rambourg is certain that luxury sales will increase in the coming decade as companies adapt to emerging trends and respond to societal forces. The industry analyst previews this new landscape in his recently released book Future Luxe: What's Ahead for the Business of Luxury - complete with "21 predictions for '21 and beyond." How has Covid-19 impacted the luxury industry?After a decade of very strong top-line growth, luxury brands had become somewhat complacent. Even in this crisis, there are some silver linings that will turn our focus to changes that were probably needed years ago. These opportunities include getting to know the customer better, improving the in-store experience, enhancing the online experience, using data more efficiently and developing a more intimate and authentic relationship between the brand and the consumer. Over the last seven months, many brands found ways to be good corporate citizens - whether by donating to charities or repurposing production sites to produce hand sanitizers or personal protective equipment (PPE). That is what they should do.I think the pandemic will accelerate the move, at least with Western consumers, from going after products and logos to spending on brands that have values and purpose. Is the role of luxury changing?Not in the short term. The industry is still dominated by first-time purchasers. But as we move along into the new roaring 2020s, it will be shifting from a recruitment industry to one that is more driven by repeat purchasers. When that happens, people will be buying less to impress others and to fit into society, and more for themselves. At that point, they'll start asking a lot more questions about the brands. The function of luxury is to capture the cultural zeitgeist. Environmental, societal and governance concerns - ESG issues - manifesting in Black Lives Matter and the #MeToo movement, among others, will take on greater importance, especially with the younger generation.You devote an entire chapter to "The Future Is Female." What leads you to that assertion?The Japanese refer to "womenomics" to explain the greater number of women professionals in the workplace and their higher earning power, which gives them greater financial autonomy.The second change is societal. The family structure is evolving. Women are getting married later, if at all, and having children later, if they choose. As a result, women have more money to spend on themselves, which will produce a surge of spending.This phenomenon has already been seen in the diamond industry. While sales of diamond jewelry have grown in the past decade, they have not kept pace with the faster rate of increase for jewelry sales overall, which has been driven by women who are self-purchasers and/or impulse buying. I think the traditional bridal market will structurally lose share to the self-purchasing segment. It doesn't mean that the diamond will disappear - it will be used in a different setting.Millennials and Generation Z are often cited as being uninterested in luxury and instead preferring experiences. How will that change the industry?Despite the fears that young people would lose interest in luxury and move to experiences, the exact reverse has happened. This is the selfie generation that spends 12 hours a day on their phones, on Instagram or Snapchat. They are producing a perception of themselves to impress others, and that image is sent via all those apps. They want that perception of themselves to be quality and high-end, and the brands they wear are key to making that point. Luxury brands ramped up their e-commerce efforts during the pandemic, but you write that brick-and-mortar stores will remain "immortal" for luxury. Why is that?Luxury will be one of the few industries that prioritize brick-and-mortar and physical interaction over online sales. In the next decade, online sales will account for 20% maximum of luxury sales. [This is prediction number 10].For now, luxury is driven by first-time buyers. We talk a lot about storytelling between brands and consumers. But the more important storytelling is what occurs between friends when that first luxury purchase is made. Am I going to tell my friend that I just bought a Louis Vuitton bag online, clicked twice and had it shipped to me in 24 hours? That's not a story. But brick-and-mortar has to change. People are looking for surprise and delight. They want to be entertained and educated. Luxury retailers can't risk the consumer walking into the store and getting a sense of d?(C)j? vu. Their key challenge is to provide the customer what she hasn't seen before somewhere else. They will need to install new displays, incorporate art pieces, offer targeted product assortments, and find innovative ways of communicating and welcoming consumers to their stores - even those that are in different neighborhoods in the same city.What do wealthy consumers want in 2021?We'll see a continuation of the pattern of the last three months, which can be summed up as "buy less, but buy better." These so-called hero products they're purchasing are actually the classics. Many brands have taken to revisiting their classics. It's hilarious - young people think they're new and cool, even though many of them were created decades ago.Will luxury brands use lab-grown diamonds? Projection number 20. Even luxury brands like Cartier, Tiffany & Co. and Bulgari will mostly use lab-grown diamonds for accent stones in their jewelry and watches, with full transparency. Mined diamonds will continue to be used for center stones as well the higher-end pieces and bespoke designs.Will technology disrupt the industry?While it will impact materials and production, technology will not make luxury obsolete, because of the very nature of luxury itself. Luxury is not something we absolutely need, but it is very hard to resist the temptation. Luxury can be a form of escapism, or it can just put a smile on your face.This article was first published in the January 2021 issue of Rapaport Magazine.Image: Erwan Rambourg. (Erwan Rambourg)