The carefully watched Bain Luxury Study was released for the 17th time earlier this month. It was produced by the Milan branch of the storied consultancy company, on behalf of Fondazione Altagamma, the trade association of Italian luxury goods manufacturers.
To take proper advantage of the changing market, the Bain report authors say that companies in the personal luxury sphere must proactively develop dedicated strategies to address market trends, design a distinctive formulae based on consumer needs and so all they can to win over younger consumers, who represent a key engine for future market growth. Importantly they will need to master new technologies, which will fundamental enablers across the luxury value chain through 2025.
The seven market trends identified by Bain & Co. are as follows:
CHINESE SHOPPERS WILL BECOME EVEN MORE DOMINANT
By 2025, the report states, Chinese consumers will account for 46 percent of the global market, compared to 33 percent in 2018. Of special importance is the prediction that they and they will make about half of their purchases at home in China, which represents an increase from the 24 percent that was reported in 2017.
THERE WILL BE A DIGITAL ELEMENT IN ALMOST EVERY PURCHASE
By 2025 online purchases will account for 25 percent of the personal luxury market, 150 percent more than the market share it holds today. But, adds Bain, about half of all luxury purchases across the value chain will be digitally enabled through new technologies, and nearly all will be influenced by online interactions.
BRICK AND MORTAR STORES WILL REDEFINED BY CONSOLIDATION
There will be a consolidation of retail networks largely as a result of reduced foot traffic at bring and mortar stores. At the same time the role of the store will evolve from a simple point of sale to an experiential touchpoint for consumer engagement, Bain and Co. forecast.
YOUNGER CONSUMERS WILL BECOME MORE INFLUENTIAL
Generations Y and Z will comprise approximately 55 percent of the personal luxury market in 2025, contribute 130 percent of market growth over the coming six years. The figure will be offset by a decline in sales to Baby Boomers and members of Generation X.
CULTURES AND SUBCULTURES WILL DRIVE CONSUMPTION
Ethic will be in, reports Bain & Co., as will other evolving cultural and subcultural trends. Instead of shying away from what makes us different, luxury brands will need to acknowledge homogenous groups in order to remain relevant.
BRANDS WILL BROADEN THEIR AREAS OF ACTIVITY
There will be a blurring of competitive boundaries between brands, Bain & Co. reports, as each will be driven to take extreme measures to address individual consumers’ unique needs.
THE MOST FLEXIBLE COMPANIES WILL BE THE ONES WHO SUCCEED
To sustain profitability luxury companies will need to become more agile. Currently, profit margins among the top luxury brands stands at about 20 percent, but that should moderate as a result of digital disruption, Bain & Co. noted in its report.