Luxury Is In Transition
The word luxury has changed immensely over the last few decades. We have observed the diversification of the concept of luxury for a long time—whether that means the personal experience, the ownership, the purchase or the investment in a luxury product. The idea of valuing and enjoying the present moment is experiencing a revival. This is ushering in a revolutionary paradigm shift, not only in the traditional branch of luxury, but also in other market segments, leading to a new understanding of the concept of luxury somewhere between exclusivity and mass accessibility.
Today, we have the phenomenon of stealth luxury: a luxury behavior defined more by excellent workmanship and qualities only visible to connoisseurs, rather than obvious characteristics like designer logos. Products with stories and pragmatic value add to their meaning as luxury goods, while shine and glamour have quietly moved into the background. Peace, mindfulness and freedom are the new touchstones of established luxury consumers.
Positive market development has been inspired by, among other things, a growing worldwide population of ultra-high net worth individuals (UHNWIs). With millennials and generation z, we are seeing generations that not only have high standards, but also have high incomes and are eager to consume. That differentiated attitude toward luxury consumption is causing a lot of movement in the industry, and the different market segments are profiting to varying degrees.
In the coming years, they will break through the previous buying patterns and market strategies that have defined the interaction between customers, producers and service providers. As a result, luxury will become the selfappointed “anti-value” against the acceleration of everyday life, rationality, multiple options, efficient thinking and future planning. Four drivers are pointing the way toward this development: the democratization of luxury markets; the individualization of products and services; global, rapidly growing and spreading digitalization; and generation alpha—the next generation.
Intelligent luxury thinking has also reached the fashion industry. The trend is moving toward a decelerating slow fashion in which just a few, but very valuable articles of clothing are produced. The emphasis on creative designs combined with the most modern and vegan materials, as well as a traceable production chain, reached its demanding target group a long time ago.
New “phygital” sales models will be decisive and purchases will continue to take place in physical stores: Customers appreciate the confidence they get from the physical experience of a luxury product. Luxury brands have to guarantee, however, sufficient digital availability and not simply digitally animate the in-store experience. In the past, cautious demand regulated the offerings. Generation z and now generation alpha will give these trends the quick boost they need. In particular, social media channels and constant access to international influencers and bloggers are decisive for the current luxury consumerism and access to the world of the UHNWI.
Meanwhile, young and international influencers are being flown in for worldwide events. It's pure luxury— whether it's a product, a service, a flight on a private jet, champagne and caviar all around—and stimulates social media channels through emotion and suggestion. They are the defining influencers for a whole generation and make the consumption of luxury goods more effective on a broad scale. Younger social classes can afford certain luxuries and are redefining this exclusive world. The increasing need for connectivity from luxury goods is changing the entire offering of products and services.
Digitalization has irrevocably changed the global economy. A new paradigm of luxury consumption has arisen along with the way business is done. Generation alpha will be the first generation to completely grow up in the 21st century, and as a result, be the best educated and wealthiest generation.
They will move seamlessly between products, styles and interests, and enter into casual connections with different social and cultural groups. Already in the early years, the appropriation of clustering behavior patterns and access to the multidimensionality of technology, service and (luxury) products will be possible everywhere.