The future for the luxury sector

In 2016 we wrote this article for our blog post but it wasn’t published.  It was a little far-reaching for the time but reading it now in 2020, four years on and in the wake of the Covid-19 pandemic, it seems almost prophetic. 

In the years preceding the economic downturn of 2008, the luxury goods industry grew at a rapid rate.  There was a feelgood factor and consumer spending was on a high.  It was all about celebrity, status and overt shows of wealth.  Indeed, it was taken for granted that if you were wealthy, you showed it. China was an emerging economy and there were a billion Chinese consumers all looking to the west to follow the trends. Luxury brands had every reason to feel optimistic about the future.

Fast-forward almost a decade and the consumer landscape looks very different.  Not only have we been through a global recession, we are also in a period of political turmoil and instability across several continents and are still experiencing global economic uncertainty. 

This is impacting the way consumers think, feel and spend.   Economists and market analysts are busy predicting how consumers will behave.   Harder to measure but having an equally important impact however, is the paradigm shift in human consciousness.  We are all slowly beginning to wake up to what really matters. 

We see daily in the news the suffering of refugees, the wars of brutal regimes and the acts of terrorism across the globe.  It is hard to find anyone well-off, educated and healthy who would not admit to feeling some despair for the state of how some people are living.   In the last 10 years the zeitgeist has shifted much further than we perhaps realise.  For companies, the big change has been about Corporate Social Responsibility. For the individual, it has been about discretion - we no longer want to show off our wealth but would rather talk about our charitable endeavours.  Being a philanthropist is now the most powerful display of wealth.

All this adds up to cautious spending by the consumer.  Understandably, even the very wealthy are cautious about how they spend their money. Only the truly hardened, selfish individual can admit to valuing consumerism over compassion.

We do still need to consume goods but we are a little bit more conscious about distinguishing between our needs and our wants.  This does not mean that people will stop buying diamonds and luxury goods.  We will still invest in “things” and a diamond is still an investment.  Nor does it spell the end of the luxury industry or the end of consumerism (or indeed the end of the world).  But what it does mean is that luxury brands need to tap into the collective conscious in order to evolve.

As we edge towards the end of another decade, Corporate Social Responsibility will take on an even more significant role. As consumers, we will question more about how products are made and by whom and how much the workers earn.  We will begin to see companies offering consumers examples and indeed direct experiences of how their purchasing power has a direct and positive impact on the lives of others and their communities.   We predict that. the designer handbag of the future will come with a check-sheet of who made it and how much of the price tag funds a school for underprivileged children – be that in a developing economy or indeed a developed nation..