+4% growth? Luxury has a bigger issue.
You can call this our "Business of __/|>" piece.
According to the number-crunchers over at Bain & Co., this year the market for luxury goods is going to grow a paltry +4%.
Granted, we should handle that figure carefully. After all, the same people were projecting anything between +5% and +12% back in June and, anyway, this is how we feel about most forecasts in the first place:
…but figures are an easy conversation piece and that +4% is a widely circulated tidbit, one which is likely being featured in countless PowerPoints as we write.
The mainstream conversation around that figure seems to focus on the “cyclical” factors: aspirational buyers feeling the pinch, China no longer being what it used to be, “when-the-going-gets-tough” discourses on polarization and the usual blah blah.
Which is perfectly true and sensible, by the way, but, by focusing on the short-term, it misses the big picture.
Luxury is facing a structural issue that, in our view, is far more concerning than the global economic outlook. Addressing that is what will separate the winners from the losers, ceteris paribus.
So what is it?
Let’s call it “luxury fatigue”, a sense that all the excitement is gone, that there is too much. Of the same stuff. At prices that do not discount the fatigue.
Early adopters feel it. (Ultra-)Young people feel it. The Industry? Not so much, generally speaking. It seems rather more intent on scouting for new pockets of growth, while the overall playbook remains the same.
Like filling a leaky bucket.
Or opening up new stores/markets to sell the nth iteration of your phone, instead of re-inventing the phone (Tim Cook vs. Steve Jobs).
So, why not enter the festive season by listing all the telltale signs that the party might be over?
#1 Vintage
It rises and rises, generating its own economy: marketplaces, dealers, fixers, re-commerce, counterfeiters, etc. You all know that already.
But let’s talk about “vintage” as a weak signal for something else, namely, the fatigue with present-day fashion (design is obviously next in line). This is especially apparent among early-adopters and insiders but it’s already plenty visible beyond that.
Simply put, vintage is a portal leading to more adventurous times, when patterns and fabrics were more exotic, collections less merchandised and the quality generally better.
Vintage comes with the additional benefit of being “unique” (which is why A-list stylists use it in between brand agreements) and it comes with a bit of cultural, IFYKYK cachet. It has reached a point where, for some people, buying last-season is almost gauche.
Vintage is a relic, literally so, of a time when the Fashion Industry was in many (business) ways much more naïve but also much more exciting.
The corporatization of fashion - the well-known transformation of a cottage industry into a global force - has brought many advances and benefits but all of this has come to the detriment of unbridled creativity, with fewer mavericks and more managers.
Time to rebalance that equilibrium!
#2 Dupes
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Dupes, shorthand for “duplicates, are already a huge thing, in Fashion, Beauty and Design.
They are a shopping behavior and, predominantly on TikTok, a search behavior (linking to that whole discourse for SEO nerds about search behaviors shifting to TikTok).
Make no mistakes, dupes are much worse than fakes.
When buying a counterfeit good, the consumer is proving he has an interest in owning a specific logo/brand. He doesn’t have the means to buy the original, so he will go for an illegal copy.
We once had a client who was kind of celebrating the fact that the the hawkers in the metro were finalling peddling copies of his brand (as in “imitation is the sincerest form of flattery).
Dupes mark a shift. the consumer wants the aesthetic but he’s not really interested in the brand. Also: dupes are about flaunting the fact that you are not being duped into paying the full price. You are a smart person, so you get the same thing for less. It’s a fundamental change: you are no longer ashamed of not being able to afford the original. Quite the contrary, you are proud of having found a smart alternative.
The psychology comes with many nuances but, once again, this is a (not-so-)weak signal about an increasing disaffection with luxury labels.
Plus, the “Zara for the rich” accusations that have become commonplace as of late are making it easier for dupes to play around the value-for-money equation.
#3 Cultural Signaling
Luxury and Fashion (which are two different notions but give us some slack here) are largely about signaling. Not “status signaling”, necessarily, but broadcasting whatever trait of your imagined self you want to be associated with.
That’s the main goal, beyond the more functional aspects (which are clearly a secondary concern, as the very existence of high heels proves).
The only trouble is that, increasingly, Luxury is suffering the competition from other “tools”.
Really, in this day and age, anything you can put on IG works as a signal (although fragrances don’t translate very well into that world, a topic for another post): a China-only limited edition sneaker might still do the trick down at KITH but it could be a cup of (hey)tea, some niche audio hardware, a vintage carpet, a trucker hat from Ray’s, even software. And let’s not even start about travel and the arts.
The overexposure to Luxury (a downside of its seemingly unstoppable rise over the last 20 years or so) and the loss of exclusivity have turned what was once, arguably, the most prominent form of signaling into just another option, one that feels increasingly less impactful.
So, what can we do about it?
Well, that’s the kind of question we usually get paid (a lot) to answer and, anyway, there is no one-size-fits-all silver bullet.
Acknowledging the issue might be a good starting place. Yes, operational excellence, markets development and sales per square meter are important topics, there is no denying that. BUT how do we make our brand (chances are, you are not in charge of the whole industry) relevant, in an age that is slowly but steadily shifting its attention elsewhere? How do we reclaim the magic?
Let’s be clear: this is not an issue that will register, significantly, on next quarter’s or next year’s numbers…which is partly the reason why it’s both so insidious and so hard to deal with, in the age of managers lasting about five minutes in their jobs.
But we are optimistic! There are still visionaries out there and, anyway, those are about the only people we can work with in the first place.
Prada is going to space, apparently, you should at the very least shoot for the moon.