Luxury brands must navigate a ‘decade of change’ driven by technology and consumer forces to remain competitive, according to a Deloitte report.
They should take advantage of evolving technological and consumer demands to help boost profits and remain competitive, the 2nd annual Global Powers of Luxury Goods report said.
The report provides an analysis of merger and acquisition activity in the luxury sector and a forward look on the changing nature of the luxury consumer – notably through the impact of technology.
The world’s 100 largest luxury goods companies generated sales of $214.2 billion through the end of the last fiscal year despite currency headwinds and intense technological disruption.
“Several key aspects of the luxury sector will be unrecognisable in the next few years,” Deloitte fashion and luxury leader Patrizia Arienti said.
“The travelling luxury consumer will change the concept of national boundaries, millennial consumers will represent a significant percentage of sales volume in luxury, and the competitive forces driven by technology will continue to disrupt at a faster pace. As such, global luxury brands must overcome significant challenges in order to maximise engagement with their digitally-savvy, time-sensitive, and socially aware consumers or risk being left behind.”
Fifty-eight per cent of millennials currently go on line to search for information on luxury items and 31 per cent use social media for gathering information around discounts and promotions, compared with 10 per cent for older luxury consumers.
Results from Deloitte’s survey of over 1,000 high-income earners across Europe also illustrated that, while traditional marketing channels such as magazines and store browsing continue to be relevant for consumers gathering information on new luxury brands, 45 per cent of participants indicated that they search online for information.
“The global economy in 2015 has provided ups and downs for luxury purveyors. On the positive, some key markets are continuing to show signs of greater strength,” Deloitte chief global economist Ira Kalish commented.
“The US economy has accelerated and will likely grow faster in 2015 than at any time since 2005. In Europe and Japan, more aggressive monetary policies are boosting growth as well as asset prices. Comparatively, China’s economy continues to decelerate, even as the government takes steps to boost credit activity.
Looking ahead to the second half of 2015, we expect to see increased growth in India, slow growth in China, and recession in Russia and Brazil, which may have an impact on the luxury sector more broadly.”