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The Luxury Report: The State of the Industry in 2020 and Beyond

The world is in the midst of a paradigm shift. The innocuous-sounding threat of ‘climate change’ has recently undergone an urgent rebrand in mainstream media to the more foreboding climate crisis...

And while there is a generational difference in attitudes to global warming – 70% of 18-34 year-olds worry about it, compared with 62% of 35-54-year-olds and 56% of 55-and-overs – these numbers are not minorities. 

New legislation, increased media coverage and political movements like Extinction Rebellion are ensuring that sustainability and climate action is far from a trend: it’s a necessity for humanity’s survival. 

Team this with a slump in equity markets, slowing regional economies, and political instability across the globe – and the implications for luxury spending seem vast. Historically, the industry has been more likened to indulgence and excess (in addition to quality craftsmanship) than it has sustainability. 

And yet. With the global luxury market reportedly reaching €920 billion ($1 trillion) in 2018, it’s set to top €1.3 trillion ($1.5 trillion) by 2025, with experiential luxury (dining, hotels, cruises, resorts, wine and spirits, furniture, lighting, cars, boats, smartphones and technology) growing faster at 5% than personal luxury goods at 3%.

Millennials, who currently represent around 32% of the market, are driving this change: by 2025, they will make up 50%. Gen Z are on track to represent 8% of the market by 2020. Both of these groups’ expectations from luxury brands are very different from their predecessors’. 

Geographically, China continues to be the majority force, making up 33% of the market and expected to rise to 40% by 2025, representing 75% of the market growth between 2018-25.

In a rapidly-changing world, with technology advancing at hyper-speed, and shifting consumer attitudes, what experiences and values do consumers expect from luxury brands? How do luxury brands recalibrate their strategies to compete in a future market where traditional ideas of luxury are changing?

The global wealth landscape

After seven years of continuous growth, high-net-worth-individual (HNWI) wealth declined by 3% in 2018, largely due to a volatile economic environment and a drop in wealth in the Asia-Pacific region – China alone was responsible for more than half of Asia-Pacific and more than 25% of global HNWI wealth loss. 

However, billionaire populations are growing: by 2025, there will be 263,500 UHNWIs (ultra high net worth individuals) worldwide.

As with the wider population, the attitudes of the global super-rich are shifting. Their sense of personal identity is shaped by politics, social and traditional media, as much as by personal and business motivations. 

Millennial and Gen Z consumers generally reject the stereotypes of traditional wealth and looks for new values to define status – from social connections to insider knowledge. They are likely to make value-based acquisitions and purchases. Luxury weaves its way through their experiences, free time, travel, community, self-growth and security. Keen to express their entrepreneurial spirit, individuality and self-made success, they are in search of luxury brands that are aligned with their personal values, and that provide a seamless digital experience. They have an expectation for fast, tailored service, in both the physical and digital realms.

Key trends

Emerging: designer collaborations

Design collaborations are big news. 67% of Gen Z and 60% of millennial luxury purchases have bought a designer collaboration piece or special edition, and they are particularly popular among Chinese consumers (62% have bought into the trend).


Supreme X Louis Vuitton Collaboration

Traditional luxury brands are increasingly partnering with cutting-edge streetwear designers to create high-end collections that are irresistible to the Gen Z and millennial customer. Notable examples of this trend are Louis Vuitton x Supreme, Off-White x Rimowa, Fendi x Fila, and – reflecting more permanent relationships between youthful, cutting-edge designers and established fashion houses  – the appointment of Off-White’s Virgil Abloh as menswear design director for Louis Vuitton, and Rihanna becoming LVMH’s first black, female designer with Fenty Maison. 

Sarah Willersdorf, Partner & Managing Director at BCG

"Collaborations are key to the new luxury. Millennials are looking for innovation in design, along with unique collections that reflect their individuality and values."

Meanwhile, in hospitality, the convergence of luxury fashion and travel has been steadily increasing year on year – Bulgari, Versace, Dolce & Gabbana and Armani have all partnered with five-star hotels. Most recently, LVMH increased its presence in the hospitality sector with the acquisition of Belmond and all its signature hotels, cruises and trains in a $3.2 billion enterprise value transaction.

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The Bulgari Hotel, Beijing

The convergence of fashion and travel is set to continue as brands realise the power of immersing consumers in their luxury world, beyond apparel or accessories. The most powerful collaborations are those that think outside the box, covering new ground and thinking long-term, rather than a one-hit strategy. 

Here to stay: Sustainability 

According to The Future Laboratory, today’s luxury purchaser is seeking to express who they are, rather than what they have. They want to be seen as ethical, creative, connected, philanthropic, and conscientious. Brands that can speak to this new mindset and live those values will have boundless opportunities to connect and deliver meaningful experiences. The real luxury for this consumer, is the elimination of guilt from indulgence.

With a heightened awareness around climate issues, consumers are no longer willing to accept unsustainable practices, and will actively disassociate from brands that do not share their values.

57% of consumers are more likely to buy from or boycott a brand because of its stance on a social or political issue. 

Edelman’s Earned Brand Report, 2018.

Jaguar Land Rover has developed a new line of leather-free and fully vegan materials for its 2020 Range Rover Evoque, Range Rover Velar, and Jaguar I-Pace SUVs. The materials, such as Eucalyptus Melange, use significantly less water than plastic and can be dyed any colour. Some are made from recycled plastic bottles – 53 per vehicle on average. 

And while electric vehicles still account for a very small percentage of global car sales, automotive companies have made significant investments into their research and production, with Bugatti, Bentley, Mercedes-Benz and more all debuting electric models.

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Mercedes Vision

The Mercedes Vision EQS electric concept car revealed at the 2019 Frankfurt Motor Show, using recycled materials: microfibre cloth made from recycled plastic bottles, maple wood trim, artificial leather and a roof lining constructed from a textile produced from recycled ocean waste. 

The cruising industry has also had to make changes to appease its critics and mitigate its negative environmental impact: Lindblad Expeditions is leading the way in sustainable tourism with its climate change action plan. Other liners are focusing on greener engines that run on cleaner fuel to reduce emissions, and innovative technology to minimise fuel consumption. 

Hilton has designed the first vegan hotel suite in collaboration with Bompas & Parr. Understated luxury meets practical sustainability, with plant-based keycards, eco-stationery, 100% renewable and sustainable Moso Bamboo flooring, a vegan mini bar (obviously), botanical artwork and Piñatex seating.

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Hilton's First Ever Vegan Hotel Suite

Brands such as Stella McCartney, Mara Hoffman and Rag & Bone are flying the flag for sustainability in luxury fashion, with Stella McCartney recently launching the ‘World of Sustainability’, a platform entirely dedicated to documenting the brand’s sustainable practices.

Global fashion search engine, Lyst, reported a 47% increase in searches for ‘vegan leather’ and ‘organic cotton’ in their latest report, which analyses data from 80 million shoppers, 100 million searches, five million products and 120 countries. The company predicts that in 2020, 10% of all fashion purchases on Lyst will be made with sustainability in mind.

Global fashion search engine, Lyst, reported a 47% increase in searches for ‘vegan leather’ and ‘organic cotton’” in 2018.

With the rise of sustainability comes the growth of the secondhand market in personal luxury goods: currently valued at €22billion and growing faster than overall personal luxury. This is due to four main drivers – increased guarantee of authenticity via legitimate websites like Vestiaire Collective; preferences for shorter ownership for sustainability reasons; broader access to iconic, ‘must-have’ products; and the more affordable price tag.

Sustainability is here to stay: luxury brands need to live and breathe values they associate with, which means not paying mere lip service to what is not simply a passing trend. 

Still rising: experiential luxury & ‘phygital’ concepts

As mentioned above, the experiential luxury market is growing faster than the personal luxury goods market. Much as with the convergence of fashion and hospitality, brands are embracing the ‘phygital’ revolution, and creating memorable experiences to immerse their customers in the brand story. To stay relevant to an audience that can afford to buy anything, do anything and go anywhere, the incentive to impress them is even greater for luxury brands than their everyday counterparts.

China is Porsche’s biggest single market for the third year in a row, with the recent world premiere of the Porsche Macan held in Shanghai. The brand is committed to creating not simply a vehicle, but a lifestyle brand for Chinese customers, which is a generation younger than their other markets. 

The Porsche Experience Center Shanghai – the sixth worldwide and first in Asia – opened in 2018. Potential customers can book test drives via WeChat, and on-site there are racing simulators, off-road tracks and a restaurant, all designed with social sharing in mind. Stats show that branded event experiences are lucrative: with 74% of consumers saying taking part in such events makes them more likely to buy the products being promoted, and 98% of consumers create digital or social content at events and experiences.

Porsche Experience Center

The Porsche Experience Center, Shanghai

Farfetch is addressing the disconnected experience shoppers can face when they shop in-store vs online, with the Store of the Future concept, citing questions such as, “Why don’t the staff know my previous purchases?”, or ”as a loyal customer, why am I not given the same treatment when I visit a brand’s store in New York or Shanghai?” as drivers for the technology, which they refer to as ‘Augmented Retail’.



Farfetch 'Store of the Future' concept

Using Browns East as a ‘live lab’ to test the concept, the Store of the Future project aims to provide personalised attention for every customer when they set foot into a partner location, using technology to enrich the customer experience across channels and facilitate a seamless experience at luxury brick-and-mortar stores. The technology launched in Thom Browne’s flagship store in New York, and Farfetch announced an exclusive multi-year global innovation partnership with Chanel last year.

A digital window into an exclusive world

The world of luxury was once an exclusive, private members’ club, but the advent of digital and social media has made it more accessible for anyone to have a glimpse. This can be difficult for heritage brands to navigate, as they balance the needs of younger and older customers.  But democratising the luxury experience with social media is a key way for luxury automotive brands to remain relevant in contemporary culture. It also makes business sense: the data available for marketers to use is unparalleled in any other media form.

Discarding the veil of mystery around luxury brands does not mean forgoing status or desirability. Rather, honesty, openness and transparency are lauded as admirable and alluring attributes in themselves.

Modern luxury has purpose

As the luxury customer’s mindset evolves, it is not enough for brands to simply pay lip service to the core issues defining our times – authenticity and genuine commitment to the future of the planet – and humanity – are essential to secure a place in the hearts of modern luxury consumers. Immersive retail concepts, strategic collaborations, seamless digital experiences, human-centric storytelling and honest brand values are key to connect with the luxury buyers of today – and tomorrow.

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MOF Team

Published by MOF Team

We are a 60-person Experience Design Consultancy with soul. We help timeless brands design what’s next. STRATEGY + DESIGN + TECH + OPTIMISATION