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Aspirational consumers are trading up to new luxury goods in record numbers. They are better educated and travel more, and their $3.5 trillion in disposable incomes allow them to pay premium prices for well-designed and engineered products with artisanal touches that transcend everyday life.
Luxury brands are activating marketplaces to connect with aspirational consumers while mitigating the risk of counterfeiting and supply chain disruption. Here are three ways they’re doing it.
Online Retailing
With COVID-19 restricting in-person shopping, shoppers have turned to online marketplaces as a new means of product discovery and delivery. This has prompted luxury brands to consider a marketplace strategy.
Taking cues from the success of Net-a-Porter, traditional luxury retailers are looking to launch their own multi-brand online marketplaces. This approach has the added benefit of minimizing the discrepancy between in-store and online purchases and allowing luxury consumers to continue to enjoy a seamless experience across all sales channels.
In addition to a dedicated online store, luxury brands are also considering selling through established third-party marketplaces such as Current Boutique and Poshmark. This approach has the added benefit of reaching potential customers who regularly shop in high-end department stores such as Harrods and Selfridges. Moreover, research has shown that the presence of copycats on these online marketplaces incentivizes the authentic luxury brand to increase its quality in order to deter the competition and improve consumer surplus.
Resale Market
The resale market in the luxury marketplace continues to grow at an extraordinary rate. The resale of luxury goods taps into collector culture and allows affluent consumers to access previous season collections, vintage gems, limited-edition collaborations or sold-out streetwear exclusives that they might have missed out on the first time around. Many of these second-hand products are also available at a more affordable price point than new items from the same brands.
While some luxury brands remain hesitant to endorse resale out of fear of cannibalising sales of new items, others are experimenting with their own resale offerings. For example, Stella McCartney has joined forces with The RealReal to allow customers to consign their pre-owned designer bags in exchange for a store credit that they can redeem online or at one of the brand’s stores.
This report estimates the TAM for the luxury resale shopping market and other key figures using a combination of public information from market reports, industry surveys and media articles. Where relevant, insights regarding the overall luxury marketplace have been included as well to provide context.
New-Luxury Market
The luxury market is changing. Where once the industry was all about logos and status symbols, a new generation of consumers is looking at the bigger picture and values. This is evident by the growing popularity of sharing and 2nd-life business models as well as conscious consumption concepts like car-sharing.
Despite a possible global recession next year, the personal luxury goods sector is likely to see further expansion, according to a Bain-Altagamma analysis. This is because the luxury market appears better equipped to cope with economic turbulence than it did in 2008 and 2009, with its consumer base both larger and more concentrated. This plus a stronger customer-centricity and multi-touchpoint ecosystem should provide resilience against disruptions.
Generational trends will also drive the sector’s growth over the next decade. The spending of Gen Y and Gen Z on high-end products is expected to rise three times faster than that of older generations until 2030, with younger shoppers displaying a more precocious approach to luxury. This will require brands to develop a smooth and easily navigable omnichannel experience that allows them to connect with customers both physically and virtually.
Future Trends
Several luxury brands are experimenting with new business models in the digital realm, including renting out their products to consumers like Rent the Runway. Other companies, such as Paris-based luxury conglomerate LVMH, are partnering with tech startups offering everything from lab-grown leather to augmented reality mirrors and AI-based product authentication.
The luxury market will continue to grow this year and throughout the decade out to 2030, even amid economic turbulence. In 2023, China is expected to resume its growth as well as new markets such as India and emerging Southeast Asian and African countries.
Millennials and Gen Z are also expected to drive the luxury market growth in the future, with younger generations growing their wealth at three times the rate of older generations and starting to spend on luxury items some three to five years earlier. In the digital space, luxury brands should also look at advancing Web 3.0 technologies, such as NFTs and the metaverse, to keep up with younger consumer demands.