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Abundantly Rare: Changing Consumer Trends in the Luxury Market

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 Abundantly Rare: Changing Consumer
Trends in the Luxury Market
Gautam Agrawal1, Rubal Rathi2,
Dr. Ruchi Garg3 and Dr. Ritu Chhikara3

INTRODUCTION: THE CONCEPT OF LUXURY

For the longest time in the academic marketing literature, luxury industry
has been seen at par with dreams. To this end, consumers associate
luxury with being undeniably fascinating and an affair of the rich and
affluent. The Future of Luxury report by Bain & Company tracked the
worldwide luxury market and the findings suggest that segments like
luxury cars, hospitality, and personal luxury items comprises almost 80%
of the global luxury market (Bain, 2019). The report also put forward
that by 2025, the personal luxury goods market is expected to see and
upward movement from 320 billion to 365 billion. A list of top 10
most valuable luxury brands is captured in Table 1. In India, the luxury
goods market is estimated to reach $8 billion with 6.6% CAGR during
2019-23 (Statista, 2019). This upward movement calls for academic and
practitioner attention on the subject to better curate experiences for the
customers.
Traditionally, economists like Veblen propounded that luxury relies
on basic needs in socioeconomically stratified societies, proposing a vent
for differentiation (Alcott, 2004). Luxury goods are known to deliver
functional and psychological satisfaction (Vigneron and Johnson, 2004).
The modern view of luxury, however, has changed the way people identify
it. ‘Today’s luxury’ presents a whole new expression, an unprecedented
emotion. Luxury has always been a very personal indulgence. It is
easier to experience but difficult to define (Miller & Mills, 2012). These
experiences are subjective and contextual for what constitutes a luxury
car for someone, might be an ordinary car for someone else.
Godey et al. (2012) stated parallels that define luxury. These include
beauty, rarity, quality, price, along product endorsement by an inspirational
brand. It is the perception that a brand creates in its customers’ minds
that makes them look beyond its functional value. Although strategic

1
Research Scholar, BML Munjal University & Visiting Faculty, FOSTIIMA
Business School, New Delhi.
2
Research Scholar, BML Munjal University, Gurugram, Haryana.
3
Assistant Professor, BML Munjal University, Gurugram, Haryana.
2 New Paradigms in Management Science

tactics adopted by brands like premium pricing or supreme quality might

increase the likelihood of a brand being considered luxurious, it all comes
down to customers’ perception (Ko et al., 2019).
Naturally, luxury brands do not become the finest overnight. Instead,
the products are uniquely crafted not just for vaunt by one generation
but also for passing down across generations. The cultural theory posits
that luxury items like watches, jewelry, fur coats are transferred across
generations either as a medium for exhibiting love and/or because of the
item’s heritage value (Niinimäki, 2015). These brands enjoy a privileged
position globally in the branding spectrum and an impression on the
consumer’s subconscious. Consumers expect fulfilling experiences
each time they interact with luxury brands. They also demand special
attention and the preference for customized products and services. A
tangible luxury product is an amalgamation of culture, design, value, and
significance for the customer.
Table 1: World’s Top 10 Most Valuable Luxury Brands 2020
Brand 2020 value 2019 value Growth
Porsche $33.9 billion $29.3 billion Up 15.6%
Gucci $17.6 billion $14.6 billion Up 20.2%
Louis Vuitton $16.4 billion $13.6 billion Up 21.4%
Cartier $15 billion $13.6 billion Up 10.1%
Chanel $13.7 billion $11.5 billion Up 19.4%
Hermes $11.9 billion $10.9 billion Up 9.1%
Ferrari $9.1 billion $8.3 billion Up 8.7%
Rolex $7.9 billion $8 billion Down 2.2%
Dior $6.9 billion $6.3 billion Up 8.6%
Coach $6.8 billion $7.5 billion Down 9.7%
Source: GQ, 2020
Allers (1991) proposed three luxury- inaccessible luxury, intermediate
luxury, and accessible luxury. Vickers et al (2003) furthered the discussion
around these levels (see Figure 1). These can be afforded by the elite class,
the professional class, and the middle class, respectively. However, the
contemporary dialogue revolves not just around the accessibility but
includes broader aspects of acquiring luxury. How do luxury brands
communicate with their new-age customers? What does the social media
presence of the luxury brand portray about them? How considerate is
a brand about the environment? Technology, digitization, sustainability
practices of luxury brands, and new modes of luxury consumption were
not contention points until a few years back. However, the new luxury
 Abundantly Rare: Changing Consumer Trends in the Luxury Market 3

consumers care about these aspects. This chapter discusses some of

these trends that make a way ahead for the luxury industry. The next
section elaborates on some promising trends in the luxury industry,
including new consumer demographics, emerging business models that
emphasize sustainability as a key driver, followed by the role technology
and digitization play in luxury consumer engagement.

Figure 1: Hierarchy of Luxury Products

Source: Vickers, Jonathan S; Renand, Franck (2003)

EMERGING TRENDS IN THE LUXURY INDUSTRY

This section discusses the nouveau trends in luxury marketing that the
haute couture brands acknowledge and adopt globally (see Figure 2).
Studies in fashion retailing should be closely connected to consumer
behavior, particularly luxury retail, with its discerning clientele.
Traditionally, research has covered themes like conspicuous consumer
behaviors (Amaldoss and Jain 2005; Tereyagoglu and Veeraraghavan
2012) and consumer-based luxury branding strategies (Choi & Winterich
2013). The present luxury retail is much more sophisticated, and luxury
fashion retailing needs to be attentive to their high-value consumers’
specific needs.
Consumers will remain demanding and assertive. The leading
practitioners of luxury believe that the symbolic foundation of luxury
has changed, and luxury retailers, to stay relevant in the changing world
need to recognize and identify the changes in the evolving customers
choices, preferences, and culture. The increasing affluence, especially in
new economies like China, India, Australia, desire to spend, propensity
to consume, desire for social media ‘likes’ has led to a democratized
luxury. The luxury industry needs to take cognizance of these evolving
trends and be responsive to their growth.
4 New Paradigms in Management Science

Figure 2: Emerging Trends in the Luxury Industry

Source: By Authors

A Shift in Consumer Demographics

Till the new millennium’s advent, Europe’s Western countries were
considered the rightful owners of magnificence and grandeur. Possession
of ostentatious ornaments and luxury vacations to the most exotic
locations symbolizes their richness and affluence. These economies have
matured now and no longer equate possession with happiness. These
are saturated markets where emerging consumer trends do not justify
investments in new contemporary designs. The leading EU economies
have experienced either a flat growth rate or a contraction in their
economies. This has allowed China to emerge as the most important
market for luxury brands, with 8% of global luxury sales in 2017 (Deloitte
2019). Simultaneously, Chinese companies like Shandong Ruyi and
Fosun International took controlling stakes in established fashion brands
like Bally International, Trinity, SCMP, and Lanvin of France.
The rapidly evolving trends have led luxury retailers to engage new-
age customers – HENRYs (High Earners -Not Rich Yet). This emerging
group has been characterized as middle-aged (average age 43 years),
earning more than US$ 100,000 per annum and investible assets of US$
1 million. This customer segment is digital savvy, has purchasing power,
intention to spend, and prefer individualized, self-expressive products.
The Millennial HENRYs will be the key luxury product drivers since
they are likeliest to become the affluent members of society. India is among
 Abundantly Rare: Changing Consumer Trends in the Luxury Market 5

the youngest populations globally. Thus, India will reap the benefits of the
demographic dividend. It can continue to enjoy the benefits until 2030
when the average age is estimated to be 31years as opposed to the average
age of 40 in the USA and 42 years in China. The new-age customers
prefer to express their individuality rather than ownership. The luxury
brands are expected to empower people by creating and accentuating an
individual’s personality. Thereby making luxury retailers an active agent
in their customer’s identity creation and engaging them at fundamental
levels by understanding their core needs.
The rising middle class and their increasing disposable incomes foster
optimism for luxury high priests (Kapferer & Michaut 2015). Middle-
income households are projected to increase to 300 million by 2030 from
158 million (WEF, 2018). From the present 30% share in upper-middle-
income households’ consumption, their share will rise to 47% of total
consumption. By the next decade, 80% of incremental spending will
be led by middle-income consumers. This had led to a global shift in
consumer demographics. Luxury brands’ history and heritage are not very
important attributes for these consumers. These characteristics are ranked
sixth in preference after quality, customer service, design, craftsmanship,
and product exclusivity respectively. Therefore, for the sake of retaining
their value and to appeal to the emerging customer segments, the luxury
retailers like Louis Vuitton, Supreme, Manolo Blahnik, and Jimmy Choo
are collaborating with streetwear brands like Supreme, Vetements, and
Off-white, respectively, which are more popular with the millennials.
Another segment that is emerging as a key contributor is working
women. Their aspirations are high, and they like to reward themselves
from time to time with cosmetics, fashion, jewelry, and even automobiles.
Data from the Chinese luxury industry shows that women account for US
$ 700 billion on luxury goods and own 40% of the luxury automobiles.
Correspondingly, in India, BCG predicts by 2020 that 158 million working
women will earn US$ 900 billion per annum (Silverstein et al. 2012). To
meet this emerging segment’s demands, the fashion houses have adopted
a consolidation strategy by acquiring stakes in luxury products missing
from their portfolios. Accordingly, LVMH acquired Christian Dior,
Jimmy Choo was acquired by Michael Kors, renowned watch company
Breitling was bought by CVC in 2018.
Based on the income generated and propensity to spend, the
immediate future of luxury are the millennials. Husic & Cicic (2009) calls
Gen Z “the next wave of luxury spenders”. Gen Z has emerged idealists
and not materialists and value experiences over possessions (Lu et al.
2013; Deloitte 2017). They are the shopping connoisseurs demanding
6 New Paradigms in Management Science

premium quality juxtaposed with the regal experience. According to the

Boston Consulting Group (2019), Gen Z is likely to contribute ~32% to
~50% to the personal luxury market by 2025. The report also suggests
that though Gen Z contributes only ~4% today, they have very different
behavior and aspirations. Brands should focus on understanding this
aspiration demographic segment better.

New Business Models

The emerging paradigm of the sharing economy in the luxury space is a
recent development. The ‘sharing economy’ refers to temporary access
to a particular design, product, service is paramount against ownership
of the asset (Bardhi & Eckhardt, 2012; Belk, 2014). The dialogue started
recently when brands observed a paradigm shift in consumer behavior,
more towards green conspicuousness and sustainability. It was then
luxury sharing platforms gained pace. PricewaterhouseCoopers estimates
that while the global rental market for fashion products will reach
US$335 billion by 2025, India is estimated to have 10% or around US
$35billion rental products industry. From the international collaborative
consumption-based platform, Rent the Runway to an Indian fashion
rental startup that caters to fashion-conscious millennials, The Stylease,
this trend is taking a universal shape. Gen Z is open to experimenting
and experiencing second hand or ‘pre-loved’ luxury products. They are
advocates of sharing, collaborative, or even free economy (Kapferer,
2018). This generation has been the habitual user of the ‘sharing
economy’ wherein access to a particular design, product, and service is
paramount against the asset’s ownership. Temporary possession of the
cherished product takes precedence over owning it for a lifetime. The
personal luxury goods comprise of 7% market value in the second-hand
commodity space and are experiencing 12% per year growth (BCG, 2019).
Non-ownership allows these young consumers to experience otherwise
unaffordable products without relinquishing other leisure experiences.

Rise of Experiential Luxury

The demographic estimates for 2030 posit India to have over 370 million
Gen Z consumers in the 10-25 age bracket. These new-age consumers are
expected to have diverse values and beliefs viz-a-viz Gen Y customers. The
current and upcoming consumers of luxury are significantly different
from their older counterparts. The purchase decisions and lifestyle choices
of the ‘seenagers’ were affected by factors like social elevation. High status
involved being advantaged, worthy, and superior compared to others
(Bandura & Locke, 2003). However, millennials and gen Z expect more
 Abundantly Rare: Changing Consumer Trends in the Luxury Market 7

than just material pleasures. This generation tends to define themselves

by what they are more than what they own. For them, immediate pleasure
and exceptional experiences are highly appreciated (Bellaiche et al. 2012).
The older consumers are more prone to be loyal to their favorite brand,
probably a heritage luxury brand. The younger generation, however, is
more susceptible to try new brands. More specifically, in the emerging
economies that are overcoming material shortage and poverty, consumers
cherish the brands that allow them a flavor of experiential luxury.
The fashion industry has identified designing personalized experiences
– the unique experiences curated to match an individual’s preferences
– as complementary services to their products. The mass production of
the products and abundance of premium brands masquerading as luxury
brands and the advent of ‘Masstige brands’ (mass & prestige) has led
to the trend of curated experiences (Truong, McColl & Kitchen, 2009).
The other retailers cannot replicate the experience, the products, retail
design, styling are prone to be copied, but the unique experience sets a
luxury brand apart from the other brands.
A key driver for fashion houses is digitization. Luxury has always
been about touch and feel. Moving forward, a real challenge facing luxury
brands is their ability to curate a luxurious experience for their customers.
The marquee retailers had been reluctant to enter digital retail channels.
In the initial period, these channels were meant for information seeking
discerning customers, the brands believed that their customers would
not adopt to the virtual world retail. Therefore, the focus was on display
visualization and product presentation. Gradually, luxury retailers like
Gucci, Louis Vuitton have accepted the reality of digital mediums as
viable retail sales channels. Accordingly, they have started to use analytics
to determine customer insights and comprehend trends emerging from
HENRYs and other demographics.
Investing in Big data analytical tools helps these extravagant
brands offer superior and curated customer service through customer
identification, segmentation, sentiment, and predictive analytics. Famed
fashion houses such as Estee Lauder, Burberry, Ted Baker, Dior, and
Louis Vuitton, have already implemented AI-based chatbots. Gartner’s
prediction that by 2020 85% of the brand-client relationships will be
system-mediated instead of human-assisted is gradually coming true.
(Gartner Customer 360 Summit, 2011).
The luxury consumers are the connoisseurs anticipating, expecting,
and demanding personalized service(s) from the retailers. In the online
environment, the retailer provides the expected services by offering
customized products, services of online style advisors, personal shoppers,
and booking an appointment for the store visit. An example of Burberry’s
8 New Paradigms in Management Science

can be quoted, which allows make-to-order bespoke trench coats and the
monogramming of fragrances, scarves, etc., at their website.
Physical and digital cannot be viewed in isolation, instead should
work in harmony to curate better experiences for the customers. ‘Phygital’
is the new hype word. Brands are continually working towards marrying
physical brick and mortar store experiences with their online channels.
The best-fitting demographics for this model are the millennials and Gen
Z. The luxury retailers need to understand that technology adoption
adds value for the customer. Holmqvist et al. (2020) present the factors in
digitization to concurrently serve the conspicuous customers requiring
better visibility and tasteful customers desiring social exclusivity.
The leading fashion retailers like Armani, Burberry have accepted the
Phygital retail channels. The ‘webrooming’ is an accepted reality by the
luxury retailers (Shankar & Jain). Therefore, to provide a full range of
the services to their esteemed clientele, the luxury retailers have added
facilities like sharing pics of the products with friends on FB & receiving
their feedback, virtual assistance to customers, 3600 views of the client
to the client service representatives in both online and offline channels
through channel integration, enabling the company to get a unified view
of customers to offer more personalized services eventually.
The luxury retailer’s technology adoption has evolved from the
basic brand information, store locator services to presenting their entire
collection online. The luxury products industry has successfully reinvented
itself to push its message and products through digital channels. Burberry,
the iconic British brand, live-streamed its new range of merchandise on
the Twitch streaming platform. The famed fashion shows of Milan, Paris
by the leading designers too, are going online. While Dior and Salvatore
Ferragamo are planning to replicate the ramp walk experience for their
discerning viewers at home due to the COVID pandemic, other retailers
adopt a Phygital strategy. Prada Spa staged local private screenings and
virtual viewing events of its Autumn 2020 show, while Victoria Beckham
in London hosted limited journalists and celebrities by invitation only
in a two-hour slot before releasing her film collection the following day.
Milano Digital Fashion Week showcased the spring/summer 2021 men’s
and women’s pre-season collections of famous Italian designer Maison
Valentino.
The famed designer houses have expanded into social media spaces
too to initiate a brand conversation through different channels. The
exclusivity of the store is gradually being replaced by the desire for an
increasing number of touchpoints. To reach a wider audience, retailers
use social media tools. Luxury brand Louis Vuitton has 39.8 million
 Abundantly Rare: Changing Consumer Trends in the Luxury Market 9

Instagram followers, followed by Burberry (17.5 million), Karl Lagerfied

(5.89 million), Donatella Versace (5.5 million). The Indian designers
restricted by their geographical reach and domestic-focused approach
have been laggards in this area. Leading Indian designers – Rohit Bal
(400,000 followers), JJ Valaya (2,34,000), House of Masaba (5,44,000)
have a long distance to cover and adopt a global attitude in order to be
counted in the world’s elite designers.
Simultaneously, the luxury brands have recognized the value of
endorsers, influencers, and niche bloggers, who have their dedicated
viewership. Mr. Bags has 3.5 million followers on Weibo and 8,50,000 on
WeChat and collaborated with Montblanc for a limited-edition handbag
collection. Gucci launched #GucciGram for collaborating with Instagram
artists and #24HourAce where 24 selected artists managed Gucci’s
Snapchat account for one-hour each. These astute social media strategies
have allowed the marquee retailers to communicate their heritage, their
vision, the design language to the tech-savvy customer in his preferred
digital language.

The Advent of Sustainability in Luxury Retail

Originally luxury was associated with “a lifestyle of excess, indulgence
and waste” (Dubois et al., 2005; Kahn, 2009). The industry was (in)
famous for gluttony, excessive consumerism, animal cruelty, wastage,
and elitism. Gradually, the changing societal values brought into focus
the concept of sustainability. Sustainability refers to the moderate or
responsible consumption of finite resources to in order ensure the
availability of resources for the future generations to meet their needs
as per their choices. The consumers for fashion products are conscious
about sustainability, the environmental impact of their purchase, and
ethical consumption (Choi and Shen 2017).
Customers are becoming more mature in their attitude towards luxury
brands. The present customers expect luxury brands to include substance
along with quality as a measurement of value. These will be exhibited
in intangible qualities related to ethical and moral consciousness.
Consequently, luxury brands are expected to demonstrate more socially
responsible practices. There has been growing discourse about the
sustainability impressions of the fashion supply chain and manufacturing
process (Phau, Teah & Chuah 2015). Ravasio (2012) and Nair (2008) have
empirically proven that leading fashion retailers lag in performing their
business in a manner beneficial for the society and the environment.
The two key aspects of sustainable production relevant to the
luxury fashion industry are the environmental and social aspects. The
10 New Paradigms in Management Science

environmental impacts on sustainability refer to the inefficient energy

and water use, GHG’s emissions in production, toxic waste disposal, and
treatment of chemicals, dyes, and finishes (Phau, Teah & Chuah 2015).
Almost 1,500 gallons of water is required to manufacture just 1.5 pounds
of cotton required for a single piece of denim jeans. Moreover, toxic
chemicals used in dyeing and laundering can pollute as much as 200
tons of water per ton of fabric. These figures denote the environmental
impact of the fashion industry. The negative impact is compounded by
destroying by burning the unsold stock to safeguard their brand value.
This issue came to the fore when Burberry reported that they destroyed
£28 million worth of stock, including cosmetics, in 2018. These excesses
and wasteful consumption led to conscious consumption acquiring a
customer-driven social movement. This movement’s positive impact can
be seen in the annual sustainability reports being published by marquee
luxury retailers like Burberry, LVMH, and GAP. Herein, the retailers
report about the environment-friendly processes and activities they
have adopted, the positive impact, and their long-term vision about the
SDG’s (Sustainable Development Goals). These initiatives emphasize
environmental issues like water conservation, waste disposal, reducing
soil, water, and air pollution but ignore the animal welfare for which the
luxury brands were regularly criticized. Taking cognizance of the social
demand for the prevention of animal cruelty, brands such as Gucci, Miu
Miu, Stella McCartney, Prada, besides many others have committed
to eliminate fur from their collections (Featherstone, 2017). Similarly,
Tiffany has adopted a zero-tolerance policy towards ‘conflict diamonds’
mined in Africa to fund the terror and illegal activities.
The social aspects include sweatshops masquerading as factories,
abysmally low wages, unregulated working hours, health and safety risks,
gender and race discrimination, animal welfare, among other concerns
(Pedersen and Gwozdz 2014). Leading fashion retailers have identified
these as existential threats, negatively affecting their carefully crafted
brand images. Therefore, companies have started taking steps to improve
their working conditions, making it more inclusive, diverse, treating
their employees and contract workers equally with respect, dignity, and
fairness. The fashion industry makes amends by allowing external social
audit and being accepted in Bloomberg Gender-Equality Index, Thomson
Reuters Diversity Inclusion Index, and Human Rights Corporate Equality
Index for the LGTBQ community. Brands like GAP, Burberry, in order
to inform and engage their present and prospective customers, publish
annual reports to detailing their efforts to make the workplaces more
hospitable and employee friendly.
 Abundantly Rare: Changing Consumer Trends in the Luxury Market 11

The leading brands partner with their suppliers and other key
stakeholders to provide a safe, fair, and healthy work environment for their
employees. These suppliers, primarily situated in low-income countries,
traditionally have been reluctant to provide safe working conditions and
fair wages. In order to overcome their reluctance, the fashion industry
has adopted several practices like formulating a CoVC (Code of Vendor
Conduct), regular factory inspections, encouraging digital payments
to the workers, periodical training to the deserving workers for their
capability building, robust grievance redressal mechanism beside others.
The successful luxury brands have realized that to grow their business
organically while remaining true to their inner essence, it is important
for them to advocate and practice the social and cultural values their
customers care about.
Pookulangara and Shephard (2013) observed that consumers are
willing to pay the premium for eco-friendly and socially ethical products,
apparels, and accessories. Gen Z prefers brands that are moral, socially
responsive, and environment positive.

MANAGERIAL IMPLICATIONS
While academic researchers investigate these themes, it is equally critical
for luxury brands to operationalize these practices in the real world. With
the emergence of new segments which are well-traveled and aware of the
dreams they associate their favorite brands with, it becomes imperative
that these luxury brands think on their feet and provide unmatched
experience to these consumers. Luxury brands that disrupt e-commerce
and utilize social media to the fullest will reap the benefits of attraction
to younger consumers. It is important to pay attention and transform
radically, parting the generation-old approach and serve the new market
with fresh presence and offerings. Naturally, only those brands will make
it ahead in the race who understand that sustainability issues are very
important to address, and technology has to be exploited to the fullest to
stay relevant in the minds of customers of tomorrow.

CONCLUDING REMARKS
The chapter addresses the current and emerging trends shaping the
luxury sector. Academic dialogue about these trends is recent, and
much of the concepts require further in-depth exploratory studies. The
sharing economy as a part of luxury requires much detailed intervention
globally. Similarly, the role of technology in the luxury marketing space
is an underexplored theme. The impact of these emerging issues is
12 New Paradigms in Management Science

expected to be contrasting in mature and emerging economies. In line

with this, what proactive measures will luxury brands take, keeping in
mind a varied consumer base with disparate expectations? Naturally, to
cater to the biggest emerging segment, i.e. Gen Z, that expect brands to
practice what they preach in terms of sustainability initiatives, brands can
no longer selectively showcase their best practices. In the digital world,
when everything is available at the click of a button, brands that stay true
to their core values will have a promising future. Others will perish.

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