1- Second Hand Luxury Becomes First-Class Priority
The global second-hand market is estimated to reach $77 billion in 2025, with growth rates outpacing the wider luxury market. Resale (thanks to its more curated assortments) is driving the growth and is expected to grow 11 times faster than ordinary clothing retail.
Resale is heating up in luxury. The very essence (timelessness, enduring desirability, durability, and in some cases, scarcity) of luxury goods makes it particularly well-suited and promising for the resale market.
The luxury resale industry is tapping into an expanding demand from affluent consumers for a more circular economy and more conscious consumerism on one side and expanding supply (enlarging competitive arena with more online resale platforms facilitating how pre-owned products can be bought and sold) on the other.
The generational shift in luxury consumers continue to fuel and shape the resale market as Millennials and Gen Z consumers see resale as 1) a convenient, sustainable replacement for fast fashion 2) an opportunity to acquire luxury goods at more affordable prices 3) a means to feed their interest in vintage styles and 4) a new form of investment (luxury resale value).
With fast growth comes the market’s natural inclination for consolidation and scale. So, we can expect to see more acquisitions, new partnership models and innovative technology solutions crystallize (i.e Rise of resale-as-a-service companies) and empower new players’ entry into the lucrative pre-owned market.
But, with resale on the rise, product authenticity and
traceability will be especially critical for luxury brands. Investments in
blockchain technology, in particular, is an interesting approach to improve the
authentication process from the moment a new product is sold to ensure greater
traceability and transparency, track a product’s sustainable credentials and
tackle counterfeiting (thanks to digital ‘product passports’), ultimately
boosting consumer trust. However, common standards remain to be developed
collaboratively for this new technology to be truly effective at scale.
What’s clear is: the relationship between luxury’s primary
and secondary markets is set to grow deeper in 2022. The only question is: how
deep.
2- NFTs to the Moon
Non-fungible tokens, or NFTs, were one of the most popular buzzwords of 2021. So much so that the term was chosen to be the “Word of the Year” by Collins Dictionary. Interestingly, metaverse and crypto were also on the shortlist, demonstrating the growing interest in this space.
Analysts at Morgan Stanley expect the luxury NFT and metaverse market to reach $56 billion by 2030. In 2022, luxury brands will continue to experiment with NFT collections, either to sell alongside physical goods, or as standalone digital collectible assets.
From the consumers’ perspective, generating profits with NFT is still currently reserved for a small portion of participants. A study by Chainalysis found indeed that buyers who can mint or be whitelisted to buy newly minted NFTs first will make a profit 75.7% of the time, while users who buy NFTs later on only make a profit 20.8% of the time. As a result, it’s nearly impossible for late comers to make a profit with NFTs if they aren’t part of the very first sale.
This is an opportunity for luxury brands to offer exclusive
access to upcoming NFTs for selected customers. Linking physical products with
NFTs, for example, is a great way to offer long term value for customers.
3- Worlds of Creativity at Play
At the crossroads of digital, gaming, AR, and VR, the metaverse―a portmanteau of the words meta (meaning beyond) and universe―represents another significant opportunity for luxury brands.
In 2022, we expect luxury brands to launch dedicated virtual experiences to enhance their customers’ experience both online and offline. Online, this will mostly happen through the brands’ own websites and one-off VR experiences. Offline, we expect augmented reality experiences to delight customers in-store and post-purchase, adding a virtual layer to a handbag or a pair of sneakers, for example.
For the metaverse to broaden its appeal, we’ll need significant technological improvements, particularly with AR and VR headsets. Gucci and Balenciaga already filed trademarks for smart glasses and connected clothes. We think 2022 will see the first releases of such products. They won’t be perfect, but they will capture the affluent consumers’ attention as more of our lives takes place online.
Investment bank Morgan Stanley estimates that the metaverse and NFTs will make up 10% of the entire luxury goods market by 2030, representing a $56 billion revenue opportunity, of which $10 billion to $20 billion will come from an entirely newly addressable digital market.
The bank thinks that brands that focus on soft luxury such
as ready-to-wear, small leather goods and shoes, are particularly
well-positioned to benefit from the metaverse as affluent consumers’ demand for
digital fashion grows.
4- Social Commerce Goes Live, Globally
In 2021, TikTok (one of the very few apps to surpass 3 billion downloads globally) announced TikTok Shop in partnership with Shopify, allowing for products to be tagged in TikTok videos.
In testing phases in the UK and USA, the native shop will be further rolled out to other markets in 2022.
Social commerce—from in-app checkouts on social media to live stream sales—is set to continue to grow as the digital space become that much more shoppable (with improved platform functionalities for a more seamless shopping experience from discovery to checkout) and consumers are increasingly seeking entertainment and engagement in their shopping experience.
Already popular in Asia for some time, live shopping will
grow in popularity in 2022 across the world. See our story on how luxury brands
use WeChat to engage with affluent consumers in China to learn more.
5- Towards a More Holistic Approach to Values
Being more inclusive and more sustainable will be non-negotiable for luxury brands to remain relevant and win over younger cohorts. Some 43% of Gen-Z fashion consumers actively seek out companies with a solid sustainability reputation.
After years of talking about sustainability, consumers are increasingly paying attention to what brands are really doing. Greenwashing isn’t enough in 2022. On the contrary, brands accused of greenwashing risk being publicly shamed and see sales declining, together with their market capitalization.
It’s likely that the crisis will mark a turning point for luxury as we knew it – luxury brands will continue to redefine themselves, expanding their mission beyond creativity and excellence, becoming enablers of social and cultural change.
Consumers are increasingly demanding more transparency around the societal and environmental impacts of their purchases. In 2022, we could reasonably expect to see more luxury brands looking more seriously into tech innovations such as digital product passports to store and share a product’s sustainability credentials (i.e materials, origins, manufacturing process, etc.)—offering the opportunity for customers to buy in accordance with their personal values. But beyond carbon footprint, though, it will be asked of luxury brands to be holistic in their commitment to sustainability, from water waste to human rights.
We will also continue to see innovations in sustainable materials as more customers demand ethically sourced and environmentally responsible materials. (Kering Group, for example, has officially announced it would go fur-free across its entire brand portfolio in 2022.)
However, there is another debate that has been on the agenda for years and still remains very much unsettled: real versus faux-leather. With leather goods being considered a luxury statement—a sign of quality and durability in luxury goods for so long—it will be interesting to see if luxury brands will take a firm stand.
In any case, luxury brands will need to rethink their business models, product strategies and the lifecycle value of their customers in order to reflect the yet to be fully defined reality.
However, we feel it is also important to highlight a
contrasted reality. Surprisingly, while we hear about a growing interest in
sustainability especially amongst younger generations, we surprisingly also see
fast growing companies built around the fast-fashion model à la Zara (but
cheaper and faster) skyrocketing. Case in point: Chinese retailer SheIn has
grown at speed by leveraging data, automation, and artificial intelligence to
deliver on-trend clothes at low prices. SheIn was the largest fast-fashion retailer
in the US at the end of 2021 with 28% market share, ahead of Zara (20%) and
H&M (11%).
6- Domestic Luxuries to Journey Away From the Global Sea of Sameness
With international tourism not expected to fully recover for another year or so, we will continue to witness growing interest and preference of affluent consumers for locally-made products and local shopping destinations in 2022. Shoppers want to support their local economy and focus on proximity e-commerce channels for luxury brands.
This focus comes hand in hand with the increased understanding of the environmental cost of global shipping and manufacturing. Luxury brands who can capitalize on this local sensibility and engage more deeply with domestic consumers will be better positioned to grow.
In 2022, we can expect to see enhanced localization strategies (from product offering to communication) from luxury brands to better adapt to local tastes and cultures in order to be locally relevant.
The heightened sense of supporting local businesses, coupled with the new prime position of online channels, will also give the opportunity for local names and digitally-savvy luxury DTC brands (the likes of Senreve, Oliver Cabell or Anine Bing) to assert their place in the market in the year ahead.
7- Data-Driven Digital Experiences as a Competitive Advantage
Experiential luxury (including hospitality, jets, yachts and cruises) was a main focus for years as young affluent generations were said to be more interested in experiences rather than buying luxury products. Then 2019 happened.
And if we have been talking about the experiential transformation of luxury goods for some time. Now, it is more important than ever.
Experiences will continue to play an increasingly important role in consumers’ purchase decisions.
In 2022, brands will need to embrace digital experiences as an added layer to their products to engage their customers as in-person events and boutique experiences will remain constrained. This provides an opportunity for luxury brands willing to fully embrace the digital realm and meet their consumers where they are—online.
Digitization will also continue to drive an increasing amount of data, which means both consumers and businesses will increasingly seek a single source of truth and use data for betterment.
In 2022, affluent consumers will continue to ask luxury
brands to demonstrate meaningful benefits of data sharing-expecting
personalized perks in exchange for giving up some level of privacy. No matter
the digital channel, luxury brands will be expected to offer first-class online
experiences that feel truly bespoke to affluent consumers, from personal
shoppers to private viewings, personalized treatments, targeted recommendations,
and recognition across all channels.