The Success of Luxury Brands Today

The shift in consumer demands, laws, ethical views and unforseen disease outbreaks have impacted the global luxury market greatly in the last year. In this report, we analyse the key steps luxury brands are taking to overcome these changes and stay relevant in times of crisis.

Written by Ashley LooiFebruary 26, 2020

Introduction

Millennials are now a driving force in the luxury retail market. It is expected that the global luxury market will top USD 1.5 trillion by 2025, 50% of which will be contributed by the millennial generation.

The shift in demand of millennial consumers is causing an internal change in assortment mix to what customers want. External factors also cause change in luxury brands such as Intellectual Property (IP) protection issues and more recently, the coronavirus outbreak in China.

One defining characteristic of the millennial consumer is their increasing environmental consciousness – online searches for “sustainable fashion” have tripled between 2016 and 2019.  In reaction, luxury brands are making concerted efforts: a large number of luxury brands signed the G7 Fashion Pact to minimise the environmental impacts of fashion with Prada being the first among luxury brands to sign a sustainability deal.

Another defining feature of today’s luxury market is streetwear – a global phenomenon, the product of a cultural shift. It has worked its way into the luxury segment, where luxury streetwear has gained a fresh impetus among millennials.

An external factor that effects the performance of luxury brands is the counterfeit goods market that has been growing with the rise of e-commerce. Brands are faced with IP protection issues from products on online marketplaces and luxury resale websites.

More recently, the international luxury industry has taken a hit following the novel coronavirus outbreak in China. With Chinese buyers accounting for 35% of the market share, luxury brands must quickly adapt to the current market situation.

In this report, we analyse luxury brands to measure their success and look at ways these brands remain relevant despite the shifting consumer demand.

More than 110,000 data points were screened from March 2019 to February 2020 from online retailers across US and UK markets.

 

All data used in this report comes from products retailing online as tracked by Omnilytics, unless otherwise mentioned.

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Brand Performance Overview

Overall Performance

Balenciaga came in top, with the highest total sell-out rate of 80%, achieved with average new-in rate and above average discounting to make up for its having the narrowest assortment. Fendi, another top-performer, achieved an above average sell-out rate despite having below average newness and low discounting.

Prada and Gucci managed to uphold brand equity throughout the period. Both brands managed to drive sales at a high median price with a low percentage of discounted items.

Although Burberry had high newness, the brand failed to drive high sell-out.

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Sustainability

Sustainability is a crucial factor for customer retention and brand loyalty – 68% of consumers deem sustainability important. Additionally, sustainability initiatives which most resonate with consumers are the use of eco-friendly materials and the implementation of ethical practices.

Sustainable Materials

Luxury brands have started using a range of eco-friendly and sustainable materials in their products – such as Linen, Organic Cotton, Better Cotton, Ramie, Econyl, Lyocell and Hemp.

Linen was the most popular among sustainable materials, contributing to nearly half of the sustainable assortment. Crafted from the fibres of the flax plant, Linen was mostly found in Jackets and Shirts. Sustainable alternatives to Cotton like Organic Cotton and Better Cotton comprised 29% of sustainable materials. The bulk of Organic Cotton was found at Stella McCartney, whereas Better Cotton was mostly used by Saint Laurent and Burberry.

Stella McCartney has the widest assortment of sustainable products among the luxury brands with 300 SKUs – 31% of the sustainable assortment.

Prada, Versace and Fendi were lagging behind in the use of sustainable materials, where offerings were below 15 SKUs.

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Sustainability (cont’d)

Aside from using sustainable materials, luxury brands also implemented sustainable and ethical practices. Aside from addressing environmental concerns, these practices also refer to culture and diversity concerns.

Sustainable and Ethical Practices

One of the biggest commitments towards sustainability demonstrated by luxury brands was becoming part of the G7 Fashion Pact – signatories included Burberry, Stella McCartney, Prada, Saint Laurent, Gucci, Balenciaga and Versace.

Although Prada was behind in terms of sustainable products over the past 12 months, the brand has taken multiple actions towards sustainability in the past 6 months. Prada is leading the way by being the first luxury brand to sign a sustainability deal. The deal will allow Prada to change its interest rates annually if it achieves specific eco-friendly objectives. Additionally, Prada has agreed to diversify its workforce following the blackface controversy of 2018.

Gucci announced that it has become entirely carbon neutral by offsetting its annual greenhouse gas emissions through projects that support global forest conservation. The brand’s CEO, Marco Bizzarri, has also invited other CEOs to join the fight against climate change in the CEO Carbon Neutral Challenge.

Additionally, luxury brands have addressed ethical concerns by joining the alliance against animal cruelty through adopting fur-free policies.

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Luxury Streetwear

With the ‘hypebeast’ narrative popular with millennials, streetwear has rooted itself in the luxury segment.

The most common category in streetwear was outerwear, which accounted for 46% of the sustainable assortment. Tops and Dresses followed with 19% and 12% contribution, respectively. Luxury brands have demonstrated understanding of the streetwear market, which typically focuses on clothing above the waist.

Sneaker Culture

Sneaker culture goes hand in hand with streetwear, where the footwear is the hero of an ensemble. In response, luxury brands have turned up their sneaker game.

The number of sneakers offered by luxury brands more than doubled in the past year, an indication of luxury brands catering to the streetwear market.

The aggressive strategy to break into the sneaker market can be seen especially at Prada, Burberry and Fendi where the year-on-year growth in number of sneakers increased tremendously by more than 200%.

The frontrunners in the sneaker market were Gucci and Prada – each brand offered close to 500 SKUs each within the category.

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Meet the Author

Ashley Looi

Ashley Looi combines her major in econometrics with her interest in fashion to help brands and retailers uncover actionable insights. She currently produces in-depth reports on the fashion industry and its changing retail scene across the United States, United Kingdom, Australia and Southeast Asia.

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