Luxury brands have always had to find a way to balance tradition with innovation. But the luxury sector is currently experiencing a pace of change that means that requirement has an increased urgency. More than ever, brands need to understand the changing nature of who has the spending power and what they are looking for from luxury. We have identified seven key themes any luxury brand should be aware of, and responding to, right now.

The future is astonishingly bright

Given the economic climate, you’d be forgiven for imagining the luxury sector suffering, with a gloomy outlook for growth. However, the data tells a different story. After a strong post-covid rebound in 2021, the global luxury industry surprised analysts and pundits alike in 2022 with impressive growth of around 20%. 

This year, despite continuing recessionary concerns, further growth is predicted for this remarkably resilient industry – with suggestions that by the end of the decade, it will be worth as much as 50% more than it is today.

The lure of luxury is as strong as ever. And the rich are getting richer – the top 1% are now acquiring almost two-thirds of new wealth, up from half during the decade pre-pandemic.

So, there is no shortage of spend, but who’s spending and what they’re looking for is markedly different.

The future is wealthy women

Society may be a long way from genuine gender equality, but women’s independence, status and earning power has increased significantly, and their share of wealth is also growing.  Women are having fewer children, later. They are working more, and in higher paid roles. In 1960, just 3.8% of women in the US earned more than their partners. Today, about half earn the same or more than their husbands. Women have more money of their own to spend as they please.

The future is being usurped by youth

The driving force of luxury is coming from the under 45s, due to account for 70% of global sales by 2025. It’s young and it’s getting younger. Gen Z shoppers are buying luxury three to five years earlier than their Millennial counterparts.

Nowhere is this more pronounced than in China where Millennials & Gen Z account for almost all luxury spending. China’s historical one-child policy, only recently relaxed, has created the phenomenon of the ‘Seven Pockets’ - an individual has their own income supplemented by two parents and four grandparents, with no siblings or cousins to share the bounty.

Luxury is being powered by these new consumers and shaped by their values, so what do they want?

The future is inclusively exclusive

Luxury brands are, by definition, exclusive. But elitism and inherited privilege is not cool. As diversity and belonging are championed by Millennials and Gen Z, these consumers reject traditional images and stereotypes of luxury buyers. An overt commitment to inclusivity is welcomed, and many global luxury brands are now giving visibility to those the sector previously ignored.

The future is self-expressive

Many of these new consumers haven’t grown up with luxury and don’t aspire to, or feel compelled to conform to, its traditional codes. Craftsmanship and quality remain key but gone is rule-bound obedience, replaced by a playful, irreverent creativity as self-expression eclipses orthodoxy.

Luxury brands are finding ways to play whilst – crucially – retaining their authenticity.  Mash-ups and collaborations abound, from children’s characters such as Barbie x Balmain and Hello Kitty x Balenciaga, to streetwear such as North Face x Gucci and Supreme x Tiffany, each aspiring to be more unexpected than the last.

The future is phygital

The merging of our online and offline reality is giving rise to greater opportunities to enrich brand stories, whilst simultaneously being fresh and surprising. Luxury brands, in particular, are pushing digital innovation. Beyond digitally-enabled immersive instore experiences, luxe brands are partnering in virtual words (e.g. Burberry x Minecraft, Mulberry’s virtual Lola bag on Roblox) and experimenting with digital collectibles (NFTs) such as Asprey x Bugatti’s phygital egg.  The next development is likely to be PBTs (physically backed tokens) using the blockchain to verify authenticity via a linked chip in the physical item.

The future: the new luxury paradigm

The luxury buyer is changing and so too the codes of luxury. From badge of status to badge of values. From upholding privilege to promoting diversity. From traditional to unexpected and experimental. From formal and rule-bound to playful, creative and self-expressive.  And beyond these codes, how and where luxury exists is changing. From the purely physical or digital to increasingly phygital.

In the face of this rapid transformation, any luxury brand that doesn’t want to find itself considered passé needs to quickly and resolutely adapt to the needs and desires of this fast-approaching future. The secret is to find fresh ways of telling authentic stories: staying true to the brand’s heritage whilst simultaneously reinventing to capture the new zeitgeist.