Opinion / The post Covid-19 luxury decade: 21 projections for 2021 and beyond – how Apple, Nike and Louis Vuitton will change to keep up with Gen Z and Chinese consumers

Jan 9 , 2021

2021 should kick off a period of growth for luxury, marking the start of a new “roaring twenties.” Photo: Jing Daily

Following the Covid-19 crisis, the next decade of luxury growth is likely to be impressive. However, brands will not be able to rely on the recipes of the past. Young people, women and Chinese consumers will fuel the luxury sector, ensuring brands can still thrive – but current distribution models will change entirely.

What’s more, societal change and a shift from products to purpose will transform the luxury industry as we know it.

Here are 21 predictions for the luxury industry in 2021 and beyond.

Gucci x The North Face collection Photo: Gucci

1. Because luxury sales are essentially driven by women’s purchases, the limited number of top female executives in the sector is fast becoming an embarrassment – or if it is not, it should be. Luxury has long been driven by a macho culture, but there is no scarcity of female talent in the industry. In the next 10 years, I predict that most board members and at least 25 per cent of brand CEOs will be female.

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2. While credibility and sales of Chinese brands should increase dramatically in sub segments such as consumer staples or electronics, I project that in 10 years’ time, Western brands will still dominate in the traditional luxury segments such as high-end leather goods, watches and jewellery, as well as in sporting goods and cosmetics.

3. Covid-19 will accelerate the shift of Chinese consumers’ spending back to China. The year 2020 will likely prove to be an exceptional year for luxury, given that Chinese consumers were so wary about travelling. Still, in 10 years, I believe that more than 75 per cent of luxury sales to Chinese citizens will occur in their homeland.

4. The Indian consumer, while still a marginal contributor to luxury sales overall, will become a key contributor to the sector’s growth, giving some hope as Chinese growth gradually slows between now and the late 2020s.

5. Founders of Kering and LVMH have given some of their children management responsibilities. Because the average consumer of luxury is young, the managers should be, too. Not all young managers have the bandwidth to become a CEO of a luxury brand in the way Alexandre Arnault has – he’s the son of LVMH’s Bernard Arnault and has been running Rimowa since age 25 – but a new generation is coming. At the end of the 2020s, it should not be surprising for brand CEOs to be in their 30s or 40s rather than 50 and older as they are today.

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6. Bernard Arnault, chairman and CEO of LVMH, will consistently top the list of the richest individuals in the world ahead of Amazon’s Jeff Bezos, as was already the case briefly in late 2019. His group will hold 90 to 100 brands, up from 76 at the time of writing.

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7. Very few luxury brands will remain independent, with the possible exceptions of Hermès, Chanel and Rolex. Most of them will merge, go out of business, buy others or be bought. Watch retailers will merge as the volume of watches sold remains a pressure point and sales shift more to stores or websites operated directly by the brands.

8. Nike will generate more than 50 per cent of its sales online, mostly via directly operated apps and its own websites. The rest of its business will occur mostly via its own full-price stores and outlets. Bricks-and-mortar wholesale partners will contribute less than 25 per cent of group sales.

9. When walking into your favourite store, you will be able to choose whether you want to use the iris scanner at the door. The scanner will call your favourite sales associate and download on their smartphone all the details of your previous transactions, favourite colours, key dates and other information, and tell the associate which products they should be showing you today. Already, at Sephora, you can choose between a red basket if you need help (“I would like to be assisted”) or a black one if you want to be left alone (“I would like to shop on my own”). This is just a much more hi-tech version of that. Welcome to the future of luxury!

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10. Luxury will be one of the few sectors to prioritise bricks-and-mortar and physical interaction over online sales. For most luxury brands, a maximum of 20 per cent of sales (versus Nike’s more than 50 per cent) will be generated online over the next decade. These brands will distance themselves from online wholesale after having broadly eliminated their exposure to bricks-and-mortar wholesale. And while their own websites will give access to their products online, they should be used essentially for storytelling rather than selling purposes.

11. Given the complexity of managing a low-growth business in affordable luxury handbags, I expect ownership of Michael Kors, Coach, Tory Burch and/or Furla will have changed in 10 years.

12. Leaving aside Swarovski and Pandora, no other affordable jewellery brand has been successful on a global basis. This is clearly a gap, in my view, and I expect new entrants will revolutionise the branded market for affordable jewellery over the next decade.

13. With some of the best management teams in the consumer space, great storytelling, emotional relationships with consumers and some of the most inspiring brand ambassadors out there, Nike, Adidas and Puma will be three of the fastest-growing consumer goods companies over the next decade in terms of sales.

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14. Apple will be known as a health-monitoring, visual entertainment (notably, films and gaming) and banking corporation, with iPhone sales accounting for less than a third of its business, down from more than 60 per cent in 2018.

15. In the next decade, travel, hospitality, cannabis, fine foods, esports and e-learning will be the fastest-growing luxury segments.

16. Louis Vuitton, still one of the largest and most influential brands in luxury, will diversify into travel in a big way, not just selling luggage and city guides like it does today, but also selling VR packages for consumers to discover the world in style without leaving their living rooms.

17. Wealthy consumers will favour boutique hotels over hotel chains. The latter, while having the incentive of loyalty programmes, will suffer from a feeling of “copy and paste” and lack of authenticity.

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18. The combination of eco-friendly attitudes and Covid-19 impacts will mean that cruises and commercial flights will be transformed; flygskam, or flight shaming, might become more than just an obscure Swedish concept; and fast rail and self-driving electric vehicles will become people’s preferred means of transport.

19. Most suitcases and athletic shoes from top brands will be made from recycled and/or recyclable material. Meanwhile, most handbags will still be made from real leather, but fur will be banned in many countries as substitutes take over (despite not being earth-friendly, since they are made with plastic derivatives).

20. Cartier, Tiffany and Bulgari will be using mostly lab-grown diamonds for their watches and jewellery, though centre stones on the higher-end jewellery pieces will still be from mined diamonds.

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21. With Louis Vuitton now producing in the US for the US with sites in California and in Texas, being a locavore will extend into wanting to buy other products that are manufactured closer to home. Supply chains in luxury will shift a lot closer to their end markets: “Made in Italy” or “Made in France” will gradually shift to “made in a production site near you.” For watches, “Made in Switzerland” will persist, but fewer clients will buy them.

This article originally appeared on Jing Daily.

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Fashion

Apple will shift its priorities as iPhone sales slump, LVMH’s Bernard Arnault will beat Amazon’s Jeff Bezos as world’s richest and Cartier will use lab-grown diamonds, HSBC’s Erwan Rambourg explains