For the first time since 2016, outside 2020, value creation in the luxury sector is expected to be lower than in the previous year. A slowdown that puts an end to a period of exceptional creation between 2019 and 2024, during which profits tripled with an average growth rate of 5% each year. Is this just a slowdown or the dawn of a deeper paradigm shift? ? Response from Clément Chenut, author of the book Circular Generation, which supports leaders in the sustainable transition, notably through circularity.
Luxury is today in search of meaning. The post-Covid years have seen incredible growth, especially prices, but the storytelling as well as the quality have been forgotten. Today we need to rethink the value proposition to create attachment and loyalty. This involves implementing a personalized strategy per customer segment, especially those who are least sensitive to economic fluctuations, namely beyond money. According to the Boston Consulting Group report, les beyond money, which represent the 0,Wealthiest 1% of the world’s population, spend on average €350,000 per year on luxury. Their share of revenue for the sector increased from 12% to 23% between 2013 and 2023. They promote the quality of products and artisanal know-how (89 %), consider that the singularity of luxury lies in exclusivity and authenticity (85 %)and are mostly looking for personalized experiences. While the world of luxury is a laboratory of innovation, where you can experiment with new technologies, materials, design, the new paradigms (environment, well-being, exclusivity, etc.)are the opportunity to strengthen the values of luxury by relying on the strengths of yesterday by nourishing them with the values of today and tomorrow. The circular economy, which aims to optimize the use of materials by generating value over the entire life cycle – and not just on production – makes it possible to meet these customer expectations. Comment ? Increasing desirability requires scarcity, which implies producing less, but better.
The legacy, new narrative of luxury
Beyond the environmental benefits of circularity, the implementation of this business model represents three major benefits for companies in the luxury industry. First of all, certified biosourced materials, or even from regenerative operations, for exceptional quality. Today, this quality does not come only from the material, but also processes that allow it to be produced and supplied in the most virtuous way possible to protect our natural heritage. The challenge is therefore to collaborate and support suppliers towards this new production framework through certification.. For leather, several innovation levers exist between regenerative animal farms and substitute materials (vegetable and vegan leather).
Preserve know-how
Second benefit, unique know-how to generate customer attachment through an exclusive experience. The latter must rely on the best local craftsmen. The challenge is to preserve production know-how while developing new ones. (example : around the repair professions, maintenance and improvement) and deploy logistics chains facilitating these services. In the same way that manual labor makes it possible to produce exceptional goods, the know-how of artisans must today be put at the service of circularity to offer even more value around the same product. The silk interior of a leather glove, for example, can be dexterously replaced to make it new again..
“Augmented” customer advisors
Third benefit : the experience only takes shape through exclusive relationships, thanks in particular to customer advisors “augmented” by digital technology, data and AI. The challenge is to anticipate purchasing and refurbishment needs, or to activate exclusive marketing campaigns for collections designed with circular products. In other words, the offer of personalized services throughout the life cycle allows customer support without borders over time.
The circular economy, a lever for innovation
In essence, luxury products are durable since they are intended to be passed down. But are they still desirable in the face of resource scarcity? ? And rare and exceptional enough to generate customer envy ? Circularity is the way to reconcile these challenges. Far from being confined to waste management, the circular economy is a lever for innovation that allows us to open up to a new luxury by offering an even more unique and distinctive product and experience. Just like F1 is the locomotive of innovation for consumer vehicles, luxury must take the turn towards circularity. It is its responsibility for the rest of the sector.
