Luxury Market
• Cognizant 20-20 Insights
Luxury Retail’s Evolving Landscape
Executive Summary
The luxury goods market may appear to many as a recession-resistant industry that generates over $1 trillion in revenue, but a closer look at the figures suggests otherwise. Luxury retailers, which were growing 9% annually a year before the recession, saw sales drop on average by more than 13 percentage points from 2007 to 2009. Meanwhile, luxury manufacturers saw their revenues decline by an average of 21 percentage points.1 The major industry brands have since overcome their tepid performances and reported strong revenue gains, defying all signs of a turbulent market in 2011. But the recession seems to be the game changer for a range of consumer behaviors that could be magnified in the coming days. And these changes could potentially redefine the business model of the successful luxury retailer over the near term. With the advent of social media, the rise of emerging markets and a refined and informed generation of millennial consumers, the meaning of luxury is blurring. It is no longer sufficient for a product to exhibit rarity. Luxury products needs to exhibit uniqueness coupled with product superiority and originality, providing value for money in today’s frugality-minded reset economy. This paper focuses on how the movement of the industry’s target segment from classes to masses is affecting the luxury market and the imperatives for retailers that wish to maintain or gain market share.
Spanning the Globe
Consensus opinion of economic experts suggests that Europe is slowly sliding back into recession. However, the revenues of retailers in this region have been fueled by tourists from Asia and China who shop in Europe to purchase high-end brands at lower prices. The U.S. appears to be recovering a bit faster. In the luxury segment, product categories such as shoes, apparel and leather are fast regaining momentum in the U.S. The market for luxury goods in Japan, meanwhile,
Luxury Retail’s Evolving Landscape
Executive Summary
The luxury goods market may appear to many as a recession-resistant industry that generates over $1 trillion in revenue, but a closer look at the figures suggests otherwise. Luxury retailers, which were growing 9% annually a year before the recession, saw sales drop on average by more than 13 percentage points from 2007 to 2009. Meanwhile, luxury manufacturers saw their revenues decline by an average of 21 percentage points.1 The major industry brands have since overcome their tepid performances and reported strong revenue gains, defying all signs of a turbulent market in 2011. But the recession seems to be the game changer for a range of consumer behaviors that could be magnified in the coming days. And these changes could potentially redefine the business model of the successful luxury retailer over the near term. With the advent of social media, the rise of emerging markets and a refined and informed generation of millennial consumers, the meaning of luxury is blurring. It is no longer sufficient for a product to exhibit rarity. Luxury products needs to exhibit uniqueness coupled with product superiority and originality, providing value for money in today’s frugality-minded reset economy. This paper focuses on how the movement of the industry’s target segment from classes to masses is affecting the luxury market and the imperatives for retailers that wish to maintain or gain market share.
Spanning the Globe
Consensus opinion of economic experts suggests that Europe is slowly sliding back into recession. However, the revenues of retailers in this region have been fueled by tourists from Asia and China who shop in Europe to purchase high-end brands at lower prices. The U.S. appears to be recovering a bit faster. In the luxury segment, product categories such as shoes, apparel and leather are fast regaining momentum in the U.S. The market for luxury goods in Japan, meanwhile,