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May 24, 2022

Mazars Report: Conscious, collaborative, connected: how the luxury sector is “navigating the now” and influencing the future

  • New customers and new demands leading luxury brands to address sustainability concerns and build cross-sector coalitions
  • Wealthy Chinese customers, HENRYs (high-earners-not-rich-yet), and Gen Z driving transformation and growth in luxury
  • Romania’s luxury market: living circular is the new goal
  • The online fashion market in Romania is expected to grow by 20% in 2021


Mazars, the international audit, tax, and advisory firm, published its new report, Conscious, collaborative, connected: making over the luxury business model. The report, released in partnership with the Arianee project consortium, reveals how the luxury sector is shaping a new business model that allows customers to experience and engage with brands in new ways and to purchase goods knowing they can be easily and expertly repaired and resold.

Conscious, collaborative, connected includes insights from luxury sector leaders, including Breitling, Comité Colbert, Kering, and Vacheron Constantin, and draws from an extensive desk review of over 150 articles, reports, and other sources.


Changing the world of luxury


The luxury business model is transforming in response to a changing world: in 2010 luxury customers spent €4.3 billion online; in 2019 that figure rose to €33.3 billion. China is now luxury’s number one growth market. And the global second-hand goods market has reached €30 billion annually, thanks to 12% average annual growth in the last five years.

According to the report, the new business model taking shape addresses the expectations of these new customer cohorts, prioritises luxury experiences, engages in partnerships, and adopts circular practices in pursuit of greater sustainability.


Customer cohorts


Luxury customers are increasingly younger and predominantly come from China. The country is the number one growth market for luxury and home to millions of wealthy customers eager to buy top-end goods. China’s wealthy luxury customers make up one of the three new ‘cohorts’ identified in the report. Other cohorts are HENRYs (High-Earners-Not-Rich-Yet)[1], found in China and elsewhere, and Millennials and Generation Z – both driving luxury fashion’s market growth potential. Each new cohort brings its own distinctive opportunities and pressures for client-centricity.


Pivoting to experiences and partnerships


Throughout a series of interviews featured in the report, luxury sector leaders highlight that ‘clienteling services’ have become the leading edge in luxury’s pivot to customer experience, especially services coming after the initial sale of a luxury product. One example is the take-back and recycling programmes for customers seeking sustainable consumption, including Eileen Fisher’s pioneering Renew programme.

Partnerships have become vital in ensuring greater transparency, circularity, and sustainability. The Fashion Pact is one example of successful collaboration: a global coalition that helps major luxury Houses such as Burberry, Kering, and Prada to collaborate with smaller ones by offering brand-to-brand exchanges. In doing so they deliver on the environmental sustainability promise that consumers want.

Some of these partnerships have been formed to expressly fight counterfeiting. Fake luxury merchandise is estimated to account for 60 to 70% of the €3.8 trillion of annual counterfeit trade flows.[2]


The online fashion market in Romania is expected to grow by 20% in 2021


According to a market research conducted by GLAMI.ro, Romania’s online fashion market is expected to grow by 20% in 2021, up to RON5.1 billion, and to exceed RON6 billion until 2023.

 Although the first few weeks of the pandemic were very uncertain, with the consumer demand falling very quickly, the fashion industry turned its direction towards the urgent public-health needs: factories that produced scarves and clothes chose to help the world by producing face masks and also donated money to hospitals and other not-for-profit organizations.

Excluding the pandemic effects, the local clothing market reaches a value of about 3.5 billion euros annually but it is dominated by international players (Armani, Versace, Ralph Lauren, Dior, Prada, Chanel, Hermes, Louis Vuitton, and Gucci), in addition to which smaller Romanian entrepreneurs and designers are also trying to promote their products and find their place among the others. It is well known that the main characteristic of the luxury sector is to create value, through creativity and innovation. Therefore, the local designers adapted and released a series of exclusive products to meet the client’s needs – for instance, MaRaMi is a brand founded by the designer Andra Clițan from the desire to create fashion items that combine traditional Romanian costumes with the traditional clothing of other countries around the world.”, mentioned Ella Chilea (photo), Audit Partner, Mazars Romania.


Romania’s luxury market: living circular is the new goal


Luxury is indeed less wasteful and destructive than fast fashion and smaller players are also considering how to tackle the environmental issues, by working simultaneously on circularity in their brands. A very new concept introduced by them is the trend “Less is more”, through which it is encouraged to buy only 10 clothing items per year. The trend brings sustainability into the luxury fashion sector, by stimulating clients to consume in small quantities quality products, instead of wearing many items of clothing that do not link to each other and on the long term they have a negative impact on nature, but also on the economic and social environment which produces them.”, mentioned Roxana Mihalache, Manager, Audit, Mazars Romania.

The expectations, shopping habits, and concerns of the clients are pushing luxury brands to change – they expect to be able to browse and buy online as well as in-store, to get instant and accurate information about a product’s sustainability and authenticity, and to be looked after following a purchase.

Therefore, luxury leaders have pivoted to customer experience, responding to the needs of their clients and making them able to own, wear and experience luxury without causing undue harm to the planet.


Looking ahead: key learnings for luxury that will shape the new generation


Integrate digital thinking: Luxury groups are best positioned to strengthen their experience innovations thanks to their financial means and the investments they have already made in data and IT infrastructure.


Catch up on the experiential pivot: Some independent brands were born as digital natives focused on experiential marketing and customer-centric services. The majority are luxury traditionalists, however, with SMEs operating as manufacturers and wholesalers. They are now going to have to take on new systems and hire new talent to play catch up on the experiential pivot.


Invest in resale: COVID-19 has given further impetus to the luxury resale market (though not luxury rentals), and so should drive investment in new services innovations. In North America and Europe, many of luxury’s young and affluent customers have suffered a loss of buying power, making the resale market even more attractive to them. This also applies to China, where secondary markets are booming.


[1] The HENRYs are a global cohort of affluent Millennials and Generation X who earn between $100,000 and $250,000 per year.

[2] https://hbr.org/2019/05/how-luxury-brands-can-beat-counterfeiters

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