LUXURY OUTLOOK 2022 Advancing as a responsible pioneer Rarity, sustainability, exclusivity, new experiences, and new territories - Boston ...
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BCG x Comité Colbert LUXURY OUTLOOK 2022 Advancing as a responsible pioneer Rarity, sustainability, exclusivity, new experiences, and new territories By Joël Hazan, Sarah Willersdorf, Filippo Bianchi and Benjamin Fassenot
Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders—empowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact. Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place.
Contents
01 | Acknowledgments
03 | Introduction 17 | C
ustomer
Relationship
04 | R
esources and
Production 23 | R
esponsibility
11 | L ife Cycle 29 | G
lobalization
Acknowledgments We would like to thank all stakeholders who contributed to this report: Steering Committee of the report Etienne Bizot, Chairman and CEO of Bollinger Laurent Boillot, President and CEO of Hennessy Christophe Caillaud, CEO of Liaigre Marc Chaya, Cofounder and CEO of Maison Francis Kurkdjian Anne Dellière, Group Marketing and Strategic Planning Director at Richemont Anne-Sarah Panhard, Managing Director at Hermès Home collections, President of Puiforcat Hélène Poulit-Duquesne, CEO of Boucheron Interviewed members of Comité Colbert Yannick Alléno, three-Michelin-star chef at Alléno Paris Pierre-Emmanuel Angeloglou, Strategic Missions Director for Fashion and Leather Goods at Louis Vuitton Philippe Bénacin, Cofounder, President, and CEO of Inter Parfums Alexandre Boquel, Director of Métiers d’Excellence at LVMH Nicolas Bos, Chairman and CEO of Van Cleef & Arpels Axelle de Buffévent, Style Director at Martell Mumm Perrier-Jouët Jean Cassegrain, CEO of Longchamp Francis Chauveau, Former Deputy Managing Director of Industrial Affairs at Hermès Marie-Claire Daveu, Chief Sustainability Officer and Head of Institutional Affairs at Kering Michael David, Chief Omnichannel Officer at LVMH Olivier Fournier, President of the Fondation d’entreprise Hermès Vincent Frey, General Manager at Pierre Frey Thierry Lamouroux, International Sales Director at Boucheron Jérôme de Lavergnolle, President and CEO of Saint-Louis Clément Lefevre, Sustainability Director at Saint Laurent 1 LUXURY OUTLOOK 2022
Frank Madlener, Director of IRCAM Emilie Metge Viargues, CEO of Christofle Thierry Oriez, Executive President of Henri Selmer Bruno Pavlovsky, President of Fashion at Chanel Gautier Pigasse, Head of Innovation and Blockchain at LVMH Guy Savoy, three-Michelin-star chef at the Monnaie de Paris Guillaume de Seynes, Executive Vice-President Manufacturing and Equity Investments at Hermès Yves de Talhouët, Executive Chairman of the Faïencerie de Gien Hélène Valade, Director of Environmental Development at LVMH Aude Vergne, Chief Sustainability Officer at Chloé Lionel Vermeil, Director of Fashion and Luxury Intelligence at Kering Cyrille Vigneron, President and CEO of Cartier Comité Colbert Team Laurent Dhennequin, Chief of Staff at Comité Colbert Bénédicte Épinay, President and CEO of Comité Colbert Alain Proust, Secretary General of Comité Colbert External experts Sofia Bernardin, Cofounder and President of Re-SEE Maximilian Bittner, CEO and Chairman of Vestiaire Collective Bertrand Lévy, Senior Vice President Global Partnerships at The Sandbox Patrice Louvet, President and CEO of Ralph Lauren Olivier Moingeon, Cofounder of Exclusible Frédéric Noyere, Managing Director at Jebsen Beverage Benoît Pagotto, Cofounder of RTFKT Studios BOSTON CONSULTING GROUP 2
Introduction
“Luxury is the richness of craftmanship, the expres- After conducting more than 40 interviews with Comité
sion of creative genius, the illustration of ancestral Colbert members, luxury fashion house directors, and
expertise.” industry experts, we identified five challenges and opportu-
Guy Savoy, three-Michelin-star chef at the Monnaie de Paris nities for the future of the luxury industry:
I
n recent years, the luxury industry has demonstrated its 1. Resources and Production. From excellence in core
ability to endure and overcome crises, lending weight to expertise to responsibility across the entire supply chain,
market estimates that predict a return in 2022 to pre- the industry must perpetuate quality and accelerate
COVID-19 levels of value creation and growth of 6% be- innovation in view of the scarcity of resources.
tween 2022 and 2026—and French luxury fashion houses
are playing their cards right. Now more than ever, in coun- 2. Life Cycle. From symbolic products to responsibility for
tries where it is most highly developed, luxury is a source the entire product life cycle, it must reconcile sustain-
of national pride for the general public. This is the opinion ability, use, rarity, and novelty.
of 85% of French respondents and 80% of Italian respon-
dents to a BCG and Potloc survey conducted in April 2022. 3. Customer Relationship. From physical experience to
digital reconciliation, the luxury industry must translate
Today, consumers view luxury as being defined by quality, excellence into new experiences.
craftmanship, and creativity. They also believe that it bears
a certain social and environmental responsibility. Luxury is 4. Responsibility. From competitive advantage to collec-
“to preserve, develop, and pass on to future generations,” tive imperative, it must lead the environmental, social,
according to Laurent Boillot, President and CEO of Hen- and governance (ESG) transition in coalition.
nessy and the newly elected Chairman of Comité Colbert.
5. Globalization. From unreserved globalization to a
But the industry is now facing paradigm shifts across its reevaluation of geostrategic dependencies, it must navi-
spectrum of activity. For example, six out of ten consumers gate new territories and anticipate risks.
say that they incorporate sustainable development into
their purchasing decision, almost half are interested in the By analyzing each of these issues, we hope to demonstrate
concept of a virtual store, and 80% believe that luxury in this report that luxury, based on its core principles,
fashion houses should commit to product life-cycle man- can become and is becoming a bold pioneer of
agement beyond production and sales. change.
These new demands and aspirations facing luxury fashion Bénédicte Épinay,
houses in France and abroad highlight emerging pressures President and CEO of Comité Colbert
to which players must respond individually or collectively.
Naturally, given its flourishing economic success and its Joël Hazan,
excellence in certain areas (such as product quality and Managing Director & Partner at Boston Consulting
customer relationships), luxury has a responsibility to help Group in Paris
drive a larger movement that extends beyond its industry
sector. As an international leader in the luxury industry,
France should be at the forefront of progress in this area.
Disclaimer: The results of this report stem from the survey and from analyses conducted by BCG on the basis of interviews with
members of Comité Colbert and external experts.
3 LUXURY OUTLOOK 2022
Resources and Production: from excellence in core expertise to responsibility across the entire supply chain BOSTON CONSULTING GROUP 4
Perpetuating quality and accelerating innova- supply chain. On the other hand, there is a need to accel-
tion in view of the scarcity of resources erate innovation, which is not yet considered a real
industry asset, and to support the search for materials
“Close collaboration between private players and for the future that are in line with environmental con-
public authorities is essential. Without it, we risk straints and regulations.
permanently losing certain expertise.”
Alexandre Boquel, Director of Métiers d’Excellence at LVMH There is also pressure on human resources. Luxury
I
fashion houses face difficulties in recruiting for produc-
n the face of the climate emergency, there is existing tion, sales, and, in particular, artistic crafts because they
pressure on physical resources. The imbalance be- are relatively unknown and even undervalued. This
tween the need for raw materials and their availability situation poses a threat to the transmission of exper-
has grown despite efforts to increase demand planning tise that is indispensable for luxury to continue to exist.
and optimize production.
Industry players could work with governments and
Collaboration among industry players would help to each other to promote craft occupations among younger
initiate a profound transformation at every level and generations, and they could increase their attractive-
develop robust standards to deal with environmental ness to high-potential talent by investing more in voca-
challenges. On the one hand, there is a need to improve tional guidance.
traceability in order to better control and trace the
2/3 7 th
proportion of luxury
consumers who are ranking of the luxury industry in
convinced of luxury terms of innovativeness
product sustainability
1.1 Going beyond optimizing production know- farming” (Olivier Fournier, President of the Fondation
how to establishing standards throughout the d’en-treprise Hermès). Some luxury fashion houses—for
sector and the industry. exam-ple, MMPJ and Kering— train and financially
support farmers, and set up incentive systems to promote
Luxury fashion houses have been among the first to face good practices. “There is a key challenge around supply
the finite nature and scarcity of resources in their produc- chain traceability, which is essential to properly influence and
tion chains. They are also increasingly forced to deal with re-ward the players in the earlier stages of these chains. It is
regulatory constraints (such as traceability) and consumer constraining, but it is how the industry can develop.” (Marie-
pressure, and are now aiming to improve their practices Claire Daveu, Chief Sustainability Officer and Head of
across the value chain. Institutional Affairs at Kering). To ensure this traceability,
the fashion houses could work to develop a digital ID for
Historically, luxury fashion houses have devoted them- each product that would record all of the information
selves to optimizing their processes, notably by making needed to trace the product’s source and manufacturing
greater use of data to anticipate demand and to align stages.
production levels. Some fashion houses have also chosen
to limit their production in order to guarantee their cus- Some luxury fashion houses, especially those that tend to
tomers the highest quality; this is the case, for example, renew their collections more often, are under increasing
with the Saint-Louis crystal glassworks. It is now pressure from stakeholders to address environmental
important that we go beyond the frontiers of expertise challenges. In recent years, the sector has seen an
and explore each sector with an eye toward transforming increas-ing number of initiatives on innovation and
the industry at a deeper level. For luxury fashion houses, research into materials for the future that can respond to
this means tracing every element of the sometimes- these new challenges. These product innovations were
complex supply chain (for example, the leather supply) in first used in luxury items by foreign fashion houses such
order to recon-nect the source of the raw materials with as Ralph Lauren, which recently partnered with the
the finished product. startup Natural Fiber Welding to develop the RLX
CLARUS which transforms virgin and recycled cotton in
The aim is to bring together all of the players involved new ways to create high performance fabric. Reflecting on
(farmers, breeders, and so on) and collaboratively define this initiative, Patrice Louvet, President and CEO of Ralph
robust standards. “We work with all of the sectors, taking a Lauren is convinced that “the luxury industry has an
scientific approach. This is what we have done for ostrich incredible responsibility to play a role in sustainability."
5 LUXURY OUTLOOK 2022
French luxury fashion houses are now in step; Kering, for scale” (Philippe Bénacin, Cofounder, President, and CEO of
instance, created its Material Innovation Lab in 2021, Inter Parfums). This suggests that fashion houses should
piloting projects based on innovative raw materials and not pursue these efforts separately, but rather that all
biotechnology research. players in the sector should come together to develop and
create sustainable materials for the future. For example,
Such scientific research currently faces some technical replacing plastic requires the collaboration of all players in
limitations that it must overcome in order to scale up. the sector. With this in mind, Kering wishes to use its Mate-
“Today, it has become essential to innovate and make environ- rial Innovation Lab to develop pilot projects involving inno-
mentally responsible products, but the process is still con- vative raw materials that incorporate insights from biotech-
straining, and we face difficulties to produce on an industrial nology research projects, going beyond the luxury sector.
Exhibit 1 - Production and Resources
The luxury industry is perceived as lagging behind others on innovation, with only a
few brands and collections thoroughly engaged
The luxury industry appears in seventh place among the most innovative sectors, although luxury clients rank it higher
Industries perceived as the most innovative1
Industry ranking:
#1 #1 #1 #2 #4 #3 #3 #5 #2 #4 #3 #4 #5 #6 #5 #7 #2 #9
63% 59% 65% 47% 44% 48% 46% 40% 48% 45% 44% 46% 33% 36% 40% 34% 48% 26%
Technology Chemicals and Telecommunications Automotive Aerospace Luxury
pharmaceuticals and Internet and denfence
Total Luxury customers Nonluxury customers
Nonexhaustive Examples of product innovations in the luxury industry
2001 2019 2021 2021
STELLA McCARTNEY PRADA CARTIER KERING
All Collections Collection Re-Nylon Watch TankMust Material
Vegan clothing and Clothing and leather goods Solar Beat Innovation Lab
accessories (e.g., made of nylon created by Bracelet made of Pilot projects using
biodegradable jeans, recycling plastic waste from apple residue with a innovative raw
yeast-based silk) the ocean ("econyl" dial powered by materials and
technology) solar energy integrating biotech-
nology research
Source: BCG x Potloc survey conducted in April 2022 in France, the US, and Europe.
1 Percentage of respondents ranking the industry in the top five most innovative industries out of a total of 16 industries.
BOSTON CONSULTING GROUP 6
1.2 From preservation of craftspeople to a wide- into a hub for creation and innovation, but also for trans-
spread talent war mitting expertise by welcoming professionals, students,
and young apprentices. In collaboration with the Institut
The pressure on physical resources extends to human Français de la Mode, Chanel has also created an academic
resources, since the transmission of expertise and of man- department to develop a center for research and instruc-
ufacturing processes is critical to guaranteeing the quality tion in fashion expertise, for the purpose of preserving
of luxury products, which in turn is key to the viability of artistic crafts. In the field of gastronomy, the Ritz Paris
the industry. Quality and expertise are the two attributes works to pass on expertise through the École Ritz Escoffier,
that best define luxury, according to the European and which offers professional cooking and pastry courses, as
American consumers we surveyed. well as courses and workshops open to everyone.
Today, some artistic and crafts trades have lost their promi- To ensure that the work carried out by the luxury fashion
nence, putting the availability of expertise at risk. People of houses has a lasting impact, “it is now vital that we see close
all ages left more than 20,000 positions vacant in 2021, collaboration between private players and public authorities.
almost twice as many unfilled openings as there were in Without this, we risk permanently losing some expertise”
2019. Various factors have contributed to this situation: (Alexandre Boquel, Director of Métiers d’Excellence at
jobs are undervalued in career guidance processes, there is LVMH). To this end, local authorities, incubators, compa-
a lack of knowledge of them, sometimes they are remotely nies, and training centers in Paris created the Campus
located, and career prospects may be limited. As a result, d’excellence des métiers d’Art et du Design. Its aim is to
in France, 65% of all positions for leather and textile crafts make these métiers d’excellence (areas of expertise) more
workers are unfilled, according to the 2021 Labor Require- visible and the training more accessible.
ments survey conducted by the French government em-
ployment agency Pôle employ—almost three times as For a long time, luxury fashion houses have quite rightly
many vacancies as for certain positions in the services focused on preserving areas of expertise. However, the
sector. “Our business is limited by our workforce, and the need to recruit now extends beyond this effort. For the first
balance remains fragile. The transmission of expertise is there- time, fashion houses face difficulties in attracting and
fore an absolute necessity to ensure a sustainable future for retaining high-potential talents across all sectors. For this
our company” (Vincent Frey, General Manager at Pierre reason, companies must now work toward changing the
Frey). image of their employer brand. The war for talent is mainly
a result of younger generations’ desire for very flexible and
It is therefore essential that we preserve and promote meaningful work. It is felt particularly strongly in such
these professions. The luxury fashion houses have under- areas of the company as sales-related roles (for example,
stood this well and have created their own schools, such as retail outlet management and sales advice) and digital
the LVMH’s Institute of Métiers d’Excellence, the École design roles. As a result, luxury companies must differenti-
Hermès des savoir-faire, and Van Cleef & Arpels’ L’École, ate themselves through tailored offerings that take into
School of Jewelry Arts. These schools aim to create training account the needs of new generations (for example, flexi-
courses that optimize skills development and state recog- bility in their career path, strong internal mobility, and
nition. Van Cleef & Arpels has also developed De mains en customized training).
mains (“from Hand to Hand”), a career path discovery
program for students in middle schools within French
priority education zones, to offer access to skilled trades
and provide long-term guidance to interested young peo-
ple. For its part, Chanel opened 19M, bringing together 11
maisons d’art and 600 artisans with the goal of turning it
7 LUXURY OUTLOOK 2022Comité Colbert Outlook
Influencing regulations on the luxury fashion houses’ production methods, for
better and for worse
—Laurent Dhennequin, Chief of Staff of the Comité Colbert
What are the different regulations in the luxury in- mental scores. In addition, some regulations are too re-
dustry, and how have they evolved? strictive because they are too heavily based on the precau-
tionary principle. For example, the presence of certain
From the start of the millennium, the first decrees and substances is now measured in parts per billion (ppb),
directives on environmental, social, and health matters whereas it was previously measured in parts per million
began to multiply. They came from a wide variety of players (ppm) and before that as a percentage. This leads to over-
(the EU, local authorities, and others) and notably included measuring substances that can already be found every-
nonfinancial reporting, measuring environmental foot- where in small quantities. Furthermore, some laws, such as
prints, and banning certain chemical components. The the Digital Services Act (DSA), cover many subjects simul-
luxury fashion houses also face increasing numbers of taneously in a very horizontal way, which has a negative
international regulatory constraints (such as specific taxes, impact in specific situations. As a result, issues surround-
unrecognized appellations, a diverse range of conformity ing intellectual property protection in the fight against
tests, and country-specific requirements). Given that the counterfeiting have not been dealt with in this context with
sector has a strong focus on exports, this further compli- the efficiency needed to protect consumers.
cates the country-specific responses.
Another example is the implementation of restrictive
How do the luxury fashion houses need adapt to regulations, particularly those linked to certain materials
these regulatory constraints? whose alternative is not necessarily better in terms of
health (for example, silver versus stainless steel). This may
Generally, regulations have a positive purpose and ensure unfairly impact certain areas of expertise and even lead to
that environmental issues are taken into account. However, the end of an industry (such as ironwork). To address these
they do not sufficiently account for the particularities of pitfalls, Comité Colbert is in active discussions with legisla-
the sector. The fashion houses have not waited for these tors to remind them of the particularities of the industry. It
regulations to come into force to ensure the sustainability is also working with similar entities from other countries to
of their products. For several years, some of them have enforce its message within the European Union. Nonethe-
been redesigning their various chains to ensure the quality less, it is now essential for luxury fashion houses to form
of raw materials. coalitions around these collective issues, among them-
selves but also with other sectors impacted by industry
What are the limits of these regulations? regulations (plastic, silver, leather, and the like) so that
progress can be made on these issues.
Although the regulations are well-intentioned, there is still
a significant gap between how public authorities see the
sector and how it works in practice. As a result, certain
laws use benchmarks that are ill-suited or wholly unsuit-
able for the industry. For example, displaying the environ-
mental footprint of products does not sufficiently convey
the sustainability of luxury products, as there are times
when some fast fashion products achieve the top environ-
BOSTON CONSULTING GROUP 8Focus K
ering is now committed to proactively redesigning its
supply chains and is sustainably investing throughout its
value chain so that it can perfectly trace most of its raw
materials. The luxury fashion house has also set itself the goal
of achieving full traceability of its key raw materials by 2025.
Kering, a role model for ecosystem The group has already launched several technologies to sup-
preservation through sustainable port progress toward this objective, such as developing organic
cotton that is 100% traceable through analyzing the natural
redesign of its supply chains chemical properties of individual fibers that can link them to
the field in which they grew. Kering is also expressly commit-
ted to preserving the climate, nature, and ways of life through a
fund that “supports the transition to more regenerative practices
through scholarships awarded to groups of farmers, project lead-
ers, NGOs, and other players willing to test, corroborate, and
develop agricultural practices in harmony with ecosystems.”
Launched in January 2021, the Regenerative Fund for Nature
emphasizes the urgent need to act for the future of the planet.
Through these efforts, Kering has positioned itself as a leader
in best practices. Using the example of leather, in 2021, the
fund notably invested in the Solidaridad project in Argentina,
which “aims to promote sustainable management of pastures in
the Gran Chaco region. It also aims to restore native forests and
the vegetation within them. By the end of this pilot project, Soli-
daridad hopes to triple the income of local farmers.”
9 LUXURY OUTLOOK 2022Focus The IME aims to be part of a comprehensive learning
pathway that combines theory and practice, and ulti-
mately offers qualifications ranging from CAP (Certificate
d’Aptitude Professionelle, a vocational French qualification)
to Master’s. Apprentices enroll in technical and theoreti-
The Institut des Métiers d’Excel- cal courses in any of 24 partner schools and can gain
lence works to preserve expertise practical experience in one of the 39 luxury fashion hous-
es linked to the program. The IME works with reference
schools that are certified and recognized by the French
State, such as the Compagnons du Devoir or the Haute
Ecole de Joaillerie.
F
The group has already trained nearly 1,400 apprentices
ounded in 2014 by LVMH, the Institut des Métiers d’Excel- in six different countries (France, Switzerland, Italy,
lence (IME) is committed to training and passing on Spain, Japan, and most recently Germany). In September
expertise in 27 trades ranging from crafts and design to 2021, the institute had a record 339 students at the start
excellent customer service. For example, it is possible to train of the academic year. This sector of excellence, which
in sewing, culinary arts, or even sales advice. This work/study focuses on human side of the sector, guarantees a 99%
training is offered to career-changing professionals and to success rate for the various qualifications, and 75% of
young people, including those with no qualifications, and yet it young people secure a job with LVMH or its external
applies extremely rigorous selection criteria. partners.
BOSTON CONSULTING GROUP 10Life Cycle: from symbolic products to responsibility for the entire product life cycle 11 LUXURY OUTLOOK 2022
Bringing together sustainability, usage, rarity, In the face of the climate emergency, luxury fashion
and innovation houses must commit to extending or even multiplying
how long the product is supposed to last over its entire
“The first way to help the environment is to have life cycle. To this end, fashion houses must invest in new
products that last a long time.” usage-optimization models that take multiple scenari-
Jean Cassegrain, CEO of Longchamp os into account: repairing, to ensure the durability of
products; second hand, to increase the number of uses;
“Buying second hand shows respect for our creativ- recycling or upcycling, to give existing products a sec-
ity. It’s how fashion and luxury can come together.” ond life; and renting, to limit consumption and maxi-
Lionel Vermeil, Director of Fashion and Luxury Intelligence mize usage.
at Kering.
T
The second-hand market is currently experiencing
ogether, the quality of the raw materials used and strong growth. As a result, it now represents an opportu-
the expertise of the industry mean that luxury nity for luxury fashion houses to align themselves with
products tend to be inherently sustainable. But the needs and preferences of younger generations, as
this idea of sustainability raises the issue of how prod- well as to encourage sustainable consumption. In this
ucts are actually used and what their stylistic life span context, product traceability and authentication are
is. How they are used is more important than how they key issues in this market.
are produced.
80% €50
luxury consumers who predicted value of the
think luxury fashion second-hand market by
billion
houses must be involved 2025 (+13% per year vs.
in the product life cycle +5% per year for the first-
hand market)
2.1 From putting sustainability at the heart of product ranges today include Hermès, an artisan saddler
luxury DNA, to considering how products are since 1837, and Saint-Louis, a former royal glassworks found-
actually used ed in 1586. “With the end of overconsumption, our strategy is to
make our products iconic without racing for innovation”
The concept of sustainability lies at the heart of luxury (Cyrille Vigneron, President and CEO of Cartier).
fashion houses’ DNA. This is due in the first place to the fact
that their products combine high-quality raw materials and On the other hand, fashion represents new trends and the
extensive expertise, meaning that they effectively last longer. constant search for creativity. “Luxury survives the seasons;
“The first way to help the environment is to have products that fashion marks a season” (Lionel Vermeil, Director of Fashion
last a long time” ( Jean Cassegrain, CEO of Longchamp). and Luxury Intelligence at Kering). Many companies in the
Second, the relative rarity of luxury products, particularly in ready-to-wear industry released two collections in the past
connection with their exceptional quality, reflects their year (Fall-Winter and Spring-Summer), but the so-called
limited production. “Our products are produced in a limited fashion houses now offer as many as four collections, as
number to ensure their quality and craftsmanship” (Guillaume relatively season-specific models have become increasingly
de Seynes, Executive Vice-President Manufacturing and popular and recognizable. The same is true in the fragranc-
Equity Investments at Hermès). Quality and rarity thus es and cosmetics sector, which continues to release more
provide luxury fashion houses with a theoretical competitive and more new products every year. In the early 1990s,
advantage in dealing with new environmental challenges. about 100 launches would be expected per year, compared
to more than 3,700 in 2019.
Beyond their inherent sustainability, luxury products also
have a stylistic lifespan and a pattern of usage. From a Creating iconic products is a potential solution to the
stylistic point of view, it is necessary to distinguish between sustainability issue. But even iconic products today are
timeless luxury and fashion. often accompanied by new ones: variations on the original
model in different colors, shapes, materials, sizes, uses,
On the one hand, timeless luxury has a seemingly nev- and so on. Consequently, the entire luxury industry must
er-ending stylistic lifespan thanks to iconic products that consider how its products are actually used. Today, 70% of
remain just as desirable in later years as when they were luxury customers view commitment to the environmental
first made. The Louis Vuitton Keepall bag has never left the impact of products as a basic criterion to consider when
catalog since its debut almost a century ago in 1930. Other choosing a product to buy.
luxury fashion houses that continue to offer their original
BOSTON CONSULTING GROUP 12Exhibit 2 - Life Cycle
Intrinsic value and frequency of use need to be taken into account when assessing
the environmental impact of luxury goods
French silk Polyester from China
Made in France Made in China
~15kg CO2 equivalent ~12kg CO2 equivalent
VS Lower carbon footprint for
~1,000 ~300 high-quality products, even
though they are sometimes
~15g CO2e/use ~40g CO2e/use more costly to manufacture
French leather Leather from Bangladesh
Made in France Made in China
~49kg CO2 equivalent ~105kg CO2 equivalent Higher carbon footprint
VS
for better-quality but
~200 ~600
less frequently used
products (especially true
~245g CO2e/use for fashion products)
~175g CO2e/use
Total carbon impact Potential number of uses Number of uses
Source: BCG analysis
The scenarios above are theoretical and for illustrative purposes only.
French silk versus Chinese polyester sweater: French versus Bangladesh leather shoes:
We estimated the number of potential uses on the basis of The French leather shoes are owned by someone who has
product quality and the garment’s ability to survive sea- several pairs of shoes and who wears that pair only on
sons and trends. special occasions. The leather shoes from Bangladesh are
worn every day for a few years.
2.2 A duty to join forces and excel at can give some fashion pieces a second life decades after
optimizing usage their first appearance. “The second-hand market demonstrates
respect for our creativity. This is where fashion can be closer to
Based on this observation, the luxury fashion houses must luxury” (Lionel Vermeil, Director of Fashion and Luxury
consider how consumers use their products throughout the Intelligence at Kering).
products’ life cycle. Considered in this light, four major
optimization models emerge. The second-hand market also presents a unique opportunity
to move a portion of the population toward better-quality
Offering repair services to ensure product longevity and therefore more sustainable products; some people
would prefer a single second-hand luxury product to a num-
Repair services are the first lever that fashion houses can use ber of new products designed by mass-market brands with a
to ensure the longevity of their products. At Hermès, as Rob- lower intrinsic lifetime. The second-hand market can there-
ert Dumas once said, “luxury is that which can be repaired.” by limit overconsumption, reduce the ecological footprint,
Every year, customers bring more than 12,000 Hermès items and help drive the transition toward sustainability.
back to stores to give them a second wind. Similarly, Chanel
offers repair and restoration services for its iconic bags as part Indeed, the second-hand market grew twice as fast as the
of a dedicated program called Chanel & moi. first-hand market, driven by the younger generations (83% of
Gen Z survey respondents said that they would be willing to
Developing the second-hand market to multiply life cycles own clothes temporarily). The second-hand luxury market was
estimated to be worth around €33 billion in 2021 and is expect-
The second-hand market offers another way to multiply the ed to exceed €50 billion by 2025. Given this enthusiasm, luxury
uses of luxury goods over time. Beyond its positive impact fashion houses are adopting different positions, depending on
on products’ ecological footprint, the second-hand market their size, their value-generating potential, the preexistence of
13 LUXURY OUTLOOK 2022relevant platforms, and their operating philosophy. Those that positive” (Thierry Oriez, Executive President of Henri Selmer).
favor participating in second-hand markets can do so in several
ways: they can establish partnerships with existing platforms; Although investments made by luxury fashion houses in the
they can acquire a pure-play company in the market; or they second-hand market demonstrate their commitment to
can develop their own in-house model like Christofle and meeting emerging customer expectations and enable them
Selmer, which plan to offer their customers old restored mod- to control their image, luxury brands must be attentive to
els, thus strongly affirming their commitment to a circular and the need to maintain customers’ dreams and emotions—
responsible economy. “We chose to start an internal second-hand the differentiators in the industry—in both the first- and
business. For customers, there is extra value in buying iconic vintage second-hand markets, while clearly distinguishing between
pieces that are guaranteed by us, and for us, the economic value is the two markets.
Exhibit 3 - Life Cycle
Three main engagement models for luxury players to adopt in developing the sec-
ond-hand market
Commitment
level
PARTNERSHIP INVESTMENT “IN-HOUSE”
Partnering with platforms—for example, Investing in or buying out Curating vintage products on the
to encourage targeted buyback programs second-hand platforms (e.g., brand's platform (e.g., Selmer
(e.g., Burberry x TheRealReal) or to Watchfinder bought by Richemont, Rewind) or in person (e.g.,
launch such programs (e.g., Alexander Vestiaire Collective, and Kering) Valentino Vintage, Weston)
McQueen x Vestiaire Collective)
GUCCI
BURBERRY RICHEMONT HENRI SELMER PARIS
CHRISTOFLE
ALEXANDER McQUEEN KERING VALENTINO
OSCAR DE LA RENTA
Recycling or upcycling products to give them a sec- Maximizing use through rental
ond life
Yet another way to limit environmental impact while maxi-
To preserve or increase the emotional value of used or mizing the use of luxury pieces is through rental. This mar-
outdated products, some luxury fashion houses rely on ket is relatively small (projected to reach €2 billion by 2025)
recycling or upcycling. These techniques, which involve and is still struggling to achieve the expected success. Al-
transforming existing pieces or materials, give products a though consumer expectations are high, rental remains
second life. For example, the fashion houses of the LVMH focused on certain product categories, such as leather goods
group, such as Louis Vuitton and Ruinart, are increasingly (29% of rentals are handbags). Several projects, such as The
engaged in recycling or upcycling efforts. During his Spring/ Lauren Look (Ralph Lauren), Tulerie launched by Violet
Summer 2021 fashion show, designer Virgil Abloh, Louis Gross and Merri Smith, Vivrelle for jewelry, Daytime or
Vuitton Artistic Director, created LV Trainer Upcycling from Yourse for designer furniture, are exploring different rental
the first LV Trainer models, in partnership with the compa- models. So far, however, none have stood out, and retailers
ny’s shoe factory in Fiesso d’Artico. The original models who have attempted them have failed to achieve their goals.
were deconstructed and transformed to bring a new genera-
tion of LV Trainers to life. These still-nascent initiatives underscore the economic
necessity of finding the right model. An innovative environ-
On a broader scale, in 2021, LVMH teamed up with mental approach is sustainable in the long run only if it is
Weturn, a textile recycling startup, to give unsold clothes a financially viable. To achieve this, sharing ideas and initia-
second life. Twelve of the group’s fashion houses will begin tives between luxury fashion houses within the same group
selling their unused fabrics on the Nona Source platform (as in thr case of Kering’s investment in Vestiaire Collective)
by the end of 2022. as well as between fashion houses of different groups (for
example, product authentication via the Aura Blockchain)
may be sound strategies, enabling participants to accelerate
change and make the necessary investments.
BOSTON CONSULTING GROUP 14Expert Interview
Vestiaire Collective and the relationship with luxury fashion houses in the sec-
ond-hand market
—Maximilian Bittner, CEO & Chairman of Vestiaire Collective
In theory, the second-hand market allows a product What relationship do you have with the luxury fash-
to be used multiple times, thus limiting its environ- ion houses?
mental impact—but is it not sometimes a catalyst
for increased consumption? We are positioning ourselves as a real partner of luxury
brands by offering a tailored resale solution. The circularity
Vestiaire Collective is an online marketplace for buying and process of Vestiaire Collective also naturally supports the
selling second-hand luxury fashion products, and therefore iconization of luxury products. Having some items avail-
aims at finding new life cycles for products, to better amor- able for sale several years after their release prevents them
tize their environmental costs. The durability, the quality, from falling into oblivion and guarantees them a perpetual
and the iconicity of our inventory’s pieces make them presence in the wardrobes of current and future luxury
attractive for a large audience. Pieces find a second or even customers.
a third life, regardless of seasons, sometimes even from
one generation to another. We are trying to educate con- Why are some luxury fashion houses still opposed to
sumers against overproduction and overconsumption, by the second-hand market?
incentivizing them to “buy better,” preferring quality over
quantity, reconciling these values with a certain financial Luxury products are intended to live forever and to pass
affordability. Namely, consumers can afford products of through new generations. The second-hand market must
higher quality through the second-hand market, than they be at the heart of luxury brands’ strategy to reduce their
could have afforded buying new. As recently published in environmental impact. Engaging in the second-hand mar-
our impact report, we are convinced at Vestiaire Collective ket would allow luxury brands to have power over their
that second-hand creates a virtuous circle fighting against resale pricing and to control the products’ traceability and
overconsumption and having a real positive impact on the authenticity more effectively. On the other hand, second
environment. By purchasing on Vestiaire Collective, a given hand should also be perceived as a catalyst for creativity. In
customer reduces by 90% the environmental cost linked to fact, once the second-hand circuit is well controlled, it
buying a new one. should allow brands to innovate more and launch more
exclusive collections to differentiate their new products
from their historical ones.
15 LUXURY OUTLOOK 2022Expert Interview
Re-SEE: the ultra-luxury second-hand platform
—Sofia Bernardin, Cofounder and President of ReSEE
Can you tell us a little more about what Re-SEE is How is the ultra-luxury second-hand market doing?
and how it is positioned in the second-hand market?
The second-hand market is booming. Our growth is dou-
Founded in 2012, Re-SEE is an ultra-luxury second-hand bling every year, driven mainly by handbags and clothing,
platform for women. Our model is a mix of C2C and though the proportion of high jewelry in our income is
C2B2C, but in all cases the products pass through and are growing. We are also soon entering the watch segment.
stored in our workshops before being resold to collectors or Second-hand models are becoming increasingly integrated
enthusiasts looking for exclusive pieces. On the platform, into the consumption patterns of ultra-luxury customers,
the brands live through the enhancement of products and, whether they are sellers or buyers. All customers are taking
behind each piece, the heritage of the brand and the col- the plunge, and we are working hard to address the un-
lection is told. The pieces displayed are therefore the retell- tapped potential of women’s closets.
ing of a unique moment in the history of a luxury fashion
house. How is your platform perceived by the luxury fashion
houses?
Today, only around 5,000 pieces are offered on the site per
year, because each piece is rigorously chosen by our ex- We hope to position ourselves as a partner of the luxury
perts. Of course, we aim to increase this figure in the com- industry. In fact, brands are very interested in our platform
ing years, with an ambitious goal of increasing it tenfold in because we apply the same discipline in terms of stan-
five years, but we want to maintain a very high standard of dards and DNA, whether it be in the curation of our prod-
curation in all cases—the average basket being around ucts, in the online experience, or in the selling or buying
€12,000. In addition, we strive to capture the luxury experi- experience. We are therefore a partner of choice for fashion
ence. For example, on the seller side, we have a concierge houses that have not yet integrated the second-hand mar-
system in place to collect pieces directly from their homes, ket into their internal growth model and that would like to
and sometimes we use stylists to help sellers sort through start selling old pieces or historic collections.
their closets and choose the pieces they want to sell. For
buyers, we systematically repair damaged pieces and offer
maintenance accessories.
BOSTON CONSULTING GROUP 16Customer Relationship: from physical experience to digital reconciliation 17 LUXURY OUTLOOK 2022
Translating excellence into new experiences Web3 (NFTs and the metaverse) represents a new field
of opportunities to differentiate and strengthen the
“Digital is a great opportunity to deliver an im- sense of community, notably by reintroducing the con-
proved experience to our in-store customers.” cepts of rarity and ownership and by revolutionizing
Jérôme de Lavergnolle, President and CEO of Saint-Louis digital creation.
H
ampered by certain limitations of Web2, notably The luxury sector must engage in a test-and-learn pro-
leading to a certain level of content standard- cess on Web3 to express its creativity and reinvent on-
ization, luxury brands are not yet able to translate line customer engagement. This effort will include devel-
the excellence of the physical experience of their prod- oping digital expertise and providing tools for co-creation
ucts to the digital world. In addition, mass-market brands, with the communities engaged in this new space.
having invested in digital ahead of time, have dimin-
ished the historical differentiation that existed with “Luxury and NFTs rely on several common con-
luxury brands. Luxury brands must therefore continue cepts that make them compatible: rarity, innova-
along the road to omnichannel service and use data to tion, a sense of belonging, and, more generally, a
translate the excellence of the physical experience to the link with culture.”
digital world. Pierre-Emmanuel Angeloglou, Strategic Missions Director
Fashion and Leather Goods at Louis Vuitton
The luxury segment must also continue to reinvent the
physical customer experience (particularly through
services) to defend its values of excellence, exclusivity,
and community among its customers. Some luxury fash-
ion houses have already invested in technological innova-
tion to make themselves more experiential and unique.
2/3 60%
luxury consumers who 18- to 34-year-olds who
think that luxury lags see the metaverse as
behind when it comes an alternative to social
to digital networks
3.1 The luxury fashion houses are widening their lead like the Miss Dior Millefiori Garden pop-up in the heart of
in terms of physical customer experience… Los Angeles.
The luxury segment is maintaining its leadership position in Luxury brands go beyond excellent products and services in
the excellence of the physical experience, which reflects the inventive ways. They combine discoveries and emotions,
standards and values of the luxury fashion houses and is fostering links with and between their customers, who in
one of the best assets for creating and strengthening a turn become more like a community. In this context, LVMH
sense of community. The fashion houses have always man- is diversifying its offering with the Cheval Blanc hotel in the
aged to surprise their customers and reinvent experiences heart of Paris. Some products from the group’s brands are
to continually differentiate themselves and guarantee the on display there, conveying a sense of total immersion in the
feeling of exclusivity to their communities. On the experien- diversity of its luxury fashion houses.
tial luxury side, the Ritz Paris has opened a new Ritz Bar
offering guests a light show and the projection of constella- 3.2 …but are still looking for the perfect omnichannel
tions onto the ceiling, accompanied by a menu of 12 cock- strategy
tails, one for each sign of the zodiac, in reference to the
Belle Epoque when astrology was very fashionable. Despite a preference for in-store buying, which remains at
the heart of the luxury fashion houses’ strategy, customers
Other luxury fashion houses are developing stores that have begun to adopt an omnichannel process: although 80%
offer unique experiences: Hermès is testing a multiform of customers make their purchase in store, 50% start their
immersion around silk, offering visitors different activities product search online. Having, for the most part, turned
related to the creation and design of its iconic fabrics. toward digitization later than mainstream manufacturers
Parfums Christian Dior is developing olfactory and multi- did, the luxury fashion houses have had to catch up in order
sensory experiences (makeup sessions, DJ sets, perfume to provide a seamless experience between physical and
consultations, and more) combined with temporary stores digital points of sale.
BOSTON CONSULTING GROUP 18Carrying this standard of excellence over into digital chan- developed online “perfume sound” experiences, believes
nels remains a challenge, however. A perfect omnichannel that “sound is a powerful way to engage the senses during the
system has not yet been achieved, most notably as a result digital experience.”
of technological limitations (IT system interconnectivity) and
skill level (vendor training). For example, 64% of consumers Other innovative approaches attempt to connect the physi-
believe that luxury brands are falling behind when it comes cal and digital worlds while maintaining the concept of a
to the digital market, and 67% believe that the digital experi- unique experience. For example, in its Paris store, Saint-Lou-
ence of luxury brands does not meet the standard of the is offers the opportunity to visit its crystalware factories, via a
in-store experience. With this in mind, some luxury fashion 360-degree virtual reality experience. Jérôme de Lavergnolle,
houses are trying make up for the lack of a suitable sensory President and CEO of Saint-Louis, argues that “digitization is
experience over digital channels by implementing new a great opportunity to offer an enhanced experience to our
initiatives. Frank Madlener, the Director of IRCAM, which in-store customers.”
Exhibit 4 - Customer Relations
Moving toward greater importance of social and e-commerce platforms
INSPIRATION TRANSACTIONS
A growing share of the decision-making Physical retail accounts for 60% to 75% of transactions;
process is moving online—in particular, online, growth is faster for multibrand platforms and social
at the beginning of the client journey commerce
Luxury fashion Luxury beauty
50-70
~40% ~75%
~60% 10-15% Brand.com
~90% 70-85%
~10% Brand.com
~10% Brand.com
~20% 1P
~10%
and 3P 1P, 3P,
~12% 1P, 3P, 5-10%
~5% ~15% 20-35% and Social
and Social
~30% Social
~18% ~5% 10-20%
2019 2025 2019 2025 2019 2025
The shift toward 3P will jump fromamount of personal data (such as daily habits, tastes, and Beyond the metaverse, nonfungible tokens (NFTs), although
family situation). In the digital age, such differentiation is on initially rather far removed from traditional approaches in
the decline, which benefits mass-market players that cap- the luxury industry, represent a fantastic opportunity for
ture and use more digital customer data for ultra-personal- luxury brands to reset their digital interactions with their
ization: Nike and H&M are great examples of this. Because communities.
they sometimes lag on these issues, luxury fashion houses
must seize opportunities for customer engagement and On the one hand, NFTs can help consolidate the trust built
sales that result from collecting and analyzing online con- between brands and their customers by reintroducing stan-
sumer behavior and purchasing data, if they are to succeed dards for protecting confidential data—in particular, through
in maintaining their competitive advantage. Michael David, identification and authentication certificates based on NFT
LVMH’s Chief Omnichannel Officer, affirms this point: “Digi- portfolios or through creation of new business models that
tization allows brands to collect implicit customer data, which do not rely on using data.
was once one of the competitive advantages of luxury brands.”
On the other hand, the development of NFTs offers new
Today’s major digital platforms (particularly Instagram and opportunities to enhance the feeling of luxury within the
Facebook) heavily restrict creativity and the way in which digital sphere. Rinvigorating the concepts of ownership,
brands can reach and engage customers (through communi- exclusivity, and rarity, NFTs could boost a sense of communi-
cation format, use of influencers, and so on). As a result, ty (as with Dolce & Gabbana’s #DGFamily collection, for
both luxury brands and mass-market brands run the risk example) or recast the customer relationship and loyalty
that their content will become standardized. Such standard- model (as with Louis Vuitton giving access to exclusive
ization would endanger luxury brands’ fundamentally assets that tell the group’s story via Louis the Game).
unique characteristic of standing out through the expression Pierre-Emmanuel Angeloglou, Strategic Missions Director
of creative genius and specific sensitivities. for Fashion and Leather Goods at Louis Vuitton, says, “Luxu-
ry brands and NFTs are based on various common concepts
3.4 Web3 and NFTs: differentiation opportunities and that make them compatible: rarity, innovation, a sense of be-
enhancement of the luxury experience longing and, more generally, a link with culture.”
Web3, driven by blockchain, NFTs, and the metaverse, has Finally, some NFT projects could also allow brands to create
taken center stage for the past year. The metaverse appears new business models in which the creator or brand and the
to be a new opportunity to move away from brand promo- community would share the value.
tion to online brand building. The emergence of new immer-
sive and completely personalizable brand ecosystems will To achieve this, Benoît Pagotto, Cofounder of RTFKT Studios,
undoubtedly lead to the invention of new digital experiences one of the most famous Web3 studios recently acquired by
and the creation of homogeneous ecosystems that reflect Nike, explains that luxury brands must embrace Web3
the real world, although they are struggling to exist on the codes and move from the customer to the community once
internet today (as the equivalent of a virtual Avenue Mon- and for all: “To successfully create new worlds and experiences
taigne). Bertrand Lévy, Senior Vice President Global Partner- in Web3, brands will have to form strong communities. There-
ships at The Sandbox, says: “All luxury brands are interested in fore, they should no longer think of their audience simply as
the metaverse, and while 90% of the companies we meet simply customers, but as a community that they will have to provide
want to make a nice advert in Web3, luxury brands go beyond tools for in order to create a brand universe together.” Luxury
this and want to create new experiences. Today, luxury brands brands have a definite advantage in this field, thanks to their
make up 10% of the brand experiences that will be available in unparalleled experience and expertise.
The Sandbox at the opening in six months’ time.”
Today, luxury brands still face the question of how best to
Moreover, investing in the metaverse is a way for luxury encourage engagement. Most will go through a preliminary
brands to ensure that they communicate with their current test-and-learn phase, which, depending on their ambition
and future customers. In our survey, 62% of the 25- to and strategy, will lead them either to create new, integrated,
34-year-old respondents said they believe that the concepts end-to-end ecosystems or to integrate with existing ecosys-
of Web3 and the metaverse could eventually replace today’s tems through strategic partnerships. Either way, it seems
social networks. This is particularly the case with members necessary to start investing in these new universes now,
of Generation Z and Generation Alpha, who represent the because, as Patrice Louvet, President and CEO of Ralph
future customers for luxury fashion houses and who spend Lauren, reminds us, “Creating new different and different
more and more time online. Web3 could therefore be the universes has always been a core element of luxury brands.
cornerstone of the new global strategy for the luxury fashion Web3 is simply a natural digital enhancement.”
houses and one of the key consumer contact channels.
Gautier Pigasse, Head of Innovation and Blockchain for
LVMH, concurs: “We are only at the beginning with Web3. We
have to let the matter evolve, but it has real potential. We see
this as an opportunity to create new intersections and new
experiences with customers.”
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