Top 4 cross-sector trends impacting the luxury industry
By Katerina Mansour - 30 June 2021
Now and again we see the emergence of a new technology or an innovative business model in one industry, which ends up being adopted by very different sectors. We have seen the gig economy transform the taxi business before it disrupted the hotel and restaurant industries, for instance. The luxury industry is now on the verge of being transformed by technologies that have so far been leveraged in other sectors. Here we focus on the four key cross-sector tech trends that will change the luxury scene.
Why innovation matters for the luxury industry
The luxury industry is arguably one of the sectors with the strongest need to stay on top of innovation. It’s a sector almost entirely based on the consumer’s desires. Running a luxury brand means coming up with tomorrow’s trend: the new product or service that perfectly fits their consumer’s needs, even when the consumers didn’t know they needed it. Innovation is therefore at the heart of luxury. It is especially key today considering the consumer persona of luxury products and services is changing.
While older generations used to be the traditional luxury clientele, millennials and Gen Z are demographic groups luxury brands cannot afford to ignore. These two groups are purchasing more and more luxury goods and have very different expectations. Luxury today is vastly different from what it was a few decades ago, even just in terms of this demographic shift. The shift in itself led to the need for innovation, as a 25-year-old’s expectations typically don’t match up with those of a 50-year-old. As such, the sector has been redefining itself, focusing on growing trends for younger generations, such as sustainable fashion.
So, which innovations do other sectors have to offer for the luxury industry?
1. Blockchain: for authentication and traceability
Blockchain is typically associated with fintech and cryptocurrencies. Yet, there are a plethora of potential applications across industries for this technology. For instance, luxury brands stand to benefit from leveraging blockchain to fight counterfeiting.
According to the Global Brand Counterfeiting Report, luxury brands lose around $30 billion worth of sales to counterfeits online. While many willingly buy counterfeit products for the cheaper price tag, luxury brands could help those who unknowingly buy fakes by adopting authentication solutions. Furthermore, peer-to-peer resale of luxury goods has become widespread. More and more platforms are emerging for consumers to resell their luxury products. However, this situation also leaves potential buyers at risk of buying counterfeits.
Blockchain is a distributed and immutable ledger that can record transactions, track assets and provide transparency. Data is stored in blocks that are all linked to each other, timestamped, and considered unforgeable. When paired with NFC and IoT technologies, blockchain provides the ability for consumers to access a product’s entire history, whether it’s new or second-hand. They can also contribute to its verifiable history by scanning product tags or including proof of purchase details that are then uploaded to the blockchain.
Some luxury brands have already taken steps to incorporate blockchain as a solution to counterfeits. In 2019, LVMH partnered with Microsoft and ConsenSys to develop AURA, a blockchain-based platform to authenticate luxury goods. With the solution, during manufacturing, each luxury product receives a unique identifier. When a customer purchases a luxury product, they can access its online certificate which has been cryptographically signed by the brand and all those involved in its supply chain (design, raw materials, manufacturing, distribution).
2. Digital twins: for more sustainability
A digital twin is a virtual representation of an object, person or process. Digital twins are typically used to run simulations that help predict how a process or product will perform. This technology is relevant to a plethora of industries, from construction to healthcare. The possibilities are vast, which is why so many sectors have been developing digital twin solutions. A digital twin can help simulate a patient’s reactions to a medical treatment. It can predict maintenance needs for equipment in industrial contexts. Benefits range from reducing costs to optimising production.
It’s no secret that demands for sustainability are growing. Sustainable fashion is an especially relevant issue for luxury brands. Indeed, a Nosto survey showed that 52% of survey respondents want the fashion industry to become more sustainable. Luxury brands have grown aware of this demand and many are slowly but surely trying to provide more sustainable products.
The sustainability trend is even more important considering it extends to other verticals in the luxury industry, such as wine, spirits and cars. So, how can luxury brands leverage digital twins to become more sustainable?
Reducing textile waste
Fashion brands often waste a significant amount of fabric during the design phase of their products. Numerous samples are used, which end up being discarded and sent to landfills. Researchers have estimated that if there are no changes, the textile and apparel sector’s nonrenewable raw material usage will reach 300 million tonnes by 2050.
By using digital twins, the industry can eliminate the need for physical samples, which get shipped around the world for testing only to be discarded. Furthermore, using digital samples can speed up design, prototyping and sampling phases.
A more indirect effect of digital twins on sustainability in fashion is designing better clothing sizes. By creating digital twins of individuals and clothing items, designers can adapt their clothing to more diverse and specific body types. In addition to providing better products for consumers with diverse body types and thus increasing customer satisfaction, this can also help reduce the amount of clothing returned or discarded due to poor sizing.
Predicting environmental impact and costs
Digital twins are useful for their predictive capabilities, namely for construction and building management use cases. Applying the technology to luxury products one could simulate the entire design and manufacturing phases. This would enable stakeholders to estimate resource needs (e.g. raw materials), the costs incurred and the impact one change might have on their entire development process. This holistic visibility can help reduce waste (e.g. avoiding purchasing more materials than needed) and keep all parties on track with any sustainability goals they might have defined for a product’s creation.
3. Remote experiences: to enjoy luxury at home
The advent of video calls was mainly a response to professional and academic needs at first. With the Covid-19 pandemic, employees and students shifted towards working and studying from home, which led to the development and adoption of more virtual meeting tools. However, other sectors were able to use this new trend to their advantage as well. Numerous startups and corporates have begun offering remote experiences for consumers to enjoy at home, including luxury brands.
Indeed, the pandemic led luxury brands to look for different ways to engage with customers remotely. With bars closed, luxury wine and spirits companies explored new ways of offering wine tastings or mixology classes at home.
Want to visit a vineyard and try their exclusive wines? You can have their wine delivered at home and visit the vineyard through a video call – or even better, fully immerse yourself with VR technology! A sommelier could connect with you virtually and guide you through the tasting remotely.
Want a luxury shopping experience? Much like virtual meeting rooms and virtual classrooms, brands can create virtual boutiques which can showcase products in 3D and provide you with an online shop assistant. Coupled with augmented reality, these online stores can now also allow you to virtually try on products from the comfort of your home.
4. Biotechnology: for better beauty products
Biotechnology involves using living organisms and biological systems, such as bacteria and yeast, to create products. Unsurprisingly, this technology is often used in healthcare, to develop new medication, for instance. However, luxury beauty brands can also reap benefits from this trend.
By leveraging biotechnology, beauty brands can use new ingredients that are healthier and more sustainable. They can find alternatives for ingredients that deplete the planet’s resources or involve unsustainable farming practices (e.g. palm oil). They can bioengineer ingredients to be more effective in meeting specific requirements such as levels of moisterization. Biotechnology also enables brands to create fully plant-based and natural products, which are in high-demand.
For example, the cosmetics brand Biossance uses biotechnology to produce the moisturizing agent squalane more sustainably. Instead of using the traditional sourcing method of shark fishing, it uses yeast that synthesises squalane from sugarcane via fermentation.
Ever-evolving based on consumer demands, luxury will need to continue seeking innovative technologies to stay competitive on the market. As we have seen above, various tech trends that have originated in a different sector are now showing their potential in the luxury space. Startups, which are often able to adapt their technologies to different sectors, are key allies for luxury brands to leverage these trends.