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Luxury’s Opportunities for Growth Through Innovation and Sustainability

In Paris, Shopify and BoF gathered executives from Jacquemus, Coperni, Isabel Marant, Marine Serre, Paco Rabanne, Vestiaire Collective, among others, to discuss the strategic imperatives required to navigate the uncertain socio-economic environment, and reimagine how the industry operates.
Attendees of the Shopify x BoF Roundtable Event in Paris.
Attendees of the Shopify x BoF Roundtable Event in Paris. (Getty Images)
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In contrast to 2021, when industry growth was driven by middle-class consumers, it is the big spenders who have opened their wallets this year. Indeed, luxury brands increased their prices on average by 10.7 percent in 2021 and 10.3 percent already in 2022, with little pushback from shoppers, according to financial services firm Jefferies, while many mass retailers trimmed their outlooks for the end of the year. Concurrently, the number of ultra-high-net-worth individuals has increased by 9.3 percent globally between 2020 and 2021, according to Knight Frank’s The Wealth Report.

But in the current macroeconomic climate, securing luxury’s recovery is no simple task — especially as its customer base and their expectations of brands evolve rapidly. To enable transparent discussion on the challenges and opportunities ahead, BoF and Shopify connected industry leaders to share their experiences in navigating industry disruption and their plans for the future under the Chatham House Rule.

Hosted at Paris’s Château Voltaire by Shimona Mehta, Shopify’s managing director of EMEA, and Nick Blunden, president of BoF, executives from Isabel Marant, Jacquemus, Patou, Coperni, Vestiaire Collective, Giambattista Valli, Marine Serre, Paco Rabanne, Ami and Early Majority gathered to discuss the complex path ahead for luxury, and the strategic imperatives required to not only navigate the uncertain socio-economic environment, but to also reimagine the ways that the luxury industry operates.

“We are seeing this need and this requirement to connect to consumers more deeply, to build relationships and to build communities,” said Shopify’s Mehta (who elected to be identified), citing the state of the economy, the rising cost of customer acquisition, and the diversification of new channels and platforms as key drivers.

From left: BoF president Nick Blunden and Shopify managing director of EMEA, Shimona Mehta, at the event in Paris.

For luxury players within France, opportunity remains. Shopify research into the French market suggests that 75 percent of consumers are going to spend on high quality items this season, while two thirds planned to buy products from sustainable brands this Black Friday and Cyber Monday.

Below, BoF shares condensed, anonymised insights from the intimate discussion to provide actionable insights for our global community.

Make Multi-Channel Retail Strategies Cohesive

Retail experiences should and must be cohesive across all channels for an authentic luxury experience, said one executive. “Globally, and whether you are online or offline, in an airport, on a retail platform, our website or in-store, you have to send a consistent message. It is a symphony — building agility to overcome short-term challenges while also working on delivering a long-term brand vision.”

“I think for a post-Covid [era], a real ‘revenge’ action is to go back into stores itself to relish making those purchases. In luxury, so much work has been done to train store associates to really bring added value back into the store experience. For luxury, in-store shopping remains a very different experience from transactional online shopping.”

Manage Wholesale Relationships for Price Consistency and Control

“Super luxury brands have managed to take back all the business internally, so that they don’t rely on wholesale business models. In turn, it means their prices are consistent,” said a guest. “If you are an SME or a smaller size business — and, by that, I mean even just under a $1 billion business — then you still need to rely on wholesale. You have to make sure those relationships are high-quality to work on assortment and price. Those relationships require a lot of control and agility because markets evolve geographically and also in terms of channel.”

The wholesale side of business is a key challenge for small and emerging brands [but retailers] can kill your online business because they don’t respect your price point.

“On price, the wholesale side of business is absolutely a key challenge for small and emerging brands, because retailers play with their price for customers,” said another guest, sceptical of the support that the wholesale model can provide.

“They can kill your online business because they don’t respect your price point and create unfair competition for your own website. You can literally give them the keys to kill your business. The only way to stop them is to sell to them,” shared one executive.

“It is also unfair, even tougher competition for your stores if you fight to open stores abroad, which is a huge challenge for a young brand, then you’ll start at a showroom because [retailers] don’t respect your price point at all, and in many countries you cannot force them to respect your price point. So [...] what to do? Do I kill this and I lose the biggest part of my business growth, or I keep and I try to fight with the price? And I think it’s not a good deal,” they continued.

Consider Co-Creation Strategies to Engage Consumers

“On social platforms — in Web2 spaces — people want to have fun. They are on Instagram and TikTok because they just want to relax and connect with each other. This means that no traditional advertising is going to work on these platforms because consumers can sniff it out immediately and find it offensive,” said one attendee. “That’s why the move towards user-generated content is so powerful. It’s a real challenge for people who want to build very premium brands.”

“When it comes to Web3 spaces, and considering co-creation in those environments, luxury will have to grapple with how lo-fi these spaces are,” said another guest. “Discord looks like a Slack channel — it is not about beautiful visuals and relinquishing creative control in that sense; it is more about co-creating in a very intimate and collaborative way.”

Rethink Luxury’s Approach to Textile Waste Management

“Companies typically overproduce by 30 or 40 percent every single season. A factory I know sold 93 tonnes of materials — that never got made into anything — for 10 cents a yard. Something that would have been $10 million was sold for $100,000, and who knows where it is going to go. That kind of waste is really staggering and it is going to be powerful when visibility is brought to that, because it really is the industry’s dirty secret.”

“I hope that regulation — for instance, mandatory unique digital identities for every product — will bring transparency to the degree of waste we see in the industry, and new strategies for combating it,” said one executive in response to a discussion on the impact of planned EU regulation.

Address the ‘Fibre Gap’ Between Commitments and Available Stock

“We all know that consumer awareness for sustainability is super high. However, it doesn’t matter how fast we try to [take] action or what we commit to — there are deeper complexities at the heart of the issue. We require an entire revolution of how we make clothes and do business,” were one guest’s opening remarks.

We require an entire revolution of how we make clothes and do business.

“In most companies, around 75 percent of carbon footprint comes from fabric development. That is the most energy intensive aspect of our industry — it is all in the fabric,” shared another guest. “If the sustainable fibres aren’t there for us, at scale, then what can we do? It is really a question of the mills pivoting to address this demand. It is not a question of cost for us because we know our consumers will be willing to pay more for sustainable products. We need the mills to help us make this feasible,” they continued.

“As a brand, you are only one piece of the whole chain. All stakeholders need to have the same objectives, but they often don’t,” echoed another.

Incorporate Re-Commerce Strategies, Profitably

“Luxury brands have to look to the future to imagine what resale could look like incorporated on a [profit and loss statement] — having another yield of revenue from that same original hit of cost of goods,” said one executive. “But bigger brands are going to have to figure out how to incorporate resale onto their platform first. At the moment, many view it as competition to their primary sale.”

“Inside some companies, many view it as sacrilegious to incorporate resale — to decimate the premium product,” agreed another attendee. “We are all competing to resale product, and this is where I think a membership model could come in handy with support from platforms.”

Explore Post-Product Strategies to Futureproof Your Brand

“Even as interest around NFTs begin to cool — that was an interesting source of revenue for us — we anticipate seeing more and more people buying into a different business model,” said one attendee. “It’s what makes this idea of brand membership so interesting.”

“They are buying into a community,” agreed another guest. “As luxury leaders, we need to understand that there are different, more responsible ways to grow a business. Looking at new ways to monetise should ignite interest from brands and consumers — a desire to build together.”

However, one guest was less bullish about NFTs becoming established as a luxury product category. “For me, NFTs are more a marketing tool — it is going to pick up CRM, you can give a nice experience buying on a website, [because] you can’t reproduce the store experience, so you need to add things that are website native. NFTs are super nice to give to clients on a website, so for me, as i said, it is more like modern CRM.”

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