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Op-Ed | The Future of Luxury in 4 Trends

The post-virus luxury sector will be shaped by the acceleration of four existing trends, writes Erwan Rambourg.
A boarded up Louis Vuitton storefront in SoHo, New York | Source: Getty Images
  • Erwan Rambourg

I don't know about you, but I find it tedious reading articles saying the luxury market will never be the same again. Conversely, I don't think anyone is naïve enough to believe Covid-19 will change nothing in the sector. Will the pandemic meaningfully shift consumer behaviour towards luxury goods? Well, that depends heavily on who and where we are talking about.

It may seem odd to be thinking about the future of luxury when half the world is living in confinement and fear. Is anyone really thinking about purchasing Chanel handbags or Rolex watches as fatalities escalate, unemployment soars, equity markets struggle and just a few weeks ago people were busy panic-buying staples like pasta and toilet paper?

This is a fair question. But just as we have become familiar with new concepts like "super spreader" and "flattening the curve" and new habits such as WFH and using Zoom for happy hour with friends, so will the luxury market evolve and adapt. Luxury brands will have to learn new vocabularies, observe new rules and remain open-minded as to what circumstances might bring. And yet, in the year to come, the sector will primarily be shaped by the acceleration of existing trends along four main vectors: China, consolidation, channels and conscience.

1. China: The Bling Dynasty lives on.Opens in new window ]

The rapid stabilisation of Covid-19 cases in China in March 2020, only two months after the initial outbreak in Wuhan, means that Chinese nationals have been the first to return to luxury consumption. For them, the epidemic has proven to be short-lived and consumer confidence will rebound quickly.


LVMH, a bellwether for the luxury sector, recently commented that some of its assets, like Louis Vuitton, Christian Dior, Bulgari or Sephora, have already rebounded strongly in mainland China since late March. To be fair, the majority of sales to Chinese consumers typically take place outside the mainland on travels to western fashion capitals like Paris and London, which have been shut since mid-March, or key destinations in East Asia that have suffered a second wave of infections (Hong Kong, Singapore, Japan), so it is only normal that sales in mainland China are rebounding. And, overall, total Chinese luxury consumption still remains sharply down.

Yet the specific dynamics of the Chinese market support strong long-term prospects. In contrast to Europe and America, where the luxury market consists mainly of repeat customers, growth in China is largely driven by first-time purchasers. Without increasing their penetration rate, a brand like Louis Vuitton can expect ongoing new wealth creation in China to grow the size of its target market. Covid-19 may slow this growth, but not dramatically.

Beyond the math, there is also reason to believe the consumer psyche in China is supportive of a return to growth. Talk to colleagues or friends in Shanghai (which only registered just over 300 confirmed cases) and they will tell you Covid-19 will be remembered, not as the heavy trauma that has weighed on cities like New York, but as a vague negative souvenir. The more collectivist outlook in China, embedded in its Confucian culture, has made the country more willing and able to undertake the kind of mass societal action that has enabled it to beat the virus and exit the crisis, within a relatively short period of time, with renewed confidence.

Chinese shoppers might drive a majority of [luxury] sales as soon as this year.

Covid-19 will likely act as an accelerator in China in two ways.

First, the luxury sector, which started off as a European sector with a strong Japanese following, has become increasingly Chinese-driven. Chinese nationals accounted for close to 40 percent of sales and 70 percent of luxury growth in 2019, and were on track to drive more than half of luxury sales by 2025. As a consequence of Covid-19, however, Chinese shoppers might drive a majority of sales as soon as this year, as they start to buy again while western consumers retrench.

Second, there has been a repatriation of luxury growth in Mainland China over the past two to three years as price harmonisation, lower taxes and heightened confidence in local shopping increased. When Japanese consumers started dominating luxury sales, they bought more than 80 percent abroad; now they buy 90 percent at home. There was fundamentally no reason that Chinese luxury consumption wouldn’t go the same way, and here again Covid-19 has been an accelerator: with many flights grounded and fear factor high, the Chinese have little option but to shop at home.

2. Consolidation: And then there was one?

No need to be Hercule Poirot or Sherlock Holmes to know which companies will dominate the luxury sector this year and beyond. The bigger brands and the bigger groups have dominated the sector for years for a simple reason. As explained, luxury is still largely a recruitment (not a repeat purchase) market, so if you're looking for "my first handbag" and you are a young female Chinese consumer, it's unlikely you will purchase a second-tier brand. You will think primarily about the bigger three who dominate social media and prime retail and marketing real estate, and who all of your friends and coworkers know about: Louis Vuitton, Chanel, Gucci. If you are wealthier, you might go to Hermès; if you're edgier, you might choose Dior. Other brands will simply struggle to be noticed. Once again, here Covid-19 will be an accelerator. Consumers may not buy more but instead what they perceive to be "better" and the leading luxury brands will likely increase their market shares.


Acquisitions are unlikely to occur over the next six to nine months. Family-controlled companies will rightly believe this is not the time to sell as sales revenues fall and margins follow, and the usual suspects on the acquiring side (LVMH, Kering, Richemont) have other priorities and will need to contain spending in a year where cash is king. But as we exit the crisis, pent-up demand will favour the bigger brands, who have the scale and resources to withstand the revenue hit, and, as balance sheets recover, the wave of M&A is bound to resume. LVMH went from three assets (Louis Vuitton, Moët & Chandon, Hennessy) to 77 (as and when the Tiffany deal clears). There is no rationale for the group to stop there.

3. Channels: The future is not what it used to be.

As quarantine conditions reduce the barriers to online shopping, it may seem reasonable to expect luxury consumers will start to make the bulk of their purchases online, as is happening gradually in cosmetics and sporting goods. Nike has said that eventually more than half of its business will be done online. For L'Oréal, that is already the case in China. Luxury, however, will be an exception. For the past ten years, observers have been projecting that the future of luxury is online and there has been excitement around Farfetch, Net-a-Porter and Chinese platforms like JD.Com and Luxury Pavilion from Alibaba. I don't share that excitement at all.

I am convinced that luxury demand and social distancing are virtually incompatible.

Online sales of luxury have grown from nowhere a decade ago to close to 10 percent of sales at Gucci in Q1 this year, for example. Can this stretch beyond 15 percent or 20 percent in the short term? Sure, if more than half of your brick-and-mortar network is shut like is the case today. But in a normal environment, 20 percent is likely to be a cap. If you are a top European luxury brand and your online sales are above 20 percent of your total revenue, we need to talk.

Indeed, I am convinced that luxury demand and social distancing are virtually incompatible. Luxury will continue to be sold predominantly in stores or at least face to face, not online, even in a post-Covid-19 world. Consumers still want to enjoy mingling with their favourite sales associate, touch and feel products, drink their favourite champagne in a VIP salon to which few have access. Future store openings will be mostly in mainland China, following repatriation trends, and in airports, again a counterintuitive thought given many are shut or seeing subpar activity at present. Travel will be different in the future, but there is no way it will not remain aspirational. In early May, Louis Vuitton reposted ads from its "Core Values" campaign on Instagram, a campaign about travel, still a powerful desire for high-end consumers at present.

4. Conscience: What are you made of?

The most important long-term implication of the virus, and a silver lining of sorts, will be on consumer conscience and values. The world likely faces far worse threats than Covid-19 with climate change being the most obvious. I do not subscribe to the idea that luxury will be a victim of a sort of “quarantine of consumption” in which sales never bounce back. It’s simply not human nature. However, Covid-19 will further fuel a movement already gaining momentum in recent years: consumers, mostly driven by youth (the so-called “selfie generation”) and women (still the future of luxury demand), will be more thoughtful about their choices.

Consumers will remember what you did and stood for during this crisis, and whether you went into hiding.

Luxury clients are likely to ask more questions. Marcus Aurelius said: "what we do now echoes in eternity." Companies who are not "doing" will face the risk of irrelevance. This is a time to show your mettle — consumers will remember what you did and stood for during this crisis and whether you went into hiding. Repurposing production sites for masks or hand sanitisers, cutting your dividend when you are getting loans from the public coffers, giving to charity or hospitals, all of this is doing good and showing you have a soul and a purpose to defend, not just a P&L.


Environmental, social, and governance concerns will be under heavier scrutiny as consumers pick up on the reality that the fashion industry is amongst the most polluting in the world. Supply chain substitutes will emerge, a circular economy of luxury could develop and brands will need to strive to become more trustworthy.

The luxury sector, not unlike the world at large, is living through unprecedented times. But what Covid-19 fundamentally means for luxury is acceleration: existing trends happening quicker! Chinese consumers will become even more relevant. Consolidation will go into overdrive. Companies will develop a greater sense of conscience and do good. And yet, it’s unlikely the crisis will fundamentally rewire the channel mix, tipping the sector towards e-commerce. We may be buying more goods on Amazon but when it comes to luxury, brick-and-mortar and, more importantly, physical, social, emotional, human interaction will survive.

Erwan Rambourg is a luxury analyst and the author of ‘The Bling Dynasty: Why the Reign of Chinese Luxury Shoppers Has Only Just Begun’ (2014, Wiley) and the forthcoming ‘Future Luxe: What’s Ahead for the Business of Luxury’ (2020, Figure 1 Publishing).

The views expressed in Op-Ed pieces are those of the author and do not necessarily reflect the views of The Business of Fashion.

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