Challenging socioeconomic factors continue to shape consumers’ purchasing behaviours, with one focus being the Pursuit of Value, one of Euromonitor’s 10 Megatrends. In luxury categories, this pursuit of value is manifesting in brands adjusting to more affordable luxury strategies.
Challenging economic conditions are creating slower long-term growth for the luxury industry
Global inflation is expected to remain high over 2022-2023, with a forecast of 8.9% in 2022 and 6.2% in 2023. Consumers are still feeling the looming consequences of the energy crisis in Europe, the war in Ukraine, the rising costs of living, and the long-term consequences of the pandemic, and these circumstances are shifting budgeting and spending beyond reactive, short-term habits. With slowing global consumption, global real GDP is expected to fall from 3.0% in 2022 to 2.3% in 2023.
The luxury industry, although normally immune to many market rules, has felt the effects of these economic headwinds, and more luxury brands are embracing affordable and value-driven options. Historically, the industry experienced healthy sales growth before the pandemic-led slump in 2019/2020. Now, the industry is bouncing back to pre-COVID-19 global levels, with value sales of luxury goods set to grow by just under 6% in 2022, and continued year on year growth forecast over the next five years, albeit at a slowing pace.
Swatch's new strategy strikes a balance between affordable and absolute luxury
Swiss luxury watch manufacturer Omega announced in March 2022 its collaboration with Swatch to launch an affordable version of the former’s Speedmaster, also known as the Moonwatch. While Omega’s Speedmasters retail at an entry-point of GBP6,000, with vintage models reaching the million mark, the new Omega x Swatch Biometric MoonSwatch provides an affordable take on the original luxury watch, with various designs corresponding to a planetary object, such as Mission to Mercury, or Mission to Mars, but costing just GBP207.
This collaboration was a clear landing on affordable luxury and value-driven consumption. The watch met a chaotic debut, with shoppers flocking to stores and camping out overnight, something that the watch industry had never seen before. Nine months after the debut, the affordably-priced galaxy-themed collection continues to generate a buzz.
Affordable luxury manifests itself in consumers’ pursuit of value
Luxury shoppers, especially gen Z and young millennials, still want to indulge, but are also actively saving money, economising, and seeking the best value for their investments. In response, high-end brands are increasingly broadening their portfolios and exploring affordable collections through entry-level price point products and services. Key strategy considerations include:
- More than value for money: Consumers investing in luxury are not only looking at value for money, but also value through experiences, convenience, sustainable impact, and authenticity. Swatch is doing just that with the MoonSwatch range, creating themed products and supporting this with MoonSwatch-themed cars touring throughout Europe, Asia and the US, hosting in-person drop-in events and engaging with fans.
- New business models: Sharing, renting, and borrowing allow consumers to access luxury goods at an affordable price, while avoiding the cost of ownership and minimising the environmental impact. Rent the Runway, BagButler and Vivrelle have attracted great interest.
- Cutting back: Luxury consumers are buying in smaller quantities and looking for longer-lasting, higher-quality products.
- Loyalty no more: High-end shoppers are embracing a no-strings-attached stance towards luxury brands. Consumers are becoming less loyal to specific brands as they are looking for the best investments. In addition, younger consumers are buying timeless classic pieces with the idea of selling or renting them to make money.
- Bargain hunt: Consumers are economising not only out of necessity, but also because looking for luxury bargains and engaging in second-hand shopping has become cool and acceptable. Platforms selling pre-owned luxury goods, such as eBay, Fashionphile and Luxury Garage Sale, have all seen tremendous growth in the past few years.
Just as Swatch, other luxury brands are responding to the pursuit of value
- In October 2022, Italian luxury fashion-as-a-service platform Hesse launched a membership-based high-end rental service, whereby customers can select clothing and accessories that will be delivered the next day directly to their homes and in zero-emission vehicles. This initiative is a manifestation of “new business models” in the form of luxury rentals.
- In January 2022, North Face and Gucci launched their second collaborative collection of luxury outdoor clothing, after a successful first launch in early 2021. This time, the collection turned to the 1990s for inspiration, and added vintage-feel products that had a lower entry price compared with the luxury brand’s core collection. This combined effort is able to offer “more than value for money” for consumers that are “cutting back”.
- Luxury hotel brand NIHI Sumba, and winner of Travel magazine’s no 1 Hotel in the World, recently announced the luxe KODI hotels, targeting budget-conscious travellers and younger people still seeking luxury experiences without out-of-this-world price tags. The first KODI property is set to open in the summer of 2023 on the Indonesian island of Flores. NIHI Sumba’s attempt to offer luxury experiences to more budget-conscious customers speaks directly to the “more than value for money” sub-trend.
Consumers’ search for luxury has broadened to include options that are more affordable and value-driven. Luxury brands wanting to stay ahead of the game will have to respond accordingly to stay relevant and drive growth, especially in times of global instability.
For further analysis on Megatrends, including the Pursuit of Value trend, read our report, Megatrends: a Framework for the Future.
At Euromonitor we have a dedicated team of consultants overseeing projects across multiple industries and helping clients tackle their key questions to stay ahead of the game. If you would like more information, request a consultation with us.