Jessica Gerberi says structural growth themes in the industry have turned luxury stocks from a cyclical to secular growth opportunity. Gerberi, a senior research analyst with Calamos Investments in Naperville, Ill., was positive on the industry before the pandemic, partly based on the resilience of luxury goods companies, some a century or two old. “Their resilience was just tested in such an unprecedented way with Covid, and Covid’s really been an accelerant for positive change in this industry,” she says.

The S&P Global Luxury index, which was launched just over ten years ago, tracks around 80 global companies either making goods or providing services that can be classified as luxury.

Many of the names are instantly recognisable: champagne, cognac and leather-goods leader LVMH, for example, alongside Gucci-owner Kering and Swiss group Richemont with its enduring brands such as Cartier, Dunhill and Montblanc.

OUR TEAM:

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• Investing in unique masterpieces or creations that ascertains a strong personal fashion statement
• Investing in the brand power and its related ecosystem

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Our management team with proven record in luxury retail & private sales are well positioned to capture investment opportunities through upcoming niche boutique brands, rare collection of precious stones, as well as state of the art technology to provide consumer experience solutions in luxury industry.

LUXURY DIGITALLY:

The recent purchase trends has disrupted both the supply and the demand for luxury brands. For some brands, the crisis poses an existential threat. However, there will also be winners among independent luxury DTC brands. Digital adoption has indeed empowered the emergence and growth of new brands, new concepts, new nuances of luxury. The rise of these new disruptive direct-to-consumer brands means more competition for luxury consumer spending (for brands) and access to virtually endless luxury alternatives (for consumers). In the year ahead, consolidation of the luxury market will most certainly intensify once we exit the crisis, leading to an increasing polarisation between the luxury groups and the rising stars of the luxury DTC world.

Bain & Co. finds despite a contraction in the overall global luxury industry due to the pandemic, global online luxury sales grew almost 50%, to about US$59 billion, in 2020, compared to about US$39.7 the prior year. This sales channel is forecast to grow further, from an estimated 23% last year to more than 30% by 2025. Gerberi says the industry may not see a full recovery until 2022 or 2023, but the speedy adaptation to selling online undertaken by many companies offers a compelling reason to consider investing in luxury stocks.

YOUNGER CONSUMER AS A GROWING TARGET BASE:

Bain & Co estimates that 70% of the site’s luxury-fashion segment is made up of Millennials – consumers born in the early 1980s and so coming of age in the late 1990s – closely followed by the subsequent, fast-accelerating Gen Z, a huge cohort.

As younger consumers become the largest segment of luxury buyers, it is a necessity for luxury brands to understand how to relate to and win over these young generations.

Millennials and Gen Z are inevitably driving significant share of luxury market. These new generations of younger (but certainly not less demanding) affluent consumers will continue to rewrite the rulebook of the once bulletproof luxury industry; with new needs, new behaviours, and digital-infused lifestyles. As younger consumers become the largest segment of luxury buyers, it is a necessity for luxury brands to understand how to relate to and win over these young generations.

These groups are very important because the amount they are spending on luxury goods is growing faster than in older generations. The average annual spending on the site by the latter is expanding by an impressive 22% a year. But the rate for Millenials is 24% and for Gen Z it is 33%. These two generations should consume more as they grow older and wealthier. They also have a greater propensity towards spending money on quality goods and experiences than previous generations, who had less disposable income because their first move was getting on the mortgage ladder. This generation is also more switched on when it comes to environmental sustainability, an increasingly important theme with bespoke, hand-made luxury goods. It is also significant that Millenials and Gen-Z in particular have a much stronger online presence and so they can influence others and spread trends much more quickly than their elders.

CHINA AS THE LUXURY HUB:

Six Chinese luxury brands have penetrated the top 50 of Deloitte’s annual survey into the most powerful global luxury goods firms, all of them jewelers; Chow Tai Fook ranked higher than Hermès or Rolex. And, according to a survey by CSG and PR firm Ruder Finn, 74 percent of affluent Chinese are aware of at least one homegrown designer label, with almost half planning to buy local in the next year. Of course, this shift in favor of homegrown luxury is noteworthy for the global market, given that Chinese buyers represent 32 percent of luxury consumption worldwide, per management consultancy Bain & Co.

When it comes to China one of the best gauges of consumption trends comes from following Alibaba’s Tmall, the country’s biggest business-to-consumer e-commerce website; it is essentially an online mall. Bain estimates that 70% of the site’s luxury-fashion segment is made up of Millennials – consumers born in the early 1980s and so coming of age in the late 1990s – closely followed by the subsequent, fast-accelerating Gen Z, a huge cohort.

CUSTOM MADE & PERSONALIZED LUXURY AS THE FUTURE:

According to the annual luxury study carried out by Bain & Company in 2018, the personal luxury market is expected to reach 405 billion euros by 2025. Consumers demand personalised treatment from brands due to overexposure on social networks and mass consumption. One in five luxury shoppers said customisation, specially tailored, is relevant to them when they buy luxury goods.

Personalisation applied as a strategy goes beyond customising a product; it is about elevating the individual shopping experience and the consumer’s relationship with the brand. “Today, with digital and data analytics, brands have the opportunity to have a personalised relationship with everyone, not just with their VIP customers and top buyers,” said Olivier Abtan, a partner at BCG. eCommerce will permeate each purchase and by 2025 will represent 25% of the market value. It will relegate the more “traditional” channels to the background. Also, 100% of luxury purchases will be influenced by digital interactions, including 50% of luxury purchases that will be enabled thanks to the use of virtual reality and mobile payments.