Rosy forecasts for expenditure on “true luxury” goods, referring to hedonistic and ultra-elite consumption exclusively available to a segment of 20 million individuals (out of a global total of 370 million). 40% of this group expects to increase their luxury spending in 2024. These findings, from the latest study by Boston Consulting Group and Altagamma, were presented in Milan during the ninth edition of Altagamma Consumer & Retail Insight on July 5, 2023. “High-end consumers exhibit a double-digit growth in spending propensity,” confirmed Matteo Lunelli, President of Altagamma, during the presentation. “In this context, the Altagamma Foundation reaffirms its strategic priorities: safeguarding craftsmanship, internationalization through dimensional growth, sustainable and digital transformation, and ultimately, the international promotion of Italian excellence.” However, in the realm of ultra-luxury, digital must be handled with care.
Discontent with the (solely) digital experience. But what about the metaverse?
Following years of restrictions on free movement, experiential luxury is making a comeback. Lunelli continues: “The number of retail outlets remains stable,” yet there is “a significant increase in size and the creation of ever-more personalized and exclusive experiences. Consumer habits, values, and multichannel distribution methods are changing, while new collaborative and consolidation strategies are emerging upstream and downstream in the value chain.” This responds to the dissatisfaction expressed by true luxury customers regarding the digital experience. Satisfaction with the luxury e-commerce channel is currently lower compared to “mass market” digital platforms. “Less than 50% of luxury consumers are genuinely satisfied with their purchasing experiences,” comment Filippo Bianchi, Managing Director and Senior Partner at BCG, and Guia Ricci, Managing Director and Partner at BCG. “Over the past decades, brands have focused on perfecting the in-store experience, lagging considerably behind online: luxury digital experiences are 0.8 times less satisfying than those of mass retailers. To enhance the experience in a context where over 50% of consumer experiences are multichannel, brands must decide whether to ‘play defensively’ with hyper-specialization or ‘play offensively’ with hyper-personalization, adapting to individual customer needs.”
Luxury and Digital, under Three Conditions: Web3, Metaverse, Generative Artificial Intelligence.
The virtual experience of Web3 – gaming and the metaverse – is enabled by blockchain technology and immersive technological devices (augmented and virtual reality). In the luxury realm, Web3 is still in its early stages, and “its adoption is slowed down,” as noted in the Altagamma and BCG study, due to “a long path remains before it can reach the mass market.” However, adoption is expected to intensify thanks to the Young tech. Pioneers and Escapers consumer segment (such as those from the Middle East, India, and Brazil) and substantial investments by Microsoft and Meta. Moreover, consumers of “true luxury” state (54%) their intention to increase spending on virtual fashion in 2024, holding a positive perception of brands involved in virtual fashion development. Additionally, 90% of respondents believe that their virtual identity carries weight beyond the virtual dimension. What individuals purchase and wear in immersive spaces impacts their choices in the physical world (and vice versa), with 88% stating that they draw style inspiration from their avatar’s attire. By 2026, millennials and Gen Z will constitute 75% of the market. In this regard, “generative AI” is considered a priority by many executives. In the luxury sector, it offers “significant opportunities across the entire value chain, with a high impact on marketing, personalization, and customer experience,” extending to the so-called “VIC treatment” (Very Important Consumer), even for aspirational luxury customers (350 million individuals).
Altagamma and BCG Report: The New Geographies of Luxury.
Geographic differences are evident: in China, the inclination to purchase is over 50% higher than the average; the post-pandemic euphoria remains strong here, but the future will diverge from 2019, with local demand dominating consumption. The “high-spenders” support the market (40% of total spending), while the youth under 30 and residents of less prominent cities will increasingly contribute to sector growth. UHNWI consumers in the United States exhibit a 40% higher propensity than the true luxury average. Europeans, on the other hand, display a 40% lower net purchasing inclination, heavily influenced by macro uncertainties. And the Middle East with Saudi Arabia? It presents a promising opportunity for the sector. The personal luxury market is valued at around 15 billion euros in 2023, and it’s anticipated to double (and more) by 2030. The Saudi Arabian market, in particular, offers numerous untapped prospects due to local development fueled by economic and developmental policies linked to Vision 2030.
