By Jukka Aminoff
One of the key questions in the luxury industry is. How can it survive the digital transformation? Is there a desire for luxury amongst new generations? Will the current online environment decrease global sales? There are lots of questions because digitalization is changing the business landscape - locally and globally.
In 1995, the value of the personal luxury goods market was 77 billion euros, and in 2016, it was 249 billion euros, according to Statista. The luxury industry has been able to penetrate into new developing markets, thanks to globalization. However, the luxury industry lost two billion euros when we are comparing figures to 2015, which was the best year so far, the market size was 251 billion euros. The reason for the mild decline is that there is uncertainty in the whole global economy, and it affects all industries, not just luxury.
However, it is estimated that the global middle class will grow in the future, and this will increase the global market size of personal luxury goods. There is lots of room to grow, and one of the key drivers when pursuing growth is to enhance online sales. In 2003, global online sales were just one billion euros. In contrast, in 2016 19 billion euros. The market size has doubled within a couple of years, and therefore, we can expect positive growth.
Growth Of Global Online Sales In The Luxury Industry 2003-2016
This exponential growth also answers the question. Can luxury brands survive in the online environment? Yes, they can. I remember an interview from Financial Times, which said that it is possible to sell watches, which cost over 50 000 euros, online. Hence, it is possible to sell very expensive items online because there have been doubts. There is not always a need to visit a shop because people might be busy or the brand's physical location is too far away. Even tough luxury consumers like the idea to buy from shops because they want to receive high-end buying experiences. Therefore, luxury brands will need both sales environments.
However, there are lots of luxury brands, which have not fully engaged in the digital world. Cartier announced just a while ago in an interview for Bloomberg that it will expand its online presence. Hence, the global market size will grow when luxury brands will be more active online because it is also a good environment to reach for new and current customers. As I mentioned in my previous blog post that there is a growing interest amongst Millennials towards luxury, and the best way to reach them is to be practice active marketing on social media channels. The luxury industry has a very bright future.