Emerging trends in the Luxury Fashion Industry: Future or fad?
By Dr. Sheetal Jain
After a woeful year due to pandemic, the luxury industry has started to regain strength. As per recent Bain & Company report, 2019 levels would most likely be attained in this year. Covid-19 has forced luxury brands to pivot into the digital space at a startling speed. Many brands have recognized the need to transform and revolutionize more than ever before. They are exploring unique digital methods to virtually engage consumers to offset their declining sales.
Now-a days, the most asked question is: Are emerging trends like gamification, NFTs and pre-loved fashion in luxury industry is future of fad?
Gamification: During the pandemic gamification has emerged as a widely used marketing tactic to provide immersive experience to consumers. Increasing number of brands have realized the need to integrate gamification in their overall digital marketing strategy. Many luxury brands including Dior, Burberry, Balenciaga and Chanel have been leveraging the power of gaming platforms to acquire, engage and attract young consumers. Recent trends in China have already confirmed the successful partnership between beauty, e-commerce and gaming. In 2019, MAC’s limited-edition lipstick which was commercialized for Tencent-owned game Honor of Kings was completely sold out within 24 hours.
High-end fashion label, Balenciaga have revealed their latest Autumn/ Winter 2021 collection through an interactive online video game titled Afterworld: The Age of Tomorrow. It allowed players to dress the characters from head-to-toe with their new collection. Louis Vuitton has designed skins for Riot Games’ League of Legends. Last year, Burberry became the first luxury fashion brand to collaborate with live-streaming platform Twitch to showcase its Spring 2021 show. Lately, the Gucci Garden Experience on Roblox, an online gaming platform, blurred the difference between the virtual and real world. Gucci has been amongst the pioneer luxury brands to spot the opportunities of the metaverse – the emerging virtual universe where users can live a parallel life to their real-world existence.
Video games are allowing consumers to obtain digital outfits for their avatars, giving them access to luxury brands which they might not otherwise afford to buy in the real world. According to Newzoo’s recent report, the global games market is projected to generate revenues of $200 billion by the end of 2023. GenZ and millennial shoppers are reinventing social community in digital space through sharing experiences via online games. Young consumers also known as ‘digital natives’, find traditional media as tedious, since it emphasizes more on transactional aspect rather than experiential. On the other hand, new age unconventional platforms like gaming, generate youthfulness and fun and build special bond with the users. Today, young consumers are spending same amount of time, if not more, on gaming as on movies and music. Therefore, it makes complete sense for the brands to venture into this space.
Note: Gamification is a great way for luxury brands to reach to a larger audience, boost brand awareness and engagement, create competitive advantage, build reputation, acquire user data and eventually build strong customer base.
Non- Fungible Tokens (NFTs): NFT means unique digital asset like artwork, videos, audio and music which is tracked through blockchain and cannot be interchanged.
Every day we have been hearing breathtaking tales on new NFT record sales, from Beeple’s $69 million artwork to 18-year old’s $500,000 Vampire Queen. However, presently, NFT use cases are in their infancy, particularly for luxury fashion. Luxury brands are contemplating whether the affluent consumers will ever be interested in luxury fashion NFTs? Will consumers achieve any value from them? Will this strategy lead to brand dilution? And so on… But at the same time, luxury brands do not want to miss the opportunities offered by NFTs. Various luxury fashion brands are preparing to release NFTs. As per Vogue Business, Italian luxury fashion house, Gucci lately said it’s “only a matter of time” before a brand like Gucci releases an NFT.
Just like high-end fashion brands came up with their diffusion lines to make luxury affordable, NFTs may further pave the way towards democratization of luxury. For instance, customers who may not be able to afford real Gucci gown may buy its digital version. They could develop their images wearing the 3D dress and share it on virtual platforms or use it for avatar in games.
NFTs can help resolve Counterfeiting problem which is a major challenge faced by the luxury industry through authenticating and tracking high-end items. Also, by storing info in digital ledger, shoppers can know about the previous owners, etc. which could also help the brands to get royalty for each resale. In addition, digital collectibles can be created by luxury brands using NFTs. They can serve as a new revenue stream for brands.
Note: NFTs can be used along with 3D visualization, AR filters and virtual try-on technology to provide more engaging online shopping experience to the consumers.
Pre-owned luxury:Lately, the demand for pre-loved luxury fashion is growing phenomenally. Environmental concerns, desire for uniqueness, affordability and wide variety are some of the key reasons driving this market. Few years back, nobody could have ever thought that luxury brands would ever collaborate with pre-owned fashion resellers. Moreover, most of the luxury brands were hesitant to enter the resale market due to the fear of cannibalizing sales of new items and risk of brand dilution. However, today this is becoming a hot trend. Lately, Gucci partnered with TheRealReal; Alexender McQueen partnered with Vestiaire Collective, to name a few. A recent BCG –Vestiaire Collective’s research revealed that the global secondhand market is likely to grow at the rate of 15% to 20% over the next five years. Findings also indicated that 62% of shoppers are willing to buy more from fashion brands that collaborate with the resellers. As per CPP Luxury, the global market of pre-owned luxury goods is estimated to grow from current $30 billion to $64billion by 2025.
Note: It is becoming increasingly important for the luxury brands to look for new business models that promote circularity and sustainability to entice growing number of conscious consumers.
Emerging trends like gamification, NFTs and pre-owned luxury are innovative ways of connecting with the new-age consumers. They may provide immense opportunity to many luxury brands to thrive in the future. However, there holds a key challenge for the luxury marketers to strike right balance between inclusivity and maintaining brand identity and exclusivity. Brands should not jump in the bandwagon rather they should formulate strategies related to these emerging trends by being more client centric as well as by delivering clear value proposition.
(This article has been previously published in Fibre2fashion.)