What are the geopolitical, economic, and cultural forces shaping the luxury industry and changing the way consumers interact with brands? Why are we seeing declining luxury sales in China and Russia, and what impact does currency have on demand? How can luxury brands become more sustainable? What role do “made in” labels or “smart” products play in luxury brand marketing? Euromonitor International takes a look ahead of the INYT Luxury Conference.
The International New York Times Luxury Conference 2015, which is hosted and moderated by New York Times fashion director Vanessa Friedman and award-winning New York Times journalists, will addresses some of the most critical challenges and opportunities facing today’s luxury goods industry.
Aptly named Luxury Beyond Product, the event will bring together a select group of brand thought-leaders and innovators from luxury fashion to art, technology, entertainment, beauty and retail to share ideas on the most pertinent issues luxury businesses face in this ever-evolving landscape – joining the International Luxury Conference 2015 event are C.E.O.s Maureen Chiquet of Chanel and Marco Bizzarri of Gucci, icons and celebrities like will.i.am and Victoria Beckham, and unexpected experts such as Doctors Without Borders founder Bernard Kouchner, choreographer Benjamin Millipied, artist Grayson Perry and myriad others.
Below are just some of the thought provoking and highly informative discussions that will take place at The Trianon Palace in Versailles on 17–18 November 2015.
The Global Context
Moderated by Roger Cohen, op-ed columnist at The New York Times, one of the key discussions which will take place in the morning of the first day of the International Luxury Conference 2015 event will look at the geopolitical, economic, and cultural forces shaping the luxury industry and changing the way consumers interact with brands. Joining Cohen to talk about these testing times will be Nader Mousavizadeh, co-founder and partner at Macro Advisory Partners, and Bernard Kouchner, former French Minister of Foreign and European Affairs and founder of Médecins Sans Frontières. Together they will look at the troubles in today’s Russia, the new conservative attitude to luxury in China, as well as the impact of the floating Swiss Franc and what these mean for the industry going forward.
Indeed, Euromonitor International’s latest luxury goods data reveal that 2015 was yet another challenging year for the industry. In particular, the economic instability, social unrest, and armed conflict buffeting formerly fast-growing emerging markets have driven up the strategic importance of the developed markets, not to mention the turmoil on the global foreign-exchange markets since late 2014 creating a global currency war for the industry.
In 2014 and 2015, mainland China posted its lowest growth in sales of luxury goods since our records began (a real decline of -3% and +1% respectively). The slowdown in growth also means that China will not overtake Japan to become the world’s second largest luxury goods market in the world in the next five years and is expected to maintain its third position ahead of France and the UK in the short to medium term.
Similarly, Russia’s luxury goods sales delivered a disappointing real decline of 5% (real RUB terms) in 2015, making it the world’s second worst-performing market after Ukraine. With the backdrop of sanctions and the deterioration of relations with the West, business and consumer confidence in the economy has collapsed, to some extent. On the consumer side, this (alongside falls in real wages) has contributed to a decline in luxury expenditure; and on the business side, a lack of investment and capital outflows. With the risk of an escalation of geopolitical tensions weighing on the economy, however, confidence is likely to remain fragile.
At the same time, external currency pressures continue to create even more headwinds for the industry and are forcing some of the world’s leading luxury brands to revisit their global pricing strategies. The strength of the US dollar and, to a lesser extent, the UK pound, teamed with a surging Swiss franc and debilitated euro in 2014 and 2015, has led to marked consequences for some of the key luxury goods categories. China’s latest currency devaluation could further amplify the situation by creating greater disparities in prices between Asia, North America and Europe. In some markets, prices are going up, while in others, they are going down. It is arguably one of the biggest challenges facing the industry today, particularity on the back of the floating Swiss franc.
One such category which has fallen prey to this currency war is luxury time pieces. What was once heralded as one of the world’s fastest-growing categories is now dwindling in sales. Euromonitor’s new research indicates that global sales of luxury watches declined (-0.5%) in 2014 and will just reach over 1% for 2015 (US$ real terms).
All of this and more on these pressing topics will be discussed at the International Luxury Conference 2015 event.
Strategic Sustainability
The rise of consumer awareness about labour working conditions, sustainable sourcing processes, or environmental policies is shaping the apparel and footwear industry globally. The luxury industry as a whole is under increasing pressure to source, manufacture, distribute, and sell in a more ethical manner as consumers start to assess more carefully how garments are produced and in what type of labour conditions.
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