Kayla Marci

April 13, 2021

The state of luxury retail today

Analyzing the data behind the core shifts in the luxury space.

From designers reimagining dad sneakers as "It" items to being first in line for the NFT disruption, "luxury" in fashion is becoming harder to define. 

There's no denying it’s experienced significant overhauls in recent years. The adoption of ecommerce. The appointments of new designers helping heritage brands fully embrace streetwear. The push for greater inclusivity on the runway. Then, to cap it all off, the pandemic adds another layer to its already steep and complex pricing architecture. 

To stay on top of this ever-changing space, retailers can rely on data to demystify luxury and monitor wider market shifts. Read on as we unpack the current state of play.

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Key takeaways

• Streetwear is now fully integrated within luxury and is showing no signs of slowing down. Noted growth areas include hoodies, up a significant 70% in the number of styles stocked since 2019 and women's sneakers up 35%.

• Despite streetwear's ever-growing presence, price rises have been driven upwards by more traditional categories. Louis Vuitton was among designers increasing handbag prices to protect margins during the first wave. This move paid off - LVMH has reported a bounce back with fashion sales up 37%, beating 2019 figures.

• The majority of luxury handbags are priced between $2,000-2,500 - higher than pre-pandemic 2019, where designers mainly operated in the $1,500-2,000 threshold. However, the $500 or lower interval has also grown, paving the way for affordable It bags inspired by Coach's Pillow Tabby or Telfar's Medium Shopping Bag.

• Luxury brands are continuing to fine-tune their DTC strategies to regain control of pricing and branding. Online at Neiman Marcus, Saint Laurent's range has contracted 70% since 2019 and Balenciaga, 51%.

What does luxury look like online? 

Luxury lagged behind other markets in its transition to omnichannel as they stuck to their tried and true methods of maintaining exclusivity and customer service. However, as technology evolved, more high-end designers got on board. This was the right move too as all physical stores were shuttered temporarily (and some, permanently) due to the pandemic - regardless of prestige. 

Currently, these are the most super-luxe brands online across the US and UK as judged by the proportion of the offering priced at $5,000 or more.  

  1. Cartier with 50% at $5k and over
  2. Louis Vuitton with 10% at $5k and over
  3. Tom Ford with 7% at $5k and over
  4. Dior with 6% at $5k and over
  5. Fendi with 5% at $5k and over

Diving deeper, EDITED data reveals accessories make up 75% of these higher-priced items, including jewelry, watches and handbags. Outerwear follows at 17%, with mink coats exiting at nearly 50k driving the prices up. As more designers pledge to phase out fur, it will be interesting to monitor how these categories shift.  

Consumer casualization and streetwear are embedded in luxury

While luxury brands’ online adoption has made it possible for consumers to shop white gold watches or ostrich skin handbags from their couches, it’s also helped pave the way for accessible luxury. 

Brands with an ecommerce presence are able  to extend their reach and grow their audience, helping nurture a future consumer who may not have felt comfortable shopping in a traditionally stuffy brick-and-mortar store.  

Additionally, luxury is no longer associated with products like those mentioned above. The irrepressible power of streetwear culture has led heritage brands to fully embrace casualization and elevate the status of items like T-shirts, hoodies and sneakers. COVID-19 cemented the need for comfort, where designers took a cue from pandemic dressing, sending sweatpants down the runway. 

These shifts continue to impact the luxury market. The consistent breadwinning category for menswear, sneakers are now also the top stocked women’s footwear style for luxury brands too. On retailers’ standalone sites, this silhouette makes up 29% of shoes stocked over the past three months, with a 35% increase since 2019 when it was the third top-stocked shape.

luxury retail

An 8% rise has been noted in luxury sweatpants available since 2019, while T-shirts are up 19% and hoodies up a significant 70%.

Some luxury streetwear and casualwear retail for eye-watering prices (and even more on resell sites). Yet, the majority of products are positioned as an entry buy-in to the brand. 64% of the tops currently priced at $500 and under are T-shirts and 63% of footwear in this threshold are sneakers. 

So, we’ve examined products at each end of the pricing scale. Now, let’s take a look at how overall prices are evolving over time.

Prices are shifting upwards

At first glance, pricing emphasis has changed very little in the past few years, with the bulk of luxury goods remaining between $500-$1,000. On further inspection, the data points to shifts in luxury away from the lower end of the price architecture. The $500 and under threshold is seeing its lowest investment compared to the previous two years. Retailers also aren’t operating in the $1,500-$2,000 bucket as much as they did in 2019. 

Instead, there is a greater uptake in price points between $3,000-$4,000, plus more products stocked at $5,000 and higher. 

luxury retail

Streetwear may continue to disrupt the luxury market and add clout. However, it's not responsible for the shift in prices. Do you know what it is? 

The resurgence of the ‘It’ bag

As detailed in our August pricing report, many big name designers such as Gucci and Louis Vuitton announced pricing amendments for handbags to offset raw material costs and combat first-half losses due to COVID-19. Relying on the loyalty of their wealthy consumer demographic to outlast COVID and beyond, prices are continuing to shift upwards. The majority of handbags stocked online over the past three months were advertised between a price bracket of $2,000-$2,500, an upwards swing compared to the same period in pre-pandemic 2019 where $1,500-$2,000 was the dominant threshold.

Luxury brands are also pushing deeper price brackets than previously seen. This year, there are more bags retailing between $2,500-$3,5000. More significantly, those priced at $5,000 and higher make up 5% of products in stock compared to 3% in 2020 and 2019.

luxury retail

Consumers may have had no desire or occasion to carry a designer handbag over the past year. However, that’s swiftly changing as vaccines continue to roll out and venues reopen. Additionally, McKinsey & Co. reported consumers would likely return quickly to paying full price for luxury goods – the same way they did after the 2008 global financial crisis. The firm anticipates growth of 1% to 4% for luxury retail in 2021, creating a sense of optimism and security for this category, especially for the brands that cushioned their margins with raised prices. 

What are the post-pandemic luxury ‘It’ bags your consumers have on their radar? 

On the higher end of the pricing scale, Louis Vuitton’s Coussin PM handbag has been spotted by tastemakers, including Dua Lipa and Selena Gomez. Contrasting the maximalism associated with occasionwear and bold color stories dictating current assortments noted on the Spring 2021 runway, minimalism held strong as a key influential trend. This translated into ‘It’ bags with celebrity and influencer buzz surrounding the Prada Cleo bag, a favorite of Kendall Jenner. 

While prices are shifting upwards, there is still opportunity at the lower end of the scale (we have 2012’s Mansur Gavriel bucket bag to thank for the introduction of contemporary ‘It’ bags). Luxury bags priced at $500 or lower have grown from 2% of the offering to 3% this year. Sitting within that benchmark is the Coach Pillow Tabby. A refresh of an early 2000’s model, the Y2K-inspired, Gen Z approved shoulder bag has achieved TikTok fame, racking up 470,00 views since mid-March in a video from @dailyfashionfinds hailing it the "bag of the year." Coming in at an even more affordable price is Telfar’s shopping bag aka the Bushwick Birkin. This Black-owned fashion brand’s vegan, gender-neutral brainchild won Fashion Design of 2020 from the London Design Museum. It’s so in demand, the brand has implemented its own security program to stop bots inundating the site to resell at a higher price whenever new stock lands. 

luxury retail

From clutches to minis, there’s no shortage of inspiration for the next ‘It’ bag. 

Log into EDITED to see the trends that will dictate fall products

“Second-hand” is no longer a dirty word

One of the most significant shifts in luxury is around the perception of wearing second-hand or pre-loved clothing. With the stigma vanishing, it's become more aspirational with many factors contributing to its normalization. Sustainability is a huge priority across all sectors within fashion to which luxury brands aren’t exempt. There has been a huge push within this market to rectify their practices following news of burning unsold goods, adding to this global problem. 

Participation from luxury retailers have repositioned the narrative that second-hand fashion is more affordable. While Gen Z has championed peer-to-peer selling on platforms like Depop, The RealReal and Vestiaire Collective have succeeded in targeting consumers with a higher disposable income. With ThredUP estimating the second-hand market to reach $64 billion within five years and retailers placing further emphasis on creating a circular economy, this is a shift within luxury that is guaranteed to stay. The consistent worldwide Google searches below show it's also on consumers minds too.

luxury retail

Concentrating on DTC

As outlined in our March report, luxury brands have been trimming back on their wholesale partnerships, concentrating on DTC strategies to achieve higher margins and regain control of their pricing. Prada was a notable example, tightening its distribution channels resulting in the contraction of products at stockists like Farfetch, Net-a-Porter, Mr. Porter and Selfridges. 

It’s not the only designer brand implementing this strategy. There are 51% fewer Balenciaga items available online at Neiman Marcus compared to 2019, while Saint Laurent has contracted 70%. Fendi has also pulled back 55% on MyTheresa and Gucci by 16%.

Disruption by younger consumers 

According to Boston Consulting Group, millennials and Gen Z will collectively account for about 60% of global luxury sales by 2026. With American Gen Z-ers currently wielding an impressive spending power of over $75 billion, this is a consumer group retailers of all sectors need to be talking to. 

We’re already seen the impact this cohort has on luxury with trends popularized on TikTok, such as Cottagecore and Regencycore making their debuts on Paris catwalks. However, viral trends aren’t the only thing making these consumers tick. 

The shifts luxury brands will need to note are in the values and priorities of these consumers who are politically, environmentally and socially aware at a young age. They have grown up around digital and social technology, celebrate diversity and authenticity, alongside an unmatched geographic mobility.

With luxury retailers late to the party on ecommerce, they are prioritizing tech to ensure they’re not behind on how to tap into this demographic. Luxury brands are tipped to be first in fashion to pull the trigger on NFTs. These unique digital assets powered by blockchain technology are forecasted to bridge phygital experiences and provide transparency and authentication. As most used by millennial consumers, they are poised to be the next big thing for Gen Z.  

And that’s only the beginning. 

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