What is the Next Frontier to Conquer for Luxury?

18 months ago, I wrote an article called “Will Luxury Brands reign forever?” in which I questioned the unrivaled success of luxury brands, despite the rising inflation and some pressure points like the widening gap between rich and poor, an increasing sense of climate change dangers, or the Chinese obsession for “shared prosperity”. At that time, I had the feeling that the luxury resilience was linked to its ability to make people dream and play an essential role in their lives. 18 months later, amid a wave of disappointing quarter results by the luxury titans (exception made of Hermès), I cannot scroll on LinkedIn without reading catastrophic posts about the End of Luxury or read articles in the press about the falling of luxury brands. Yet, I still believe luxury brands (but certainly not all) will keep reigning in the coming years. Because the true nature of luxury is to be in conquest. Conquest of new geographies, conquest of new demographics, and tomorrow conquest of new territories, myths and fictions to keep growing and expanding.

Before sharing a few insights on how luxury brands could keep gaining ground in the coming years, mostly revolving around the idea of “luxury of experience”, I would like to take a look in the rearview mirror of luxury past decades growth. I am, indeed, convinced we can always learn from the past, to better project into the future.

A look in the rearview mirror: Decades of growth driven by widening the offer and expanding the presence all around the world.

As we take a look in the rearview mirror of Luxury, a concept long associated with exclusivity and the elite, we can see it has gradually evolved to become a global, omnipresent force. Today, it transcends social and geographical boundaries, not only embedded in the lives of the wealthy but also in those who aspire to own a fragment of a dream. Behind this phenomenal expansion lies a strategy akin to conquest, where luxury brands have not only democratized their product offerings but also expanded their geographical reach with precision. This conquest of new markets has allowed luxury to thrive in previously untapped territories, further propelling it to new heights and making it more accessible and widespread than ever. As the industry continues its strategic conquest, new questions arise about the future paths it will take to maintain this delicate balance between prestige and accessibility while conquering new frontiers.

Historically, luxury was reserved for a select group of wealthy elites. Brands such as Louis Vuitton, Cartier or Hermès embodied a world of exclusivity, where products were synonymous with rarity and excellence. However, over the decades, these brands recognized the need to broaden their offerings to remain relevant and expand their influence. This is where the democratization of luxury comes into play, aiming to offer a portion of the luxury experience to a wider audience without diluting excessively the brand’s essence.

The turning point for this democratization came, first, through more affordable products. The iconic example of Louis Vuitton illustrates this well. While the brand initially became known for its travel trunks, it was with small leather goods, notably handbags and wallets, that it truly captured the hearts of the broader public. These products, more accessible in terms of price, allowed a wider audience to own a piece of Vuitton's heritage without having to purchase a trunk worth thousands of euros. Other luxury houses followed a similar path. Chanel and Dior, two titans of haute couture, launched ready-to-wear lines, making their designs available to a less elite audience while maintaining exclusive haute couture collections. This strategy allowed couture houses to become global players, making their brands desirable to the middle class while preserving their air of exclusivity. At the same time, major luxury brands expanded their reach with beauty and fragrance lines. Owning a bottle of Chanel No. 5 or a Dior lipstick is, for many, a way to access the myth of these iconic brands.

In parallel with the democratization of offerings, luxury has embarked on an unprecedented geographical expansion, reaching new markets and strengthening its global presence. This conquest is not only a matter of physical location but also a digital adventure that disrupts traditional distribution models and boundaries. Luxury houses quickly understood that their success would not be limited to historical luxury capitals such as Paris, Milan, or New York. They embarked on an aggressive expansion into new, often unexpected regions. The legendary example of the opening of a Louis Vuitton store in Ulaanbaatar, Mongolia, illustrates this ambition to conquer unexplored territories. Today, major luxury houses compete for the best locations in the world’s most important cities, where luxury real estate has become a strategic battleground. However, physical expansion alone is no longer sufficient. Digital platforms have become a vital tool for reaching new audiences. With e-commerce, luxury products are now accessible from anywhere in the world, theoretically without geographic limitations. Gucci, Burberry, and even Hermès have heavily invested in online platforms that allow customers to purchase (almost every) products without leaving their homes. This shift comes with specific challenges, particularly the need to preserve the aura of luxury in an increasingly accessible online environment. To meet this challenge, some brands are focusing on creating unique digital experiences to recreate the magic of physical boutiques but in a virtual space.

All in all, the past decades growth was linked to a sense of audacity (both in terms of business strategy, retail expansion, creative choices) that looks to be diminished today. The question is: will experience the new holy grail that will help luxury brands to renew with their sense of conquest?

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Is experience the new frontier?

The luxury market has traditionally been associated with tangible symbols of wealth—fashion, jewelry, and leather goods. However, the landscape of luxury is evolving. While the overall market for luxury continues to grow, customers preferences are shifting in significant ways. Instead of investing in material possessions, many “aspirational luxury consumers” are increasingly favoring experiences, such as travel, fine dining, and unique hospitality ventures, over traditional luxury goods. This shift raises important questions: Why are today’s luxury consumers, particularly those known as “aspirational” consumers, prioritizing experiences over possessions? What economic and cultural factors are driving this transition? And how are luxury brands adapting to meet the demand for ephemeral, emotion-driven indulgences? In answering these questions, it becomes clear that one possible future for luxury is about crafting unforgettable moments that resonate on an emotional, personal, and perhaps physical and carnal level as well.

From the Impact of Inflation and Economic Context…

Inflation, currently at 3.7% in the U.S. as of September 2024, and the broader economic context have played a critical role in reshaping consumer behaviors across the luxury sector. With rising costs of goods—driven by global inflation rates, which have averaged 5% globally over the past year—luxury consumers, particularly those on the aspirational side of the spectrum, are being forced to make trade-offs. These individuals—often not among the ultra-wealthy but affluent enough to engage with luxury brands—must decide between splurging on high-end goods or allocating their spending toward experiences. For many of these aspirational consumers, experiences like travel, hotel stays, and gastronomic indulgences offer a more affordable and rewarding form of luxury compared to traditional goods like designer handbags or fine jewelry. In 2023, for example, global travel spending surged by 7%, surpassing $9 trillion, as consumers shifted focus away from luxury goods to experience-driven purchases. Travel and hospitality, for instance, provide an immediate and personal sense of luxury that tangible goods might not offer in times of economic uncertainty. Furthermore, experiences offer a broader sense of value because they create memories that linger, making customers feel as though they’ve invested in something more meaningful. At a time when inflation erodes the purchasing power of even affluent consumers—real wages, for instance, increased by only 0.5% in the U.S. over the past year—the perceived value of experiences can surpass that of material goods. A luxury vacation or a bespoke dining experience not only delivers immediate emotional satisfaction but also fosters a sense of escapism, which becomes more valuable in challenging economic environments.

…To Structural Shifts in Luxury Consumption?

It is easily understandable that, after Covid-19, luxury brands could not resist the temptation of leveraging their pricing power to drastically increase the price of their iconic products. Increasing margins to invest and prepare for a more uncertain future. Yet, some might have reached a tipping point: some prices have risen too fast and too high for too long. Creating a kind of violent backlash.

Even luxury customers are consumers: they ask themselves basic questions about value for money… Is it worth it? I believe the pricing question has been a trigger. A trigger for luxury customers to start prioritizing experiences over material goods.

Experiences are seen as a gateway to personal fulfillment and an opportunity to explore one's identity. It must be said that social media play a pivotal role in this shift. Platforms like Instagram and TikTok have transformed how consumers engage with luxury, placing a greater emphasis on experiences that can be easily shared and displayed to a global audience. A vacation in a five-star resort or dining at a Michelin-starred restaurant becomes a form of luxury expression that feels more personal, authentic, and memorable than simply showcasing a new handbag. Consumers are now more inclined to spend money on experiences that are unique and that can be shared with their online networks, thereby creating a public, albeit curated, display of their taste and affluence. Moreover, experiences offer both emotional and physical satisfaction that material goods sometimes cannot replicate. The tactile pleasure of a luxury hotel stay, or a spa visit provides immediate comfort and indulgence, which fulfills consumers' desire for sensory richness. Such experiences are often associated with relaxation and rejuvenation, which have become key aspirations in the modern luxury market.

The Evolution of Luxury Goods’ Perception?

The traditional allure of luxury goods as status symbols is undergoing a transformation. Increasingly, luxury items are seen not just as markers of wealth and prestige but as investments. The rise of resale platforms such as The RealReal and Vestiaire Collective has encouraged consumers to view their purchases through a lens of practicality and long-term value rather than fantasy and indulgence. Alongside this consumer shift, the industry has also seen a broader structural change. Many elements of luxury have evolved, from marketing strategies to consumer behavior, yet some of the most iconic products, like the Birkin bag or classic timepieces, have remained steadfast symbols of the industry's timelessness. This juxtaposition raises questions about whether the luxury industry has, in some ways, lost its aspirational essence. In the past, luxury goods were typically celebrated for their beauty and artistry—crafted not just for practicality but for the sake of artistic excellence. As consumers become more pragmatic, buying luxury goods for resale value rather than pure enjoyment, the industry risks losing some of its emotional and creative allure. Luxury, at its core, has always been about the creation of dreams. But when consumers start to buy goods with an eye on resale, that dreamy, almost ethereal quality of luxury begins to fade. A few are aware of this risk such as Rolex CEO, Jean-Frédéric Dufour. In April 2024, he said in an interview with NZZ Magazine: “We make products, not investments”. And insisted in an interview with Business of Fashion: “I don’t like it when people compare watches with stocks. This sends the wrong message and is dangerous.” The challenge for brands now is to reclaim this sense of fantasy, even as they embrace the evolving market dynamics. In a way: how to find what scratches the itch?

Reclaiming the Ephemeral and the Unique?

In response to the evolving expectations of consumers, the luxury industry is increasingly returning to its roots by emphasizing ephemeral experiences. Unique, once-in-a-lifetime offerings—such as space travel or bespoke culinary journeys—are becoming the new frontier of luxury. But how do we change the new frontier? The focus is shifting from the physical ownership of goods to the curation of exclusive, indulgent moments, creating a shift in consumer aspirations. Today’s trends echo the luxury market of the 1960s, when the democratization of high fashion began to blur the lines of exclusivity, diluting the value of what was once reserved for the elite. Now, we’re seeing a similar risk: lifestyle luxury, with its wide accessibility, threatens to dilute the essence of what luxury represents. The challenge for brands today is to maintain their allure of exclusivity in the face of mass-market exposure. Digital technology plays a key role in this evolution, enabling consumers to preserve and relive fleeting experiences through high-quality photography, video content, and digital memory tools. As a result, luxury is evolving from something traditionally owned to something shared and immortalized, but in doing so, it risks becoming ubiquitous, further diluting the brand's perceived value. The task for brands is to redefine the boundaries of luxury while maintaining its core values of rarity and exclusivity.

?Luxury Brands Adapting to the Experience Economy with a Long-Term Vision

As the luxury market evolves, many brands are expanding into the experience economy to meet the shifting desires of consumers. High-end fashion houses and jewelry brands, once focused solely on physical goods, are diversifying into hospitality, travel, and wellness ventures. Bulgari has launched a chain of luxury hotels, while Louis Vuitton has invested in hospitality initiatives that offer immersive brand experiences. Similarly, Dior has ventured into the wellness space with exclusive spas, and LVMH, with its acquisition of the Belmond train and hotel group, is creating synergies between its luxury goods and hospitality offerings. However, this pivot presents unique challenges for luxury brands. Unlike high-margin products such as watches and handbags, the hospitality and travel sectors operate on slimmer profit margins. This forces brands to think creatively about how to maintain the exclusivity and prestige associated with luxury while expanding into lower-margin industries.

?Experiences as the Ultimate Expression of Luxury with Purpose

Luxury experiences are evolving into the ultimate form of indulgence, transcending the material and creating what can be termed “new luxury liturgies.” These are rituals and curated moments that elevate the luxury brand experience to something almost spiritual. Whether it's a luxury retreat, a secluded island getaway, or an immersive art installation, these experiences offer consumers the chance to participate in an exclusive world that exists purely for their indulgence.

In this evolving landscape, it is essential that luxury brands clearly define their purpose and ensure that each experience offered aligns with their long-term vision. This clarity will not only deepen the brand’s connection with its consumers but will also solidify its presence in a competitive market. The future of luxury could see a return to pure, unproductive extravagance—experiences that exist not to serve any material utility but to provide moments of sheer, unadulterated pleasure. This shift could reconnect the luxury industry with its historical roots in fantasy, opulence, and exclusivity, while ensuring that brands remain true to their core identity.

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No doubt, the luxury market is at a turning point. As customers increasingly favor experiences over material possessions, the industry must adapt by crafting ephemeral, emotion-driven moments that transcend the physical and linger in memory. Luxury, at its best, has always been about more than owning beautiful objects—it has been about creating a sense of transcendence and exclusivity that resonates on a deeply personal level. By mastering the art of experiences, luxury brands have the opportunity to not just sell products but to create lasting impressions that go beyond material goods. This shift toward experiences marks a return to the timeless essence of luxury: the art of creating moments that captivate, inspire, and endure.