Eco-Focus Drives Luxury Market
Consumer focus on sustainability is fueling today’s luxury sector.
In fact, 75% of affluent Americans say they would pay more for an eco-friendly and sustainable brand, according to luxury consulting company Agility Research & Strategy’s TrendLens survey released in April 2022. When it comes to Gen-Z respondents, 58% say they prefer recycled products, according to financial services company Cowen’s July 2021 Intern Survey, which also found that 56% want greener transport. On top of this, Coresight Research cited sustainability as one of the top five forces in its RESET Framework of important retail trends for 2022 and beyond.
The luxury consumer is changing, with Gen Z and millennials making up a large portion of the sector, says Hemant Kalbag, managing director, Alvarez & Marsal Consumer Retail Group, a professional services firm. “Millennials and Gen Z are much more motivated by sustainability as part of that decision-making, versus Gen X. That’s having an impact on how companies need to think about luxury goods.”
Consumers are expecting to find eco-friendly products, spurring companies to make directional changes, Kalbag says. But “we're probably still maybe five to seven years away from that translating into full transparency between a manufacturer for luxury goods and the information that's available to a consumer,” he says.
Designers are responding to growing consumer interest in the environment by offering green-friendly handbags, homes, cars, watches, and yachts. “The sustainable home is becoming the norm,” says Milton Pedraza, founder and CEO of research, consulting, and education firm Luxury Institute. “Wealthy people are demanding that they get that from homebuilders, and when they refurbish or renovate homes, they’re installing those kinds of very energy efficient, aesthetically pleasing, sustainable kinds of products.”
Large technology companies are getting in on the action. Samsung, for example, is rolling out its Bespoke Home collection, which offers “everyday sustainability” encompassing usage, production, delivery, and disposal. The company announced efforts to reduce soil contamination within its factories and recycle liquid waste into reusable fuels. Pedraza describes Samsung’s move as “impressive energy savings for that great feeling that, ‘I am using appliances and products that are better for the environment: My footprint as a wealthy individual, as a high net worth individual, has just decreased significantly.”
When it comes to shopping, Coach—part of the larger Tapestry brand—has launched a (Re)Loved program, which offers bags that have been upcrafted, plus restored and vintage and modern bags, and Michael Kors has a Pre-Loved program. High-end resellers The RealReal, REBAG and Fashionphile are going strong, too.
On the high-end accessories side, companies such as Tom Ford, Oris and Tag Heuer have unveiled recycled or eco-friendly luxury watches, often teaming with groups focus on the environment. For example, Oris now has a Clean Ocean Limited Edition piece in partnership with Pacific Garbage Screening, an organization dedicated to cleaner oceans and rivers.
Hypercars are ramping up efforts as well. “Our research shows that HNW and UHNW individuals and families desire and require ultra-luxury products that meet the standards of uniqueness as well as sustainability,” Pedraza says. “Electric-powered hypercars meet those two requirements handily. The Bugattis, Ferrari, and Lamborghini, all of them are going electric,” Pedraza says. Everyday luxury cars such as Mercedes, Audis, Porsche, and BMWs are offering hybrid and electric models. “Many of these products do work better, and they make you feel better,” he says.
Private yachts are getting an eco-facelift too, Pedraza says. The X30 Villa by Extra Yachts, for example, uses a hybrid propulsion system to significantly reduce CO2 emissions, solar panels to produce clean energy, and the design features sustainable materials such as reclaimed woods. “Either they’re trying to use materials that are sustainable to build and for the furniture inside—like recycled wood—or they're trying to create energy efficiency like using solar, wind, whatever they can fit into that space,” Pedraza says.
Yacht-owners are often willing to use their purchases for a worthy cause, by adding technology that follows marine life. “It gives scientists data so that they can track global warming, ocean warming, elements in the water, and having many yachts like this, you create a picture of some ecosystem,” Pedraza says. “That at least validates you as being better than just a polluter or consumer at the yacht experience.”
Image: An ultra-rare 1955 Mercedes-Benz 300 SLR Uhlenhaut Coupé sold for US$143 million in Germany in May 2022
Luxury Boutiques Open Across the U.S.
Luxury shops are increasing their presence across the country as wealth spreads into new areas, and beyond large metropolitan cities.
High-net-worth buyers migrated to new U.S. locations during the pandemic, leading luxury brands to pop open fresh boutiques to meet the new opportunities. Paris-based luxury juggernaut Kering, for example, plans to open more than 30 U.S. stores over the next couple of years. It launched a Gucci store in Detroit during the summer of 2022, and plans more Gucci boutiques in St. Louis and New Orleans, as well as a Saint Laurent store in Detroit, too, according to reports. And Prada is opening new shops, mainly in Texas, Michigan, and Florida.
“We are definitely seeing the luxury brands speak to growing their store base in America,” says Marie Driscoll, luxury retail analyst and managing director, luxury and retail, Coresight Research.
Shops are going beyond flagship locations and opening new spaces where they can personalize offerings to the customer, she says.
More time spent at home during the pandemic led brands to being able to see where new business was coming from, Kalbag says. “During the pandemic, a very significant portion of luxury consumption shifted online, and what that allows manufacturers and retailers to do is to trace demand much more clearly,” he says.
“If you want to drive growth, you have to think about other markets where luxury consumers exist,” Kalbag says.
Also, one store opening easily leads to more stores opening. When Hermes moved out of Bal Harbour, Florida, about a decade ago and moved into the Miami Design District shortly afterward, the design district was anointed, Pedraza says. And many other top brands followed shortly afterward. “People are moving. So what are luxury brands doing? Following them,” he says.
Ethical Responsibility & Sustainability
Significantly more affluent buyers care that the brands they buy are ethically responsible, and prefer a more sustainable, eco-friendly brand even if it costs more, according to Agility Research & Strategy’s TrendLens research.
2022
of buyers that care that the brands they buy are ethically responsible
of buyers that will choose a brand that costs more if it's eco-friendly and sustainable
2021
of buyers that care that the brands they buy are ethically responsible
of buyers that will choose a brand that costs more if it's eco-friendly and sustainable
Source: Agility Research & Strategy
Luxury Market Reaches New Heights
New highs were achieved in the luxury market in 2022 as global collectors sought exceptional works while exploring new areas of the market, says Josh Pullan, head of global luxury, Sotheby’s. “We saw record first half sales total $4.3 billion [in 2022], up 23% on H1 2021, with core luxury auction sales also seeing an increase of 20% year over year.”
Among the many new highs: The Williamson Pink Star, one of the purest, pinkest diamonds ever to appear at auction, sold for US$58 million in 2022, a record price per carat for any diamond or gemstone. And globally renowned watch designer Gerald Genta’s personal Audemars Piguet Royal Oak soared to US$2.1 million in Geneva, becoming the most valuable vintage Audemars Piguet watch ever sold at auction.
“In an increasingly globalized world, people are looking for rare and unique objects with a story to tell,” Pullan says. “They are often drawn to objects with provenance, emblematic of a period, and displaying exceptional materials and craftsmanship.”
Pullan notes record levels of buyers under 40 years old. “This next generation is fueling sales both in new categories recently launched by Sotheby’s—Streetwear and Modern Collectibles, where they represent 65% of total buyers—and also in classic luxury collectibles too,” he says. This includes watches, where they represent 39% of buyers, wine & spirits (29%), and jewelry (23%).
The pandemic also drove an expansion of Web and mobile platforms, and a shift to a hybrid livestream auction format, Pullan notes. “We were the first to market with this in June 2020,” he says. “This combined with on-ground experiences enhanced with state-of-the art technology, has dramatically expanded our access to an unprecedented number of participants.”
And Sotheby’s is a big believer in the power of Web 3.0. “The day where physical art and luxury objects are somehow recorded and supported by a token on the blockchain is coming soon,” he says. “Tools such as blockchain have the potential to significantly reduce the opacity and complexity for new buyers of art and luxury.”
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