Emotional connection is the top driver of luxury brand desirability in both the US and China— above craftsmanship, heritage and logo recognition, The State of Fashion report published by BoF and McKinsey found.
Luxury clients in both are growing sceptical of artificial scarcity: In China, bespoke service is the top driver of exclusivity, while in the US, early access and loyalty rewards outrank waitlists.
China and the United States will drive much of the sector’s growth.
Valued at around $130 billion, the United States is the world’s largest luxury market, projected to grow by as much as 5 per cent annually till 2030.
China’s $60-billion high-end market is expected to recover and outpace other major regions, expanding by as much as 6 per cent a year.
However, rekindling growth will not come easily for many brands. Since emerging from the pandemic, and the winding down of the spending frenzy that followed, luxury clients have realigned their priorities. They have become more discerning about the brands and products they are willing to buy.
Growth in experiences like travel is overtaking product purchases, while inflation has dampened appetite for fashion, including handbags. Price hikes from leading fashion brands during boom times—often without corresponding product innovation—turned off clients across the spectrum, particularly at the aspirational level, according to an article on the report by BoF Insights, BoF’s in-house consultancy.
As the post-pandemic euphoria began to fade, brands sought to insulate their businesses from choppy trading conditions by focusing attention on ultra-wealthy customers. But as they focused on clients most immune from economic headwinds, many brands lost track of lower-tier clients and failed to give them a reason to visit stores. These customers, a critical base for the sector, ended up turning away in droves, the report notes.
For clients in both China and the United States, emotional connection has emerged as the leading driver of luxury purchases. As clients become more selective, they are most drawn to brands that resonate personally and reflect their tastes and values. Heritage and brand history, meanwhile, are playing a less important role.
While clients in China look to brands more as a means of external expression, their US counterparts are more interested in self-reward, gravitating most to brands that share their values.
In the United States, 68 per cent of luxury clients say challenger brands best reflect who they are, outpacing legacy houses; in China, legacy brands—both global and homegrown—continue to carry greater emotional weight, with 69 per cent of clients saying they best reflect their identity.
Luxury clients across both markets are growing sceptical of artificial scarcity: In China, bespoke service has emerged as the top driver of exclusivity, while in the United States, early access and loyalty rewards outrank waitlists.
Drilling down to the shopping experience, physical stores play a strong role in motivating all ranges of clients in China — especially at the entry-level, highlighting the central role of retail when it comes to reaching aspirational clients.
For US clients, poor retail experiences are proving to be a major pain point, with pushy sales tactics and long queues turning off clients — highlighting a critical area for improvement.
The report uncovered rising use of artificial intelligence (AI) and resale channels to shop for luxury products. More US customers are looking to AI for inspiration than in China, where entry-level clients are most engaged with AI across the shopping journey, from discovery to deciding on a purchase.
Second-hand channels are also playing an increasingly important role, for higher-spending clients in the US in particular, motivating shoppers with the ‘thrill of the hunt’ as much as bargains, the report adds.
Fibre2Fashion News Desk (DS)
