With the Covid-19 pandemic closing top-end stores and decimating international travel, 2020 is set to be the worst year for the global luxury market in modern history. Yet a new book called “Future Luxe: What’s Ahead for the Business of Luxury” by Erwan Rambourg is optimistic.
Among the book’s insights into the next decade are that health will become the ultimate luxury, and that sellers of handbags, shoes and watches will face competition from a new breed of upmarket goods, including cannabis.
Rambourg, who has spent 25 years in the industry and is currently HSBC’s global head of consumer and retail research, also predicts a shakeout in the ownership of luxury goods groups. By 2030, he expects LVMH Moet Hennessy Louis Vuitton SE to hold 90 to 100 brands, up from 76 today — or 77 if it follows through with its offer to buy U.S. diamond jeweler Tiffany & Co. By contrast, many smaller competitors will merge, go out of business, be bought or, in some cases, such as puffer-jacket maker Moncler SpA, acquire others. Amid slower growth for so-called accessible luxury handbags, he expects ownership of the Michael Kors, Coach and Tory Burch brands to change in the next 10 years.
I caught up with him to discuss the future of luxury. The following is a lightly edited transcript of our conversation.
Andrea Felsted: This year will be the worst for the luxury industry in modern history. Yet your book paints an upbeat picture.
Erwan Rambourg: There is already evidence of a very strong rebound, in mainland China, but more recently in the U.S. Part of it is artificial and short-term because it is pent-up demand, or revenge purchasing. But part of it is more fundamental. You are not spending a lot on what you used to spend on, such as vacations and going out to restaurants. There is this psychological, almost survival spending. I have gone through this. It has been tough. It has been at times depressing. It has been a bit nerve-wracking. Let’s reward ourselves.
AF: One of the things that struck me the most in the book is the chapter on health. After the Covid-19 crisis, could health become the ultimate luxury?
ER: We have had a lot of people seeing health as the new wealth. For the time being, the overlap with luxury is more in streetwear and sneakers. Could an LVMH or a Kering SA invest in premium health-oriented companies? You could look at Lululemon Athletica Inc. buying Mirror, a company that helps you stay fit at home. The example of Equinox Group is a good one. Equinox is now at the border of health and hospitality and is also well positioned to benefit from premiumization, and the aspiration of wealthy individuals to be healthy in bodies and minds — part of the health-is-the-new-wealth movement. For the next 10 years, travel is not dead, hospitality is not going to be dead. Health is going to be a great compounding growth sector if there is a way to combine them. In the book I also talk about LVMH’s mission to redefine what luxury should be in the next 10 years. There are not a lot of taboos.
AF: Could that include cannabis? You predict that it will become one of the fastest-growing categories.
ER: It’s very unlikely that the luxury brands will invest, mostly for issues of regulation. But in some streets in Los Angeles, cannabis companies are competing with luxury companies for locations, for staff and for share of wallet. And you have high-end developments, such as food and wine and cannabis combinations. There is cannabis oil, which is being aged a bit like whiskey and cognac. All of these theoretically can take away some money which would have been spent on luxury brands.