What to Watch: Why Luxury Still Has a Bright Future — in Spite of It All
Analyst Erwan Rambourg spells out his case in his latest book, "Future Luxe."
Analyst Erwan Rambourg spells out his case in his latest book, "Future Luxe."
By Miles Socha on August 31, 2020
Luxury analyst Erwan Rambourg likes to be the contrarian.
When Chinese authorities clamped down on corporate gifting as part of an anticorruption campaign back in 2012, putting a serious dent in consumption of high-end watches and liquors in the ensuing years, Rambourg came out with “The Bling Dynasty,” a book arguing that the fundamentals for continued luxury expansion in China remained intact.
His latest tome, “Future Luxe,” out from Vancouver-based Figure 1 Publishing on Sept. 22, takes a similar tack, looking beyond the colossal clobbering of luxury revenues and profits during the coronavirus pandemic to paint an unabashedly bright future for the sector.
“The point is that COVID-19 for luxury has been a phenomenal accelerator of trends and there are many silver linings to the crisis,” he said in an interview.
While Rambourg had to amend many sections of the book to reflect the impact of the health crisis, “there is not a long-term trend described in the book that I have added — or would have scrapped — because of the pandemic.”
Managing director and global head of consumer and retail equity research at HSBC, the analyst contends “we are witnessing an era of ‘premiumization of everything’ as life is fragile, and consumers around the world are becoming more inclined to reward themselves.”
This is even chipping away the “guilt” factor, which has been an impediment to premium consumption in the U.S.
“So-called ‘revenge buying,’ which started in mainland China very rapidly after COVID-19 came under control and as early as late March this year was a tangible reason not to temper enthusiasm about future prospects,” he explained. “This is not to say that brands will not have to change the way they produce, distribute and communicate, but the appetite for luxury, especially with the younger generation, is alive and kicking.”
Rambourg allows that the crisis raised a lot of question marks around luxury. Yet he tends to fundamentally disagree with many commentators.
“The future of luxury will be online? I don’t think so. The crisis will enable niche companies to emerge easily? I trust that, on the contrary, corporate Darwinism will accelerate and the big will become bigger. Travel-retail will become an obsolete channel? Not in my book,” he said.
In his view, many investors and naysayers “miss the point that the luxury sector is one of recruitment, not repeat purchases.”
“Most luxury products at Louis Vuitton, Moncler or Cartier are being bought by first-time purchasers,” he explained. “There remains a phenomenal reservoir of these first-time purchasers and it is likely one of the reasons why luxury sales tend to be stronger than expected in good times and more resilient than people would think in tough times.”
The book opens with a forward by François-Henri Pinault, chairman and chief executive officer of Kering, who writes that people buy luxury products “to assert themselves and to express their unique personalities….It’s also about choosing a style, an aesthetic, an attitude.”
Rambourg wrote most of his new book in 2019, and now believes the crisis will only accelerate existing trends underpinning continued luxury expansion.
In his view, luxury serves profound needs and desires. “Luxury is about belonging, culture and meaning,” he writes. “The main goal of this book is to explain how the luxury industry has great growth potential ahead despite the recent hiccups and offer some predictions on the changes that will accompany that growth.”
The 240-page tome unfurls plenty of data, but Rambourg keeps things lively by quoting literature, historical figures, modern luxury titans — and by sharing his wry sense of humor.
“I used to work in marketing functions at LVMH and Richemont and I have kept from those days the glass-half-full view of the world that most luxury managers tend to have,” he said. “At the end of the day, premium consumption is really linked to human nature and the willingness to fit into society.”
One of Rambourg’s most surprising arguments is that the next big luxury client is not from some new, emerging market, like the BRIC countries of yore.
“The biggest opportunity for luxury in my view is with female purchases, regardless of the country,” he said. “The future is female for luxury and that is for me the main ’emerging market’ to focus on.”
According to him, a “combination of economic as well as social factors should greatly support spending means of women, which in turn will imply greater sales for premium items today and over the next decade.”