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Luxury industry – investing and innovating to meet future demand

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Luxury will hardly ever be a sector where you can launch a brand and be instantly successful, say Scilla Huang Sun (pictured) and Andrea Gerst, managers of the Julius Baer Luxury Brands Fund, Swiss & Global Asset Management…

Brands need a strong heritage but also need to innovate to stay ahead of the curve and gain market share. Companies are responding to men’s increasing interest in luxury products, where growth is outpacing that of the women’s market. Brands like Hermès, Burberry and Gucci more and more open dedicated men’s stores around the World. Men are particularly interested in high-end casual wear, accessories and cosmetics, and demand is growing most noticeably in China and the US.

Luxury brands have been investing heavily in multichannel retail strategies as they seek to capitalise on the growth in digitally literate, social media savvy consumers who are looking for convenience and efficiency to complement the luxury experience. This has allowed firms to align their offering across different geographies and increase availability, with large-scale developments in e-commerce platforms helping to extend brands’ reach.

Luxury brands have not been traditionally known as leaders in the field of technology but e-commerce has changed the retail landscape in terms of distribution and brand promotion. Burberry is a good example of a successful digital strategy. This is an important part of appealing to a new, younger clientele, including the 30-40s, who are important luxury spenders.

Enhancing online presence is one key area of investment; companies are also investing in production and physical stores to ensure long term success. Investment in stores includes both new stores in emerging markets and refurbishment of existing stores in Europe and the US. This is to ensure that consumers have a consistent, modern shopping experience wherever they are shopping. In terms of production, companies such as Hermes and Richemont are investing here to meet future demand.

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