PARIS – Luxury brands are increasingly adopting new technologies, led by NFTs and the metaverse, but will need a concerted approach in order to attract top talents and make advanced applications available to smaller players, a new study recommends.
While luxury brands remain relatively technology-adverse, the sector is on the cusp of a revolution that will see more widespread adoption of everything from artifical intelligence to blockchain and 3D imaging, said the report, titled “Luxury and Technology: the Beginnings of a New Era” and published on Thursday by French luxury association Comité Colbert and management consulting firm Bain & Company.
“This is a key moment in the technological revolution for the luxury sector,” the report said. “The adoption of new technologies in the luxury sector is a long-term trend and it’s important to lay the foundations today that will allow it to preserve and increase its desirability in a rapidly changing environment.”
The report identified 16 technologies and questioned executives from companies including LVMH Moët Hennessy Louis Vuitton, Compagnie Financière Richemont, Kering, Chanel and Balmain on their development plans for the next three years.
While houses have adopted on average only 2.3 technologies out of the 16 mentioned in the study, they are testing on average 3.2 additional technologies, or plan to do so in the next three years.
“There is no single technology today that has been universally adopted by luxury brands,” Joëlle de Montgolfier, vice president of global consumer products, retail and luxury practices at Bain, said at a press conference. She contrasted this with the example of RFID, which is used by more than two-thirds of high street retailers.
While most efforts are focused on client engagement, luxury firms are also investing and innovating in operational excellence, a term which covers issues such as inventory management and product traceability, and sustainable development. These have the potential to sharply reduce the carbon footprint of luxury goods.
More than half of respondents plan to become involved with the metaverse and NFTs, making them by far the dominant technological trends between now and 2025, and positioning luxury brands at the forefront of the Web3 revolution.
“Despite playing catch-up, we are probably at the dawn of a third phase in the adoption of technology in the service of customer engagement in the luxury industry: the moment when the sector takes the lead on innovation, explores new fields, pointing the future direction; the moment when luxury has the potential to be pioneering – that is to say aspirational – and seen as a case study across all industries,” the report said.
Use of 3D imaging is already widespread, with 45 percent of luxury firms having embraced the technology, and the rate of adoption of virtual reality and augmented reality is set to double in the next three years.
Nascent technologies include neuronal analysis, which is being tested by beauty firms to help narrow down perfume recommendations; holography, which can be used to stage virtual events including fashion shows, and molecular recycling, utilized in the production of new materials.
These trends are fueled by Chinese consumers, who use online platforms to access personalized and exclusive products and experiences, and the coronavirus pandemic, which has accelerated the growth of e-commerce. Online sales are expected to account for 28 percent to 30 percent of personal luxury goods sales by 2025, versus 12 percent in 2019, the report said.
Among the hurdles cited by companies is a lack of internal know-how, linked to the industry’s historic focus on design, craftsmanship and marketing, with 37 percent of companies saying they lacked the talents to support their technological ambitions.
“If the industry wants to overcome this barrier, it will have to work on making itself more attractive to a target audience it doesn’t know very well,” de Montgolfier said, suggesting that one way to nurture these professions is through industry-led incubators.
Brands that belong to a luxury group adopt twice as many technologies on average as independents. “They benefit not only from a stimulating environment, but also from synergies in investments,” the report said.
In order to keep pace with technological developments, companies will have to find ways to attract tech experts; reorganize their departments to improve information-sharing, and train sales associates to integrate new technologies into their client relationships, the study recommended.
“Big luxury groups also have an important role in driving the industry as a whole, and helping the smaller houses understand the technological challenges ahead. The creation of consortiums setting standards by the luxury industry for the luxury industry is a virtuous way to support both small and large houses in the adoption of technology,” Comité Colbert and Bain said.
One example is the Aura Blockchain Consortium, established by LVMH, Richemont and Prada last year, with the aim of promoting the use of a single blockchain solution open to all luxury brands worldwide to help consumers trace the provenance and authenticity of luxury goods.