Luxury is no longer defined only by what we own.
Experiences Are Redefining Luxury
For many affluent consumers, the next luxury purchase may not be a watch, a handbag or a piece of jewellery.
Instead, it could be a journey, a stay at an exceptional hotel or a memorable meal. It might also be a wellness retreat, a personalised service or simply more control over one’s time.
This shift is changing the competitive landscape.
A handbag no longer competes only with another handbag. Today, a watch may compete with a week in Japan or a stay at a discreet hotel.
Luxury goods remain desirable. However, they now share consumers’ discretionary budgets with experiences that can feel equally exclusive and often more personal.
The Limits of Pricing Power
This transformation follows several years in which price increases drove much of the luxury sector’s growth.
According to McKinsey, more than 80% of luxury-sector growth between 2019 and 2023 came from higher prices rather than higher volumes.
This demonstrates remarkable pricing power. However, raising prices is not the same as expanding the customer base.
Indeed, prices cannot continue to rise faster than perceived quality, service or exclusivity indefinitely.
Even affluent consumers may eventually question what they are paying for. Are they receiving something genuinely better? Or are they simply paying more because the brand believes they will?
Why Scarcity Still Matters
In this environment, scarcity matters more than ever.
True luxury retains an element of difficulty. It may involve exceptional craftsmanship, a hard-to-obtain watch or a bespoke creation.
A rare vintage piece or privileged access to something unique can also represent this exclusivity.
For investors, the tension is clear.
Luxury companies need growth. Yet excessive accessibility can weaken the exclusivity that supports their economics.
Therefore, the strongest brands may be those that can expand without becoming commonplace.
A Broader Competitive Landscape
Meanwhile, luxury brands face an increasingly diverse range of competitors.
Travel, hospitality, wellness, personalised services, privacy and privileged access all compete for affluent consumers’ discretionary spending.
Even time itself has become a form of luxury.
Traditional luxury brands are not disappearing. The strongest houses will continue to command desirability and pricing power.
They will simply have to share the pie.
What Does This Mean for Investors?
For investors, this shift raises an important question.
How much of affluent consumers’ budgets will remain allocated to traditional luxury goods? And how much will move towards experiences and services?
This changing balance will therefore matter when assessing future growth, margins and valuations.
Ultimately, the question is no longer only which luxury brand is strongest.
It is also how much of tomorrow’s luxury will exist beyond the brand.
This communication is provided for information purposes only and does not constitute investment advice, an offer, or a personal recommendation. Past performance is not a guide to future results. Prospective investors should review the fund’s full documentation and seek independent advice appropriate to their circumstances before investing.