LUXURY AND TECHNOLOGY: The Beginning of a New Era

Le Comité Colbert and Bain & Company present the results of a new analysis

• The global luxury goods industry is accelerating its adoption of new technologies. While adoption is increasing from past low levels, its pace is accelerating, with increased testing among luxury houses and a cultural transformation bringing down barriers to technology

• Benefits of new technology in the luxury sector include enhance customer engagement, improved operational performance and a reduced carbon footprint as pressure for ESG commitments rises across sectors

• Luxury houses that are part of a group have a head start, having already adopted twice as many technologies, on average, as independent rivals, while being in the process of testing or planning to deploy 1.3x more technology in the next three years

The global luxury goods industry is accelerating its adoption of new technologies, with benefits being seen in increased fluidity of customer relations, operational excellence and reduction of the industry’s carbon footprint, according to a new analysis released today by Bain & Company for the Comité Colbert.

While the study finds that luxury sector houses and companies backed by a larger group are ahead of their independent counterparts, it also reports that companies across the industry are testing additional technologies, or plan to do so in the next three years. And, for certain technologies, luxury is now a pioneer.

Today’s report concludes that the acceleration of this technological adoption in the luxury industry will require three essential levers: a cultural and organizational revolution within luxury houses and businesses; a pooling of strengths; and an openness to technological advances in other sectors.

The study is based on data from 75 member companies of the Comité Colbert and interviews with senior company executives, consortia and technological partners, as well as additional research and analysis from Bain & Company’s deep expertise in the luxury sector. Among key findings are:

In the luxury sector, a wave of acceleration is underway to adopt new technologies

The level of adoption is still low, but barriers are beginning to fall:

• On average, the member companies of the Comité Colbert surveyed for this study have adopted 2.3 new technologies among the 16 technologies selected for the analysis. (These include: biotechnologies, molecular recycling, 3D printing, artificial intelligence and machine learning for process optimization, artificial intelligence and machine learning for customer engagement, augmented reality and virtual reality, automated optical inspection, scanning, 3D imaging, holography, neural analysis, haptic gloves and screens, radio frequency identification, blockchain, metaverse, NFT).

• None of these technologies have been adopted by the majority of the sector. And only RFID, 3D printing and imaging have an adoption rate of over 30%.

• The perceived limited relevance of certain technologies to specific needs of luxury companies is the reason cited in almost half of the cases of non-adoption. This is followed by a lack of in-house skills to leverage the technology involved.

• Historical obstacles, such as incompatibility with the “DNA” of the luxury industry, or insufficient quality of the technological experience are rarely cited, underlining the cultural transformation of the sector that is taking place, and the qualitative progress of the technologies analysed.

Adoption is accelerating but disparities in pace and scope remain

• On average, luxury houses are currently testing (or plan to deploy in the next three years) 3.2 additional technologies. These tests concern all technologies, especially the most emerging ones: NFT, metaverse, blockchain, holography, haptic gloves and screens, neural analysis, and scanner technology.

• The houses backed by a larger group have adopted on average 2.1 times more technologies than their independent competitors.

• It is in the most recent technologies where these imbalances are greatest. On the other hand, for the most mature technologies, the independent companies have now caught up and have adoption rates close to those of the companies backed by a larger group.

Growing interest in technology aims to support three key strategic objectives: customer engagement, operational excellence and sustainability

• Customer engagement is the primary focus of technology adoption

• Customer engagement is by far the most important focus for luxury goods companies when it comes to new technologies. The rise of the Chinese market and then the Covid crisis have accelerated the deployment of technologies that personalise and enrich distance selling experiences, omni-channel and immersion in the world of brands (notably 3D imaging, augmented and virtual reality, artificial intelligence).

• From being a follower, the luxury sector is becoming a “leader” in this area. Despite a late start and thanks to its efforts to catch up, the technological adoption of luxury in the service of customer engagement is at the dawn of a third phase: the one that makes luxury a pioneer. For example, Yves Saint Laurent Beauté, which is far ahead in the field of neuroscience, has developed a technology for analysing neuronal reactions in the presence of different scents, which allows for the hyper-personalization of recommendations based on the unconscious as the ultimate expression of intimacy.

NFTs and metaverse are the technologies that are generating the most interest in the future; NFTs are proposing a new CRM model and metaverse a new immersive universe. Adopted by only 5% of pioneers to date, NFTs could be deployed massively in the years to come: 51% of the luxury industry is already in the testing phase or planning launches before 2025. This is the highest level of projection, all technologies combined (up to 67% for the major houses).

• Growing interest in technologies serving operational excellence

• Within this group, radio frequency identification (RFID) technology is the most adopted. Blockchain, which allows end-to-end product traceability, is the primary focus of experimentations (39% of the companies in the test phase). This is followed by artificial intelligence (29% in the test phase), aimed at optimising stock allocation, supply chain fluidity and collection structures.

• Sustainability as the third key objective

• New technologies are not yet fully perceived as catalysts for reducing firms’ carbon footprint, as companies are also focusing on other action levers.

• However, experimentations are multiplying at various stages of the value chain (e.g. use of biotechnologies to create new eco-friendly materials and manufacturing processes as an alternative to animal materials).

• The adoption of technologies for operational excellence also contributes to accelerating the eco-responsibility efforts of luxury. Anticipation technologies enabling demand to be forecast and stock to be better managed (artificial intelligence integrated into sales forecasts to produce as accurately as possible, virtual twins of operations, etc) have an effect on the environmental footprint by avoiding overproduction, overstocking, overconsumption, and waste.

“The adoption of new technologies in the luxury industry is still in its infancy. They can play a central role in the profound transformation of the sector: at the service of customers, operational excellence and sustainable development. The fields of application to be explored are still numerous and promising. The pooling of forces across the sector will be a powerful accelerator,” said Mathilde Haemmerlé, partner in charge of the Luxury Goods practice at Bain & Company in Paris.

“Creativity and an interest in novelty have always been essential characteristics of the luxury business model. Its ability to integrate new technologies in line with its own requirements is a testament to the great vitality and agility of our sector. This acceleration will contribute to making luxury a pioneer in technological innovation, as it already is in non-technological innovation. It is this dynamic that the Comité Colbert, as a centre of expertise, wanted to better understand, for the benefit of its members, within the framework of this study carried out with Bain & Company,” added Bénédicte Épinay, General Delegate of the Comité Colbert.