Global markets for luxury are forecasted to continue to grow at round 7 percent a year, according to Boston Consulting Group. Yet, luxury markets risk being half a step behind the markets they are meant to serve as shoppers and the retail landscape change in dramatic ways. These challenges were behind a new report by BCG, Shock of the New Chic: Dealing with New Complexity in the Business of Luxury, which found that consumers spent an annual aggregate amount of more than $1.8 trillion worldwide on items the respondents defined as luxuries. (That figure far outstrips the approximately $390 billion globally that is usually cited as total annual sales of luxury goods such as apparel, cosmetics, watches, and jewelry.) BCG observes that success in luxury is linked increasingly to a brand’s mastery in four areas of change:

• New consumers, different segments and buying behaviors are not easy to decode. The rapid shift from owning a luxury to experiencing a luxury, along with other equally dramatic shifts in demographics, economics, technology and consumers’ attitudes and behaviors make it imperative that brands undertake more detailed segmentation of customers and customization of products.

• A need to understand new geographies and the new specifics of cities as unique markets. For example, luxury buyers in Shanghai and Beijing have more in common with their counterparts in Paris and Tokyo than they do with those in Zhenjiang and Panjin. It’s for this reason brands must deeply understand the demographic and sociographic fundamentals in cities rather than, for instance, allowing consumer research conducted in a capital city to represent behaviors across an entire country. Brands can benefit from city level analytics to enable them to cluster similar cities together and then develop go-to market strategies.

• New and innovative business models, requiring openness and cultural changes. Brands and retailers must rethink the benefits of collaborations to drive top line growth. Brands also need to reframe the value of licenses and joint ventures.

• Disruptions in marketing and selling enabled by new digital technologies. Brands must excel in ecommerce, and embrace the three c’s: commerce content and community. BCG research suggests that omnichannel consumers spend twice the amount than consumers who purchase only through offline or only through online channels do.

The BCG Report Shock of the New Chic: Dealing with New Complexity in the Business of Luxury elaborates on the above dimensions of change, identifying where the leadership teams at luxury providers must place most of their energy and efforts in the future. For more information on accessing the report, please click here.