Despite the huge impact of the health crisis and lockdown measures around the world, the luxury industry will remain a high-growth sector for the years to come. However, this growth will be accompanied by an increasing ecological awareness among consumers, particularly among younger generations.

According to a study carried out by the Boston Consulting Group, 64% of future Gen-Z consumers want companies to be engaged with these issues. As consumer awareness spreads, there is an increasing expectation that luxury brands should take ecological concerns and sustainability into account in their business practices.

 

Changes for a greener industry

Some of the most sensitive issues include animal suffering, the origin of raw materials and the waste associated with excess inventory. For years now, many brands have been taking a sustainable approach to these issues, such as Stella McCartney, which is campaigning for sustainable fashion, Kering, which has made sustainable development its strategic development focus for the next few years, and LVMH, which is committed to providing full traceability of its animal materials by 2025. We can happily say then that “green” fashion is no longer just a marketing gimmick but a necessary factor at all stages of the value chain in the luxury sector.

But is this enough? Although industry players are acutely aware of matters like animal suffering and the origin of raw materials,, the subject of luxury brand stock levels remains a significant grey area. Indeed, the word “luxury” is still very much synonymous with waste, excess and destruction.

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Luxury, a still opaque industry

On April 3, 2020, in an open letter published in Women’s Wear Daily, the Italian designer Giorgio Armani railed against the waste and overproduction of luxury brand collections. This brought back memories of Burberry, which in 2018, admitted to incinerating millions of euros of unused inventory, a practice which is still unfortunately common among luxury brands.

So, how can these brands reduce waste without facing shortages? This is a particularly important issue in France, where the destruction of unsold non-food items will be banned by law from February 10, 2022. Upcycling is one possibility. For example, Louis Vuitton will offer 25 looks for its spring-summer 2021 men’s collection from existing materials, drawn from its stocks and surpluses, and other retailers are considering this circular economy approach.

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However, this still represents only a tiny part of the surplus from past collections. Other more effective, structural solutions will be needed to clean up supply chains and avoid the quantified waste of excess inventory and clean up supply chains. If luxury production processes remain manual by definition, the supply chain that supports this sector will need to reinvent itself and become digital to meet these new challenges.

The use of powerful algorithms based on artificial intelligence is already helping many companies to measure demand uncertainty better and, therefore, produce much more accurate consumption forecasts to optimize their inventories. This new software represents a leading solution to reduce surpluses, limit waste and, in France, to prepare for the new law in 2022.