Morgan Stanley
  • Ideas
  • Sep 19, 2018

From Rags to Riches

The economics of excess in the luxury fashion industry.

In the world of haute couture, heritage is a powerful component of brand identity. But in order to continue to thrive, leading fashion houses need to be as focused on the future as they are on the past if they’re going to remain relevant.

Leading luxury brands are built on exclusivity, which until recently has meant a minimal online presence. But shoppers' dependence on the internet and shifting purchasing patterns are changing the formula for success. Staying out of the online fray is no longer an option for most luxury brands, especially if they want to be where their shoppers are.

Over two-thirds of luxury goods bought today are first researched online.

- Morgan Stanley Research

Naturally many high-end brands still prefer to interact with their clients in person. It’s hard to replace the personal service that is delivered at a flagship store. But they ignore digital at their peril. More than 60% of luxury good sales are now digitally influenced – meaning shoppers either researched online and bought at the store, shopped in the store but bought online, or purchased online outright – according to recent analysis by the Boston Consulting Group.

A key challenge for many brands is balancing accessibility with the need to maintain exclusivity and status. According to Morgan Stanley Research, the new retail reality could make it harder for some luxury brands to preserve their niche: “We think digital has the potential to reduce brand loyalty, thus spreading wallet share across a larger brand base.”

It’s safe to say that dedicated fashion devotees will continue to seek out their slice of aesthetic luxury wherever they can find it – whether online or in a hallmark building. For the brands who get the balance right, the rewards are likely to be significant.


For information on investment opportunities in the luxury goods sector please contact your Morgan Stanley Financial Adviser.