The world of fashion is ever-evolving, with trends coming and going at a rapid pace. One trend that has captured the attention of social media and investors alike is “quiet luxury.” Unlike previous fads that quickly fade away, this trend has made its way into investor portfolios and has shown substantial returns. But what exactly is quiet luxury, and why has it gained such popularity?
Quiet luxury revolves around understated and subtle displays of opulence. Gone are the days of loud and flashy displays of wealth in the fashion industry. Instead, it is now all about subtlety and minimalism. Popular shows like HBO’s “Succession” have played a significant role in boosting the trend’s popularity. This newfound movement has not only gained traction in the fashion world but has also caught the attention of investors.
Luxury stocks have long been considered an effective hedge against inflation. The segment’s high pricing, which seldom deters its affluent customer base, and higher profit margins compared to other consumer discretionary products make it an attractive investment. While the fundamentals of this segment have not drastically changed over the years, the rise of quiet luxury has prompted investors to cherry-pick companies that embody its essence.
In 2023, companies associated with quiet luxury significantly outperformed their “loud” counterparts, according to data from DBS Bank, Southeast Asia’s largest lender. Some of the top performers in this new wave include Hermes, Prada-owned Miu Miu, Brunello Cucinelli, Compagnie Financière Richemont, and Swatch Group. These companies have embraced understated elegance and timeless quality, aligning perfectly with the growing consumer preference for subtlety in luxury consumption.
Hou Wey Fook, Chief Investment Officer of DBS Bank, explains that companies focusing on understated elegance and timeless quality are more likely to resonate with consumers and benefit from this trend. This ongoing shift in the industry’s dynamics is expected to sustain the bifurcation in performance between quiet luxury companies and their louder peers.
DBS Bank categorizes a company as “quiet luxury” if it is understated, focused on high quality, and maintains exclusivity and scarcity. Some of DBS Bank’s top picks in this category include Hermes, Moncler, LVMH Moët Hennessy Louis Vuitton, Richemont, Swatch, Brunello Cucinelli, and Ermenegildo Zegna. Investors are taking a long-term view of these companies, recognizing their heritage and success in the industry.
Unlike viral trends that come and go, quiet luxury provides a more enduring investment opportunity. Consumers and investors alike are seeking higher quality products and are drawn to the heritage and long-term vision of established luxury brands. This shift in demand is particularly evident in the Asia-Pacific region.
The demand narrative for luxury goods in Asia-Pacific is changing due to China’s uneven post-pandemic recovery and lackluster domestic demand. Although Chinese consumers still have an appetite for luxury goods, luxury brands are broadening their horizons to target other big markets in Asia. Mature markets like South Korea and Japan are witnessing a growing demand for luxury goods, while India is emerging as the next big market in terms of population and growing wealth.
A recent report by Goldman Sachs predicts that around 100 million people in India will become “affluent” by 2027, defined as those earning an annual income exceeding $10,000. Currently, 60 million people in India already earn more than $10,000, making it a promising market for luxury brands in the coming years.
Quiet luxury stocks gained prominence in portfolios last year, causing brands that were considered too “loud” to fall in global rankings. Bank of America Securities research indicated that companies geared towards quiet luxury, such as LVMH and Hermes, are better positioned in the current market. Brands like Kering-owned Gucci and Burberry experienced a drop in rankings due to this shift in investor sentiment.
To re-engage customers and drive traffic, brands are advised to refocus on fashion content and newness. The allure of quiet luxury lies in its emphasis on heritage, quality, and timeless elegance. Consumers and investors are increasingly favoring brands that embody these values, resulting in a shift in the industry’s dynamics.
As the fashion industry evolves, trends come and go, but quiet luxury has proven its staying power. From its origins in subtle displays of opulence to its impact on investor portfolios, quiet luxury has captured the attention of both fashion enthusiasts and investors alike. This shift towards understated elegance and timeless quality resonates with consumers and provides a promising investment opportunity. With the demand for luxury goods expanding to new markets like India, the rise of quiet luxury is likely to shape the future of the fashion and investment landscape.
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