• Home
  • News
  • Business
  • Sustainable goods see decline due to high cost, yet luxury sales grow

Sustainable goods see decline due to high cost, yet luxury sales grow

By Jennifer Mason

23 Jun 2022

Business

Image: Pexels

With inflation rates at a forty year high as recession predictions swirl around the financial sphere, it would make sense to see a decline in discretionary spending as the cost of gas and daily essentials rise. While Morning Consult did find that consumers cut back on spending from February to March this year—with US apparel registering a one percent decline—the National Retail Federation (NRF) released a statement a month later sharing encouraging stats that showed clothing and accessory store sales were up 0.8 percent month over month.

“April retail sales demonstrate consumer strength and willingness to spend despite persistent inflation, supply chain constraints, market volatility, and global unrest,” NRF President and CEO Matthew Shay said, with the trade association’s Chief Economist, Jack Kleinhenz, adding, “it shows consumers are taking higher prices in stride.”

However, when it comes down to that willingness to spend, it would appear that taking higher prices in stride is not allocated to all clothing equally.

The “green premium” keeps sustainable item sales down

Professional services firm Deloitte emphasized financial anxiety as a top concern in updated data released from their Global State of the Consumer Tracker project that explores consumer priorities on a monthly basis through surveys conducted in over twenty countries. Concerns about high prices were expressed by over 80 percent of respondents in both the US and the UK as of May.

Showing how these concerns play out more specifically, Deloitte shared in an article on the company site Friday that sustainably produced products generally have seen a decrease in demand between September 2021 and March 2022. Over the past four weeks, the article revealed, consumers skipped sustainable options as 41 percent deemed them too costly, 24 percent responded that sustainable products were not a priority, and 13 percent cited unwillingness to wait longer to obtain such products.

Survey results also emphasized how income inequality limits who is able to participate in the sustainable market, as findings showed only higher-income consumers are still willing to pay more—34 percent of those who did buy a sustainable good or service in the last four weeks acknowledged that they paid significantly more than an alternative option. But with investment in technological advancements and innovation, there is still hope that accessibility will increase, as shown with personal computers and flat screen TVs over time.

Regardless of consumer demand, Deloitte states in their Global Turning Point Report, released during the World Economic Forum's annual meeting in May, that ignoring climate change is not an option. Left unchecked, their analysis estimates global warming could cost the global economy 178 trillion dollars over the next 50 years.

Luxury sales defy inflation belt-tightening

Even though inflated prices are a top concern worldwide, the luxury sector appears immune. American consulting firm Bain released projections Tuesday that global luxury goods sales are set to rise at least 5 percent this year to 320 billion dollars in the conservative version of their estimation.

Even with affluent Russian shoppers shut out of the market and Covid lockdown disruptions in China, luxury sales have remained strong during the pandemic recovery due to demand in Europe and the US. In 2021, Bain counted the United States as the single largest national luxury market, even as Forbes noted that luxury fashion brands like Louis Vuitton, Hermès, and Chanel raised prices substantially, without much consumer resistance thus far.

The dichotomy in luxury spending habits

It is hard to reconcile more exorbitant consumer spending, during financially stressful times, on luxury for the sake of a brand name versus resistance to spending on luxury for the sake of the planet.

Of course, those two versions of luxury are not mutually exclusive as several of the top luxury fashion brands are making investments in the needed technological advancements and innovation mentioned earlier, in order to produce less carbon intensive materials, eventually at scale. With global livestock—particularly cattle—contributing 14.5 percent of all anthropogenic greenhouse gas emissions, according to the Food and Agriculture Organization (FAO) of the United Nations, Hermès, Stella McCartney, and others are backing next generation materials by companies like Mycoworks and Bolt Threads that may become viable replacements for cowhide leather one day, assuming they can truly be plastic-free.

In circularity efforts, LVMH brands now work with Weturn, a startup credited with creating the first recycling chain dedicated to transforming proprietary, unsold textiles and waste fabric into new quality yarns for fashion houses to reuse. Those materials historically have been shredded or burned due to their intellectual property protections.

The fashion resale market that surged in 2021 also conflates eco-friendly and luxury characterizations because clearly, extending the life of clothing as much as possible is sustainable too. Luxury brands are even warming to the secondary market more officially by approving dedicated resale platforms for their goods—as Alexander McQueen has done with Vestiaire Collective and Stella McCartney with the RealReal.

But that is not the entire picture.

There are thousands of independent brands and emerging designers around the world—many featured here on FashionUnited—that are operating more and more sustainably from inception: they source locally while supporting regional ecosystems, upcycle materials, use dyes with natural ingredients, produce less waste due to their size, represent a more diverse range of creators and workers, and yes, their items typically cost more than similar alternatives.

During the height of the pandemic in 2020, all businesses suffered setbacks as entire economies shut down. But as Vanessa Friedman highlighted in the New York Times, the independent brands, the “underpinnings of the American industry,” faced bankruptcy. At the time, as Friedman pointed out, 40 percent of the members of the Council of Fashion Designers of America (CFDA) were brands worth under 1 million dollars. In contrast, a brand like Chanel had an operating profit of 2.05 billion dollars that year, even after a 41 percent decline from suspended operations.

If the world economy shrinks, it will likely be the less recognizable independent brands, the emerging talents of the industry who take the largest hit again, especially those, as indicated in the Global State of the Consumer Tracker, who use responsibly made materials with fewer environmental impacts that cost more—as all brands large and small are implored to do to reduce emissions.

In an March article published in Forbes by a market researcher of affluent consumer behavior, Pamela Danziger, she explored how quality and sustainability have taken a backseat to the desirability of high price just for the sake of it. She examined a study by researchers Joel-Noël Kapferer and Pierre Valette-Florence that focused on consumer motivations for accepting high luxury brand prices in both Western and Eastern cultures.

“Unexpectedly, the pursuit of high quality is not a driver,” was one conclusion. Instead, obtaining status and exclusivity is what moves buyers to justify the expense, not anything about the environment.

“Price functions as a fee for the right to exhibit the logo of a well-known brand and co-brand oneself,” they added.

What a state of the consumer.

Inflation
Luxury
SUSTAINABLE FASHION