Perfumes & Cosmetics: Luxury Brands' New Engine - Part Ⅱ
System Innovation: AI, Supply Chain & ESG Become New Value Pillars
In luxury brands' traditional narrative, craftsmanship, scarcity, and brand stories dominate. Yet in the current stage of structural transformation, "making sophistication sustainably efficient" is becoming a new proposition that urgently needs to be addressed within the industry. KPMG's report points out that "operational aesthetics" as a new focus in the luxury goods industry, with AI, supply chain optimization, and ESG (Environmental, Social and Governance) forming the three major pillars for building this new value system.
AI's most visible impact reflects in customer experience. KPMG research shows 72% of brand managers believe that AI has a significant positive effect on sales conversion and loyalty, especially in the "recommendation-trial-repurchase" process.
But the value of AI extends beyond the front-end. In supply chains, digital twin system enable multi-node collaboration and real-time distribution at logistics centres, significantly reducing air freight ratios and carbon emissions. New generative AI projects have also been applied in the stages of raw material screening and efficacy prediction to identify more sustainable and biocompatible cosmetic formulas.
However, KPMG notes that despite the industry's enthusiasm in AI, few brands possess the data quality and automation infrastructure. 64% of the surveyed companies stated that although they have introduced AI tools, they still lack sufficient system capabilities to unleash their full potential, especially in Small and Medium Enterprises (SMEs) and traditional workshops.
This reminds all participants in the supply chain (including cosmetic ingredient suppliers, OEMs, and packaging solution providers) to quickly meet the new demands for transparency, responsiveness, and small-batch high-complexity in the context of intelligence.
Compared to the past focus on corporate social responsibility (CSR) at the public welfare level, ESG is now seen as one of the key logics for value chain reconstruction. From green supply chains and regenerative materials to transport alternatives and carbon footprint tracking, KPMG clearly states that "Sustainability itself is a differentiated competitive advantage." In the beauty and personal care fields, traceable sourcing, plastic reduction in packaging, and multi-functional formulations are becoming critical.
ESG transcends compliance to extend brand value systems. In recent years, products with labels such as "refillable packaging", "carbon-neutral factories", and "plant-based ingredients" outperform peers in customer preference and repurchase rates. It can be foreseen that ESG will gradually evolve from a "brand bonus" to a market-entry necessity for luxury players.
The result of significant price increases in the luxury goods industry over the past five years is the "tension between price perception and value experience". KPMG cited data indicating that major brands raised prices by as much as 54% between 2019 and 2023, but this strategy has already peaked in 2024. The report emphasizes that "pricing must seek a new balance between value perception and customer structure".
Thus, brands must neither rely solely on high-priced products for few VICs (Very Important Clients) nor dilute equity with unchecked "affordable lines." A more suitable approach is to expand the revenue curve through structural optimization without compromising brand scarcity.
