Millennials, social media, online retail, disruptive brands and experiences, expansion of traditional luxury markets and responsible luxury. The world in the 2010s is clearly a different place. This could be the reason luxury now is so different from your dad’s generation. It doesn’t matter what your dad or you think, the die is cast. By 2020, the luxury landscape will be radically different from 2010, when the luxury industry was still licking its wounds from the 2008 recession.
Expensiveness and exclusivity have always been the hallmarks of luxury. In 2015, a global survey of luxury consumers (by Albatross Global Solutions) revealed that 86 per cent consumers thought ‘quality’ was a key luxury attribute; in contrast only 52 per cent cited ‘exclusivity’. John Ive, Apple’s head of design, said he was uncomfortable with the ‘exclusive’ tag for the Hermes Apple Watch. Small and personal luxuries have also come to dominate the 21st century brand of luxury—afternoon tea, precious time with friends and family (we hear the term ‘making memories’ bandied about a lot these days). It’s why many surveys point out that millennial consumers typically use up their vacations, unlike the Gen X Baby boomers who were too busy making money.
We take you through some of the trends that are likely to define luxury in the immediate future (you need to be a whizz to predict the distant future in this disruptive new world). Most of these trends have already started playing out and you may find that you’re part of the cast, too!
Can You Feel It?
The emergence of experiences as a luxury differentiator
A 2014 survey in the US discovered that 78 per cent of millennials would rather spend their dollars on a desirable experience or event rather than investing in a desirable object. It merely confirmed what brand marketers already knew. YOLO (You Only Live Once) and FOMO (Fear of Missing Out) are terms that are no longer alien, it defines the spirit of the new luxury consumer who is keen to step out of his consumer zone and pay top dollar for companies that can create bespoke experiences. From truly embracing local culture to being the first to experience everything, modern day consumers are demanding that luxury brands play ball. It’s why Airbnb can sell apartments at rates higher than the St Regis in certain cities .
Aston Martin collaborated with furniture designer Tom Dixon and created a special experience zone—a pop-up department store in London’s Old Selfridges Hotel. It is a clear indication that the traditional showroom or retail store is less intrinsic to the consumer’s buying process. Consumers would rather shop for a brand in an environment that is a truer reflection of their own lifestyle. Hamley’s, for instance, partnered with the Hyatt Regency in Chennai as part of their family-driven Sunday brunch concept to create a deeper connect with kids. It’s also changing the age demographic of buyers in well-established luxury categories. Princess, the luxury yacht manufacturer, recently revealed the fastest growth is now coming from buyers in the 30-50 age group. It’s no longer a post-retirement investment, but a younger consumer who is seeking a unique experience.
Rare local brands become sought-after in an otherwise cookie-cutter world
Chanel or Moet Chandon are not going anywhere and are probably here to stay. It’s tough for an upstart luxury brand to match the brand lineage and experience of iconic luxury brands, but that doesn’t mean there’s no room for new players. Until recently, Chinese and other emerging luxury markets like India were driven by the need to use luxury brands as a marker of status to show they’ve arrived. That’s no longer key in such markets, which are seeing more self-assured and evolved luxury consumers. It’s no longer that important how your peers view you, especially if you think you have already arrived. Clearly, these consumers are now on the higher end of the proverbial Maslow triangle. It’s also seeing a wider acceptance of home-spun local brands. It’s why you will pay a premium for an Amrut Single Malt without batting an eyelid or consider Xiaomi’s new concept smartphone designed by Philipe Starck.
Not surprisingly, experiences are leading the way in the emergence of local brands, especially in Asia. Airline brands like Vistara or a boutique travel experience like Bangkok Airways are now on the radar for many high fliers. It’s also seeing strong boutique fashion brands emerge in markets traditionally not associated with bespoke luxury brands—Nigerian fashion brand Deola Sagoe is a case in point. It’s not just about travellers to a new country seeking out a local alternative in a bid to break away from cookie cutter luxury shopping experiences, but also affluent locals in the market willing to pay more for home-grown brands. The ‘rare’ element that defines luxury is also seeing a widening of categories. Artisanal experiences and products from bread to cheese and new age diets have redefined luxury gourmet food. It’s not just caviar and champagne anymore. US retailer Neiman Marcus demonstrated this when it sold collard greens at 04,500 (plus shipping!), sparking internet trolls.
Luxury with a Conscience
How luxury brands are discovering the merits of being ethical
Apple can say that the iPhone was designed in California, but most consumers know that their phone rolled off an assembly line in China. It’s the same for quite a few brands that work with factories in Asia or other countries for their line of apparel or accessories. Back in the day, the luxury market was much smaller and it was cost effective to manufacture in an exclusive facility in Europe. Swiss watchmakers still do it, but the sheer scale of some of the luxury brands’ operations doesn’t allow them to. This has caused the occasional controversy of sweat shops and unethical labour practices. Except, now some brands have started talking to their consumers and younger consumers love brands that are transparent. Ethical supply chains, transparent pricing, profit sharing (with deserving charitable organisations), partnerships with charitable entities have all become part of the decision-making process. It’s the reason why smaller artisanal chocolate companies that follow a bean-to-bar approach (helping a local community in Africa along the way), are the new luxury superstars. It’s why restaurants like Noma in Copenhagen, that source responsibly, command a premium.
Hotel chains are also waking up to these realities. ITC hotels’ tagline ‘Responsible Luxury’ is clearly an acknowledgement that at least some guests care about their environment connect. Some brands might still use these as sales gimmicks or lip service, but the modern consumer is more sensitive to this than ever before. It’s why quite a few luxury products in the consumer electronics space have done away with elaborate packaging. Apparel brand Everlane and eyewear brand Warby Parker are among a new breed who share pricing details and their stand on environmental and ethical issues. Socially conscious luxury consumers are changing the way luxury brands do business.
With online luxury sales skyrocketing, luxury majors are discovering unconventional strategies in their rush to make their presence felt online.
A recent study by Digital Luxury Group suggested the internet would be the third biggest market for luxury goods by 2025 (after China and the US). The outlook for luxury e-commerce is bullish with a three-fold growth expected to take sales across the $75 billion mark and 18 per cent of the total market. It is significant for a business that has traditionally depended on retail stores and physical touch points as the frame for the art. Today, these brands need to develop digital frames that augment the role of flagship stores and somehow manage to create a multi-sensory experience. It’s not easy for most luxury brands, many of which have been late to respond to the digital paradigm. Leading online retailer Net-A-Porter found a clever route by merging a shopping app with its digital magazine‘The Edit’. The move set the cash registers ringing and also won it a lot of brownie points with the new-age digital consumer.
Blame it on the millennial consumer (yet again) but over 60 per cent of them use at least three social media channels to stay connected. The trepidation with which luxury brands need walk the online path is understandable. They need to distinguish themselves from the mass media brands without some of the offline aids (like retail experience). Millennial consumers are twice as likely to trust brands that use social media. Nimble luxury brands are finding new ‘interaction stories’ and experiences to engage effectively with customers. Burberry joined hands with Google for the Burberry Booth, which uses video-stitching technology to put consumers into its holiday video and then crafts versions that these consumers can share on their social media. Some other brands use the online channel as a hook; offer consumers a taste of their merchandise, but reserve some products for the flagship stores. Hermes keeps its Birkin and Kelly handbags off the web, but you can buy the brand’s legendary silk scarves and even the Apple Watch Hermes online. The social media reach of international celebrities has also forced brands to rethink their strategy—Rihanna tied up with Christian Dior while Calvin Klein partnered with Justin Bieber in a bid to give these brands a wider digital footprint with the knowledge that most Bieber or Rihanna fans might not form part of the brands’ core audience.
When luxury met technology, it was a romance made in consumer heaven
It was inevitable and it happened later than we expected it. The PDAs and BlackBerrys of the 2000s never quite integrated into our lives. Primarily, those were work tools that you cast aside just like your tie and jacket after a long day in the office. They were never part of your ‘after hours’ avatar. Smartphones, tablets, smart TVs and wearables have changed it all. They said a gentleman always needed three things in his pocket when he left home—car keys, mobile phone and wallet. Apple Pay threatens to make the wallet redundant. It’s not just how these devices have increased our daily interaction with screens (from just the laptop or PC), but how technology has integrated into every element of our life. From refrigerators that can count calories of the products stocked in them to digital assistants that can make you change dinner plans. Luxury products had no choice but to jump in.
Burberry’s iPad cases are probably one of the brand’s bestsellers, while Apple and Hermes collaborated to launch a special edition Apple Watch replete with an elegant ‘double tour’ strap and special customisations in terms of dials. We soon started seeing cheap imitations of the strap showing up on Amazon just like rip off bags that pay tribute to Coach and LV originals. It’s not just cosmetic beauty. Luxury luggage maker RIMOWA collaborated with Lufthansa to launch a truly innovative ‘Electronic Tag’ that allows passengers to check in their luggage from a smartphone app. Frequent fliers don’t need to worry about large check-in bags slowing them down at airport check-in counters any more. Christian Dior embraced the impending VR wave with its unique ‘Dior Eyes’ experience in many of its brand stores worldwide that will allow consumers take a closer look at their products and view its ‘runway presentation’ for each new season like never before.