In 2019 a major pivot is underway in the luxury marketplace as mega brands and startups start to rethink what luxury means to this highly coveted consumer.
According to the Luxury Institute Global Luxury Expert Network, in the year ahead big luxury brands are craving “alpha” growth, which is the ability to grow faster than competitors, re-examining the value of brand heritage and history, the emergence of new kinds of luxury options and start-ups for bored billionaires and centi-millionaires, and a movement towards local influencers versus celebrities.
The biggest change may be with legacy brands finding they can no longer rest on their laurels as the 2019 luxury consumer will be even more demanding and not as easily impressed as they used to be. The Luxury Institute has identified six key trends that are shaping how companies and brands need to craft their relationships in the luxury consumer battle. Here they are in no particular order.
1. Big Luxury Brands Are Setting Their Sights on Alpha Growth. This is a double digit Wall Street metric that measures a large company’s ability to grow faster than its competitors for a sustained period. Think of brands like Louis Vuitton and the Kering-owned Gucci who are locked in an exciting growth battle. They are moving the consumer needle by creating a new market environment which fosters “test-and-learn co-creation and collaboration with consumers, influencers, and other members of a brand’s global ecosystem.”
Perfect examples are last year’s Louis Vuitton collaboration with Supreme which ignited a global frenzy or emblematic fashion editor Grace Coddington and Louis Vuitton Creative Director Nicolas Ghesquière collaborating over their mutual love of animals for the Women’s 2019 Cruise Collection. Gucci’s Alessandro Michele achieves the same results by continuing to push creative boundaries leading to holiday waiting lines outside their boutiques from Rodeo Drive to Hong Kong. Look out for this trend to continue.
2. Legacy Luxury Brands Are Re-Examining The Value Of Brand Heritage and History. The tables have turned. In our 24/7 insta age, Millennials, Gen X and even Baby Boomers only care about brands that have created value for them in the last 24 hours. This is backed up by the Luxury Institute’s annual 2019 State of the Luxury Industry survey of affluent consumers.
Brand heritage and history now rank sixth to superior quality, superior customer service, superior design, superior craftsmanship, and exclusive products. The result is brand history as a relevant pitch is lessening in importance. Relevancy and reinvention are the new keys to rapid growth aimed at the soon-to-be dominant affluent millennial population. This also explains the constant creative turnover and burnout at the top fashion houses. The need for a fresh, dynamic creative view that fuels growth is virtually insatiable.
3. People Innovation Versus Product and Technology Innovation Is The New Luxury Frontier. Where luxury brands once invested in product development, the tables have turned. The way forward is through “re-humanizing” luxury across goods and services categories. In 2019, luxury brands will start to see technology as the commodity it is and instead pivot to investing in people innovation.
This concept is about everything from giving artists and designers complete freedom to invent without limits, sales and service teams creating highly unique non-formulaic client relationships to companies instituting a process to teach everyone to think as creatively as possible. It’s not something that will happen overnight but requires true corporate commitment to change the paradigm.
According to Narvar, ideas include arming service teams, so today’s millennial luxury consumer can communicate through a variety of channels via messaging and chatbots. Luxury retailers can no longer be presumptive or invasive. The idea of sales associates circling a consumer in-store is quickly becoming out-dated. It actually produces the opposite result. Think in-store and out-of-store concierge services, texting, and other ways for consumers to ask for help without feeling the pressure of a sales team. Discomfort with personal interaction continues to grow. Millennials in particular prefer not to talk to another person while solving problems. Give them and the luxury consumer technology options.
4. Affluent Consumers Continue To Lose Trust In Facebook And Other Social Media Brands. The mounting negative media coverage of social brands such as Facebook who have put users at risk due to hacking incidents and privacy invasions has caused affluent consumers to abandon these platforms. According to The Luxury Institute, “One in five affluent consumers are reportedly actively discouraging friends, family or other people they care about away from these channels.” The report predicts “consumers will continue to abandon, or curtail participation, in the most egregious social media sites in 2019. Expect the savviest luxury advertisers to follow suit.”
5. The Local Luxury Consumer-To-Consumer Channel Takes Off. This is an important tipping point. Most luxury channels use a combination of wholesale, their own retail/sales force and e-commerce to reach their most coveted consumer. A fourth channel has recently emerged. Now a “network of devoted brand customers who are local influencers and sell directly to friends and family” are proving more effective than celebrity influencers. Mega brands are seeing the potential and building relationships with a very limited number of exclusive influencers often through simple, effective apps such as Replika Software and others that connect to a brand’s website. Limiting the number of influencers, brand synergy and authenticity are the key ingredients to making the relationship work along with highly exclusive experiential events.
6. Omni-Channel Luxury Changes To Omni-Personal Luxury. Today “customer segments and channels have become the standard and easy way for luxury industry brands and their partners to attempt to categorize and interact with consumers.” With sophisticated millennials leading spending powerby 2020, these luxury consumers are looking for “individualized, seamless brand relationships akin to the relationships they have with friends and family members.
The Doneger Group calls this new way of interacting with consumers Omni-personal. According to the study, this means “seamless relationships comprised of respectful nonlinear touches that make sense to the customer and add measurable value. Look for a focus on the real-time, adaptive orchestration of data, algorithms, devices, and people to design and deploy genuine Omni-personal experiences that lead to long-term client relationships and dramatic sales gains.”
If luxury retailers get it right, the focus on achieving intense, sustained growth within this segment is the way forward.
Source: Forbes