The world of luxury conjures an image of all things rare, bespoke, premium and distant. Contrary to this dreamy image, the creation and selling of luxury does not exist in a vacuum. It goes hand in hand with the state of the economy, financial policies, cultural preferences and technological evolution. Luxury brands have been facing a tough couple of years. Fashion brands in particular have witnessed financial dips coupled with changes in top management. Consumption, in the highly promising Asian market, has declined. Competition has increased from niche, local players. Brands find themselves trying to balance fantastical seduction with financial efficiency.
Interestingly, and somewhat paradoxically, this is also an era of heightening of luxury. Luxury has never been more visible. Most major sectors now have premium or luxury segments: travel, technology, interiors, entertainment, consumer durables, food & beverages, real estate etc. The emergence of omnipresent rarity is not necessarily consumed in economic terms. Even people who cannot afford it engage with it on an aesthetic and conversational level. While the businesses might not be booming, the cultural access to luxury is.
At the macro-level, there are some trends that are the key to unlocking contextualised shifts in consumer expectations and purchase behaviour. These trends then have implications for branding, product development, distribution, pricing, customer handling and financial performance.
Method Behind Mystique
Consuming luxury has never been just about economic acquisition.
Luxury is inherently mystical. There is great deal of talk about a shift towards experience lead marketing which is further fuelled by converging trends.
The pushing of boundaries has come from interesting angles. For instance, resort chain Jumeirah offers something distinct in each of its properties. Access to the Turtle Rehabilitation project at Dubai is one such example where guests can engage with something more meaningful than just indulgence. Louis Vuitton has created a deluxe-style, invitation-only floor in its latest Shanghai maison for the uber-rich. They can even have their hair styled while shopping for personalised designs.
The penetration of social media means that everyone with a smart phone can see the latest with the click of a button. With Instagram features like Twirl, every detail of a garment can be closely examined. The distant sexiness of luxury can, therefore, potentially become mundane. In order to turn threat into opportunity, LVMH recently opened up its ateliers and maisons to Instagram influencers to show the behind the scenes of how their products are made. During the Spring/Summer 2016 fashion show, Burberry also went beyond live streaming, and shared shots of the entire collection on Snapchat before it premiered on the runway.
E-commerce means that in-store immersive experiences could be subordinated in the face of in-home comfort. Therefore, brand websites have a role to play in transporting the in-store experience to the virtual world. For instance, the Hermes website displays silk scarves in a virtual ‘Maison de Hermes’ with images of men in penguin-coats welcoming the visitor and scarves hanging on virtual hangers in a classic French boutique. Bentley is another good example. Buyers can experience customisation online by tracking the making and distribution of their preferred design online, in real time. Saks Fifth Avenue displays its clothing product along with a brief catwalk video so that the product still retains its runway charm.
Key Take Away: Methodically construct mystique on your own terms, instead of fearing its loss. Choose the right partners/platforms.
Competition is no longer traditional and limited to key industry players or even just western players. Ethnic forms of luxury are on the rise. Consumers are embracing local flavours and cultural specificities in the face of saturating western pallets. This trend is cutting across fashion, food, travel and even everyday consumer goods. For instance, the Indian market was long dominated by western bath & body brands. The last few years, however, have seen a return to Ayurvedic luxury bath products. Brands like Forest Essentials and Kama have made inroads through flagship stores, partnerships in spa and yoga tourism and exploiting other new-age opportunities. So international brands, too, are having to respect local cultural aesthetic. The Shanghai Maison of Hermes is a good example in this context. The building itself is an architectural hybrid between Chinese and French styles. The store is sprinkled with elements of Chinese décor like timepieces and tea sets. There also exists white-space in emerging markets where currently only local players dominate – wedding, jewellery, tea etc. These might be opportunities for established players to showcase some brand anthropology. For instance Louboutin recently partnered with high end Indian wedding designer, Sabyasachi, to create wedding shoes for men.
In contrast with this increased engagement with local heritage, disruptive challenges are coming in from the world of technology. For years luxury has harked back to historical pride and artisanal genius. The view was that the laboriousness of luxury stands at the opposite end of the spectrum to the instantaneousness of science and technology. However, these distinctions are now blurred. Wearable devices like the iWatch are a case in point. Another example is Surface View, an offshoot of a printing business. They offer prints for wallpapers and murals to be scanned and enlarged on to the walls and ceilings of the homes of the rich. Not paintings but prints. This is their unique take on the French art of trompe-l'oeil.
The trick then lies in catering to more nuanced consumer needs than just the need for symbolic capital through the purchase of heritage European brands. It is important to communicate to the consumer that you have moved with the times just like they have. Burberry Kisses is an excellent example of presenting British heritage in a hi-tech format. In 2013, Burberry collaborated with Google for a unique marketing campaign for their beauty products. Google created a digital experience whereby people could send each other virtual letters by sealing them with an actual kiss through their smart phone.
Key Take Away: Overdose of luxury heritage in its traditional version can become imposing. Redraw boundaries of competition.
Staging of Subtlety
There are signs of a shift from ostentatious consumption to subtle elegance; a move away from the ways of the nouveau riche to those of the educated elite. The wealthy in the Chinese market, which has emerged as a game changer for luxury, now prefer more taken-for-granted symbols of wealth. Thus the flourishing of the less well-known but sophisticated brands, discrete monogramming and downsizing of logos. For instance, Emirates airline has redesigned plane layout in a way to hide the first class from the economy passengers. Tiffany has dropped the entire spelt out brand name for just T.
However, it is important to be wary of the blanket claim of a move towards understated visual appeal. The thing about luxury is its ability to clearly disallow those who cannot have it. A move from a ‘have-not’ to ‘have’ is psychosocial achievement for the upwardly mobile millennial. There are also markets, which have only recently opened up to luxury brands, which were earlier, only the preserve of the well-travelled socialite. Adoption of the brand by first-timers may not welcome subtlety. Thus an understanding of newer markets, their cultural symbolism and adoption journey is crucial. That emerging markets are bursting with counterfeit products is not a coincidence. The fact that the quilting on bags, a classic Chanel design, is now a feature of bags in Accessorize and Forever 21 says something.
Within luxury too, the trends may vary. While in fashion, there might be a move to subtlety, in travel and wine it is possible that opulence is enhanced.
Key Take Away: Given the potential of Asian markets, there is a need to differentiate between layers of customers and individual markets in order to contextualise macro-trends.
To talk about the challenges of the world of luxury is misleading. Instead, we have highly diverse ‘worlds of luxury’, which share some trends and contradict on others. Luxury should be seen as a multifaceted combination of emerging markets, technological innovations, social media, e-commerce and unstoppable access. The learning for brands must be therefore drawn from this holistic, progressive, idea of luxury.