Lessons in New Luxury: Part 1
A 3-Part Series
Customer values and behavior have evolved, and there’s no going back.
Taking a Darwinistic view, this evolution means the demise of some aspects of retail as we have always known it, yet it also rewards those who are learning to ride the wave of change. But for some retail segments, this wave may feel more like that of the tidal type: daunting in its size and speed.
Luxury, in particular, has taken a more measured approach to prioritizing evolution, wary of diluting a perception of artistry, exclusivity, heritage, exquisite personalized service, and superior quality — all characteristics that by their very nature, take time — the one element this new market affords precious little.
This 3-part series casts light on how luxury brands, with their own unique set of challenges, are attempting to reach audiences, engage them, and execute immaculate shopping experiences.
Part 1: Luxury Broadens its Reach
Our earliest, and arguably strongest, values are formed when we are children. Circumstances at an individual, and later, global level teach us just how big we can dream. Generational cohorts often share worldviews, cultural-level experiences, and technologies that differentiate us from those that came before.
Some generations have been able to dream bigger than others. Many US Babyboomers, for instance, grew up in a world of relative peace, new possibilities, and attainable abundance. Then there are the increasingly relevant, yet minority, HENRYs, (high-earners-not-rich-yet), who already have high discretionary income and are likely to maintain wealth in the future.
In large part, however, recent generations, especially many Millennials and members of Generation Z, have generally had a different reality: one filled with global-scale economic instability and political unease. One thing they all have in common though is absolute digital transformation.
In what she calls the “Age of Fragmentation”, Sara Bernáte explains that network-focused technology has propelled this shift by opening up a democratization of voices and a diversification of ideas, and has fostered new communities of shared viewpoints, values, and tastes like never before. She says, “The gatekeepers no longer have much of a stronghold, so the definitions are unique and one group’s idea of luxury can vary wildly from another’s.”
It’s of little wonder, then, that the word “luxury”, which literally comes from the word for “excess” in Latin (“luxus”) may have very different connotations for very different generational groups. And let’s not even get started on Gen Alpha, those born between 2010–2025.
Globally, luxury its scrutinizing these new customers who are reaching their spending maturity, but who don’t connect with the traditional modes of aspiration that drive luxury.
Such intergenerational aspirational variance for these connected, and digitally native, consumers means that luxury brands must understand not only how these consumers shop, but also understand how they feel, what they value, and how to reach their eyes.
Lest we clutch our pearls in anticipation of luxury’s doom, some brands are already readying themselves for the challenge.
Luxury takes a masterclass in digital-thinking
According to McKinsey, 80% of luxury sales are “digitally influenced” with a mixed online and offline journey, calling purely offline luxury journeys (22%), “a dying breed”. Luxury must embrace different marketing strategies in order to connect with this new audience right where their attention is: on the screen.
French luxury conglomerate LVMH is one such example, and is spearheading luxury’s future with a series of investments over the last few years under Chief Digital Office, Ian Rodgers (formerly of Apple). That includes its 2018 investment in UK online fashion search business, Lyst, to fuel its digital sales and brand discovery with a new consumer group. Lyst is the largest global fashion search platform that aggregates five million products from 12,000 leading brands.
With this investment, LVMH is turning away from fears about e-commerce damaging the element of exclusivity, and is embracing a modern clientele who is willing to, and comfortable with, purchasing luxury items online. The group can now reach younger, more tech-savvy customers as well as increase its reach into other regions. In fact, in one year, the Lyst reported having 70 million shoppers from 120 different countries.
Reaching for the “stars”: influencers and virtual communities
Just as is the case with the beauty industry, luxury brands are relying heavily on influencers and social media to tap into the hearts, minds, and eyeballs of digital native luxury shoppers. In fact, even back in 2017, 91% of luxury brands were already reportedly using influencers to foster discovery because of their direct relationship with consumers. Shoppers also perceive them to be more relatable than traditional celebrity endorsers.
Luxury brands have rightfully been concerned with turning over control of their masterfully crafted image and narrative to what might be perceived as mere mortals. Nonetheless, some brands, such as Tiffany & Co, recognize the power in the perceived authenticity of influencers and their success at carving out their own niche and garnering trust. The luxury jeweler has recently secured an entire cast of well-known influencers for its SS19 collection, including Kendall Jenner, Carolyn Murphy, Imaan Hammam, Mica Argañaraz, and Fei Fei Sun.
While many wonder when the “influencer bubble” will finally pop, Revolve’s Raissa Gerona was quick to point out in the Glossy Podcast episode recorded at Shoptalk 2019 that this is an inaccurate label. Gerona states that it is the consumers driving the success of influencers, and not the other way around, as they seek out people with whom they can relate and use to inform their purchases. It’s no wonder that aptly named Tribe, an Australian influencer marketing platform, just picked up 7.5 mil USD to make it easier for micro, and even nano, influencers and brands to connect.
Expanding lines and adjusting price points
In the age of fast-fashion, shoppers burn through trends in months rather than years. This means that brands that are unable to churn out new styles because of slower production times may not be able to keep up with consumer expectations. And if they aren’t willing to rethink price points or offer entry-level products, it might make it hard for aspirational shoppers to become repeat buyers.
These new realities are particularly troubling for luxury brands, because they can no longer count on renown and affluence to keep customers buying, and must find alternative methods for capitalizing on short but powerful attention spans of shoppers with potentially lower equity.
Firstly, to align with the fast-fashion mentality, many brands are diversifying their product lines since the audiences looking at them are so different than they once were. Others, like Dior, Prada, and Valentino, have all ventured into offering athletic footwear styles in their ready-to-wear collections to appeal to streetwear fans driving the popularity of “altheisure”. Similarly, Prada is re-launching its Linea Rossa line through Highsnobiety, specifically in order to reach young male fashion consumers.
In a complete departure from fashion altogether, Tiffany & Co., has even gone as far as to create its “Everyday Objects” line which reimagines luxury in all forms, even the clothespin.
Brand collaborations can also lead luxury into new territories without the risk, cost, and time necessary for developing entire lines and items. Take, for instance, H&M’s popular limited-edition, mass-market collaborations with luxury designers.
And that’s good news for capturing younger customers: BCG-Altagamma’s True-Luxury Global Consumer Insight Survey finds that 67% of Gen Z purchase items from collaborations vs. 60% of millennials and 50% of overall true-luxury consumers. Unconventional collaborations are also winning over consumers, and they aren’t limited to fashion partnerships. Case in point, the Sims-Moschino collaboration which debuted at Coachella in April with prices ranging from $85 to $1,295 USD.
Product diversification and collaborations can also help luxury brands expand their entry-level offerings, lowering the barrier of entry for first-time buyers. That way, aspirational luxury shoppers can “buy in” to the message and feel of a luxury brand, but can choose a $45 lipstick as opposed to a $400 t-shirt. Gucci has taken note, and is relaunching Gucci Beauty, it’s cosmetics line to unlock these affordable entry points.
Additionally, McKinsey finds that affordable luxury segments and beauty products are driving online luxury sales as opposed to traditional and absolute luxury items and fine jewellery. Thus, younger shoppers, already more comfortable making purchases online are more likely to add a few entry-level luxury purchases to their virtual shopping carts, and perhaps become repeat buyers.
TL;DR: The lesson
As the saying goes, “If you build it, they will come”, but only if they can find it. The modes now required to foster discovery and attract new customers’ attention have shifted due to a surge in technology and changes in customer behavior, values, and attitudes. Thus, luxury must embrace new, innovative marketing and operational practices to make sure that they are investing time and resources “building” in the right places.
Speaking of luxury, we’re so happy to have been one of 30 finalists nominated for the prestigious LVMH Innovation Award. The winner will be announced at the VivaTech event in Paris on the 16th-18th of May!
What notable and innovative initiatives have you seen in the luxury sector? Comment below and tell us what they are! Stay tuned for Part 2, where we’ll be giving examples of what luxury brands are doing in an attempt to hang on tight to the attention of distracted, time-poor customers.
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