The luxury goods sector has long been one that inspired envy, whether it’s the attached glamour or the high margins enjoyed by retailers.
However, reports have indicated that the sector has seen stagnation and a low, single-digit growth rate in 2016 & 17. Under these circumstances, it is important to identify, understand and embrace the trends that define the industry today.
We sat down with Neha Kapasi, our Luxury Sales Director, to discuss her perspective on Luxury Brand Marketing and how WealthEngine can help companies personalize their engagement with wealth and lifestyle data. Listen to the full podcast.
Luxury companies that have foreseen or even set the trend in some instances have benefitted from having a competitive edge and are poised for success. With more brands entering the market at every level of luxury, let’s examine the trends that can help set these purveyors of refinement apart.
1. Becoming Street Smart
When it comes to staying relevant, the luxury industry has it particularly hard. What’s trendy today could become irrelevant tomorrow. Millennials and other young consumers of luxury products and services have shown that they have a preference not only for the indulgent but also for the cool.
The ‘street-edge’ factor is becoming something that is prized among consumers. Fashion giants such as Balenciaga and Balmain have hired creative directors who can create the new cool. Meanwhile, other houses are benefitting from unexpected collaborations such as Louis Vuitton x Supreme and Gucci x Dapper Dan.
2. Communicating with Personalized Precision
BCG has predicted a massive revenue shift towards the top 15% of marketers who embrace personalization. Luxury customers are especially likely to respond to messages that are custom tailored to them. We have talked before about how no two millionaires are the same.
It is no longer enough to look at just wealth indicators for marketing effectiveness. Luxury companies need to have a more holistic view of customers including demographics, lifestyle attributes, and affinities so that their Account Based Marketing is more targeted and therefore more efficient. Luxury consumers, especially those from digitally savvy generations crave an authentic experience. This means that luxury companies need to embrace data and AI to deliver the most personalized, highly customer-centric experience- whether it’s travel, high-fashion, auto, or real estate.
3. Embracing Technology
Speaking of personalization and digitally savvy consumers, luxury companies that are early adopters of technology will emerge as winners. Technology needs to permeate not only communications but also the very delivery of customer experience.
Data and Artificial Intelligence can help identify patterns, create predictive models and customize messaging for Account-Based Marketing. An omnichannel approach enables luxury purveyors to reach consumers where they gather. For instance, Instagram is not just for influencers and aspirational followers. Of the 800 million Instagram users, 80% of them follow brands. 75% of users are reported to take action after seeing a business post.
Augmented and Virtual Reality can provide consumers a richer experience when it comes to product trial, creating shareable media and enjoying a more digitized in-store visit. Amazon and Zippin have set the trend of creating check-out free shopping, eliminating a bottleneck and further integrating online and offline experiences.
4. Weaving purpose into their business
Although this may be more a movement than a trend, purpose, and meaning are extremely important to millennials and younger generations who will soon represent 45% of the luxury market. It is common for luxury conglomerates such as Kering Group or LVMH to have corporate social responsibility units.
Today, however, the emotional and experiential preferences of millennials and gen-Z go beyond perfunctory social impact. It is important for luxury companies to build purpose in the very design of their business. This could be through using sustainable materials, reducing their carbon footprints, supporting or highlighting the work of marginalized communities, ethical sourcing, and treatment of manufacturing partners. Ultimately both clients and employees want to associate with responsible businesses.
5. Making Customers and Employees Feel Included
In keeping with the idea of responsible business, inclusiveness is another big theme in the luxury market. By its nature, luxury is not inclusive. Today, however, seeming out of reach makes brands feel unrelatable.
Fine jewelry companies such as Tiffany & Co and Bvlgari are each doing their part to become more inclusive. While Tiffany has created a modernized and minimalistic space within a new retail store, Bvlgari has created more entry-level pieces to be further within reach. Meanwhile, Gucci has made strides in the area of diversity. Gucci’s rising revenues are a classic example of success bolstered by embracing the current zeitgeist of the luxury industry.
6. Enabling Access as an Alternative to Ownership
Inclusivity is further accomplished by enabling not only ownership but also access to luxury experiences. Experience is the operative term in the luxury industry today, as reports have shown that HNWIs would rather spend big dollars on memories than goods.
This being the case, the sharing economy is also affecting the luxury sector. Luxury holiday homes and private jets have started to benefit from a market that is happy with access for a desired period over long-term ownership. This is bringing about the democratization of luxury consumption, which is predicted to be an ongoing trend.