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the prestige promise
redesigning consumer luxury in 2017
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5. SECtIoN oNE Introduction — What is the Prestige Promise? 7. SECtIoN tWo The Luxury Evolution 11. SECtIoN thrEE The Three Defining Characteristics of Prestige Consumers Capacity to Purchase Status Drivers Generational Influences 17. SECtIoN Four Economic Overview The International Outlook The Australian Opportunity 23. SECtIoN FIvE Trends Driving the Prestige Promise Prestige Intelligence The Transparent Purpose Hyper Experiences The Transcendent Self Disruptive Collaboration True Individualism Rarity Reclaimed My Legacy Label 43. SECtIoN SIx Key Takeouts Endnotes
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5“Luxury is the ease of a T-shirt in a
very expensive dress.” — K Arl l Ag ErFEld
The poignant words of one of the masters of innovative luxury, Karl Lagerfeld, are symbolic of the journey of the luxury market towards 2020. Luxury now commands a sense of self that is entwined with aspiration but underpinned by a more implicit sense of status.
Luxury right now is navigating a world increasingly concerned with overt displays of conspicuous consumption and political and economic instability. It is being challenged by the economic slowdown in traditional high-growth markets and by rapidly evolving groups of luxury consumers.
But it’s not all doom and gloom. Luxury is cleverly capitalising on developments in new technologies, sustainability and a renewed commitment to craftsmanship. And it is also benefiting from a growing international middle class, new emerging markets and a greater appreciation of the experiences that luxury consumers around the world are demanding.
Australia is still experiencing some growth, driven in part by China’s 415 million Millennials who “are rapidly emerging as the country’s prime consumers.”1 And despite fluctuations in our own domestic consumer sentiment, Australia’s luxury goods market continued to deliver growth in 2016 thanks to high disposable incomes, increased accessibility to brands and the spending by Chinese tourists.2
After going through a more diluted period, luxury is now evolving from a state of having to a state of being. But it is also staunchly reclaiming some of its traditions in a thoroughly modern nod to new consumers divided by a growing disconnect between idealism and realism. As Coco Chanel famously said: "Luxury must be comfortable, otherwise it is not luxury.”
The Prestige Promise reveals insights into how the luxury industry must re-identify itself to holistically and honestly resonate with the new luxury consumers. Luxury brands grow by catering to different groups of people3 and because luxury is now about the prestige personal experience, luxury products must deliver on that experience and the desired associated status to drive future growth.
S E C t I o N o N E
introduction — what is the prestige promise?
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“Luxury commands widespread respect from consumers
for quality and achievement. Evolving beyond the high-end
aspirational, luxury is purpose-led and inspires passion. Ultimately, luxury today is
the elevation of products and services into the upper echelons of design, technology, heritage, quality and service. And all at
once, implicit and rare.” — NICK SmIth, PrEStIg E ANd lIFESt ylE
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“Luxury is an elusive idea. It is indicative of this elusiveness that its
effective meaning has not remained constant.”
ChrIStoPhEr J. bErry4
The Story of Luxury Luxury has always represented “… a standard of quality, a mark of authenticity and [been] shielded by a veil of exclusivity”5 but it has also long been debated, because luxury isn’t simply a product that “… indicates our tastes in fashion,
it also defines our political, social, and economic standing and our self-worth.”6
Luxury YesterdayThe term “luxury goods” was used by analysts on Wall Street to describe companies such as LVMH, Richemont and Gucci going public7, but prior to this, companies such as these enjoyed a global reputation for specific expertise. For example, Chanel (1910) for couture fashion, Burberry (1856) for raincoats, Baccarat (1764) for crystal and Mont Blanc (1906) for writing instruments8. But all major luxury brands have expanded
upon their traditional realm. For example, Mont Blanc into watches and jewellery; Bulgari into fragrance and hotels.9 “Fragrance was the first vehicle for the ‘democratisation of luxury’,” says Dale N. Dewey, CEO of Luxury Solutions. “While millions could never afford a Chanel gown or even a Chanel handbag, they could afford a bottle of Chanel No. 5.”
Luxury goods were initially “produced in small quantities — often made to order — for an extremely limited and truly elite clientele,”10 but during the past few decades, major brands have grown significantly to become truly global
and are now retailers in their own rights for their own products.11 And, despite a smattering of bespoke craftspeople, most luxury goods are now mass produced and sold12 and it's the decline of these custom-made products that marks one of the biggest changes in luxury.13
During the past 50 to 100 years, the concept of luxury has been consistent, but at the turn of this century, its evolution hit full speed, and the idea now reinvents itself every few years. The 2015 What Is Luxury? exhibition presented by London’s Victoria and Albert Museum,
questioned “…whether luxury is still based solely on acquisition of objects with innate material value, or has society evolved to demand that luxury have some social responsibility, be it championing traditional skills in danger of disappearing, or encouraging innovation, or even making the world a better place for all?”14 And just two years on, luxury remains increasingly difficult to define.
Luxury Today“Luxury — the word and the idea — is in a state of transition.”15 Classic “luxury” items are still popular with certain consumers, but 60 per cent of affluent consumers believe the
definition of luxury has changed in the past five years and that it now holds a different meaning to each individual.16
During the past decade, consumers have become more demanding of the luxury market, with political instability, economic instability, technological advances and rapid social change resulting in an expedited evolution of the luxury market. The periods in this evolution do not represent mutually exclusive events. In fact, the trends that have emerged are now combining to result in a far more personal and highly individualised
S E C t I o N t W o
the luxury evolution
The trends that have emerged are now combining to result into a personal, individualised experience of true luxury where
a person’s status is determined by self-actualisation.
7BUrBErry (1856)
EnjoyEd A gLoBAL rEpU TA T Ion for spEcIfIc ExpErT IsE In rAIncoAT s.
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Source | New Insights on Luxury & Luxury Consumers, IPSOS Media CT Luxury Insights Summit, April 29, 2015
The evolution of luxury during the past decade
Stealth wealth & logo shame
The intangible, artisanal & authentic
Personalisation & hyper-personalisation
True luxury on demand
Subject to moral criticism during economic hardship, conspicuous
consumption becomes less conspicuous
Ultra affluents fuel luxury mini-boom in the post-recession period. Energised by a movement
toward experiences and authenticity
Status achieved through self actualisation as a luxury experience. Ethically based
conspicous consumption, where the highest quality, design and experience meet the most
unique and creative technology
The beginning of the individualised product experience
Trading up 2005 rising
2007 The period of aspirational luxury
20082009
20102012
20132016
20172020
carefully consider its words to communicate effectively with the modern luxury consumer.
The term “authenticity” is one of the most contentious. Consumers in general are tiring of the “authenticity” and “artisanal” movements as the terms have “pervaded the marketing landscape.”19
However, it is important to distinguish the saturation of the term
with its application to experiences. Consumers still want authentic experiences; they just don’t want it to be marketed to them in an overt way. They’ve become sceptical of claims specifically made by multinational companies who they view as unable to provide a truly authentic product. Subtlety is critical.
As such, we are seeing an evolving language in the luxury industry, but underpinning its legacy are the
qualities still most associated with luxury: “highest quality”, “design”, “reputation” and “uniqueness”. So herein lies the opportunity for the luxury market — make claims that are truly authentic and tailor experiences that are unique; however, remember that the value of authenticity is now much more intrinsic in the luxury offering.
experience of true luxury where a person’s status is determined by self-actualisation.
It is now the more intrinsic values, such as time, value, experience and personalisation that are driving luxury purchases today. Consumers explore more, researching a product both online, instore and through social groups, before making a purchase. As Rebecca Robins, co-author of Meta-luxury: Brands
and the Culture of Excellence, said: “Conversations around what luxury means will range from the external to the internal, from statements of status to a deeper sense of discovery and learning, from the superficial and superfluous, to truly unique products and experiences that will be treasured for a lifetime.”17
What has become evident during this time, however, is that while ”luxury brands are facing a number
of challenges … the ones that are succeeding are those who have stayed true to their story, pricing and positioning.”18
The Language of LuxuryThe art of language is as important to luxury as the art of craftsmanship. It’s a category that has long commanded the use of influential words such couture and authenticity, but in this new world of luxury, the category must even more
Source | New Insights on Luxury & Luxury Consumers, IPSOS Media CT Luxury Insights Summit, April 29, 2015
falling 20% 40% 60%
trend
Indulgence
Highest quality
Excellent designExcellent reputation
Unique
Rare
SophisticatedDesigner branded
Long-lasting
Splurge
Refined
Status
Privileged
Pretentious
Heritage
One-of-a-kind
ExclusiveExpensive
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the three defining characteristics of prestige consumers
11It is the combination of the below characteristics that help define consumers in the prestige market:
Capacity to purchase
Status drivers
Generational influences
International affluents and ultra-affluents
Seeking status through one or more of the below:
• Experience sharing
• Storytelling
• Brand association
• Rare identified networks
• Intrinsic appreciation of brand/experience attributes
Each of these status drivers will differ based on the
product category and also the individual’s personal passions.
Millennials — the luxury reinventors
Generation X — the luxury celebrators
Baby Boomers and beyond — the luxury substantials
CapaCiTY To purChaSeAustralia has traditionally been regarded as a middle-class nation, although this is becoming less so. In the 20 years since the mid 1990s, the average gross household income has increased 60 per cent from $66,196 to $107,276 today
while during the same period, incomes of the top 20 per cent of households (highest quintile) have increased by 74 per cent from $149,552 to $260,104.20 While many Australians may not be cash rich, they are considered relatively asset rich.
Lowest Second Third Fourth Highest All households
2011-12 Mean annual HHI (gross) $21,476 $46,800 $79,196 $122,304 $234,624 $100,800
2013-14 Mean annual HHI (gross) $22,620 $47,944 $80,704 $124,956 $260,104 $107,276
% increase +5% +2% +2% +2% +11% +6%
Lowest Second Third Fourth Highest All households
2011-12 Mean net worth $32,700 $200,500 $459,600 $804,900 $2,324,900 $764,500
2013-14 Mean net worth $35,500 $206,100 $462,500 $830,600 $2,514,400 $809,900
% increase +9% +3% +1% +3% +8% +6%
INComE — AvEr Ag E AuStr AlIAN houSEhold INComE by quINtIlE
WE Alth — AvEr Ag E AuStr AlIAN houSEhold NE t Worth by quINtIlE
Source for data tables | ABS cited Australia’s household income and wealth distribution, The McCrindle Blog. June 21, 2016. Retrieved from http://mccrindle.com.au/the-mccrindle-blog/australias-household-income-and-wealth-distribution
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Compared with 10 years ago, Australia is one of the top 10 fastest growing countries for Ultra High Net Worth Individuals (UHNWI; wealth of $30m or more) and is forecast to sit in the top 10 countries for the next decade.21
Source | The Wealth Report: The global perspective on prime property and Investment, 2017. Knight Frank.
GeneraTionaL infLuenCeS
Millennials — the luxury reinventorsBy 2026, Millennials will be the main consumers of luxury.22
“Their idea of status is not shaped by luxurious and exclusive possessions, but by a commitment to freedom of expression, new experiences and technology that matches their busy lifestyles. Luxury alone just will not cut it.”23
While many have suggested that the Millennial market will be the end of the luxury market as it is currently known, many more are now recognising that the Millennial market is providing an exciting opportunity for a new boom era in luxury, with forecasts suggesting Millennials will drive the next luxury-growth spike in the middle of the next decade.24 Millennials are the luxury reinventors.
According to Helen Brand, luxury goods analyst at UBS “The US Millennial consumer tells us that they spend more on luxury than
35+ consumers and feel markedly more optimistic about their personal financial outlook.”25
Millennials account for approximately 33.6 per cent of the luxury retail revenue in Australia.26
“Millennials prefer experiences to things. Fashion brands are blurring the lines between luxury items and experiences. Luxury shopping is an experience; that’s the whole point. Digital platforms are creating new, interactive experiences every minute.” as stated by luxury marketing expert Pamela Danziger.27
While “success” may be redefined for this market, Millennials are still driven by the aspiration to be successful on their own terms, more so than any other generation. And this is where brands are experiencing a dichotomy in thought in terms of Millennials’ relationship with the luxury market. Status is still driving their luxury purchases, but the expression of this status has changed. Rather than through the placement of a brand name on a product, it is instead via experiences they can share and have validated within their social networks.
They see luxury in different terms to any previous generation: enhancing their life experiences; being able to be shared; being produced, marketed and sold in an ethical way. These are global consumers, highly digitally savvy, optimistic, sensitive to sustainability — and sceptical. They are not attracted by the simple façade of the brand, says
Antonio Achille, managing director and partner at BCG.
Ultimately Millennials see themselves as more individual than any other generation and therefore the product or experience needs to contribute to their own unique sense of self.
Younger Millennials are still working toward their window of affluence whereas data suggests that older Millennials (aged 27-35) now spend twice as much on luxury goods as younger millennials (18-26)28, with an increasing appreciation of long-lasting quality products and a shift away from the disposable mindset of their younger Millennial years.
But it is important for luxury brands not to wait for this generation, as many of its ideals and behaviours are being filtered and adapted by some of the older market segments.
Gen X — the luxury celebrators
While there is a significant amount of literature on both the Millennial and Baby Boomer luxury segments, Generation X is the demographic that is currently reaching the peak of their careers, their incomes and their
ForECAStEd PoPul AtIoN g roW th For uhNWI IN SElECtEd CouNtrIES
Vietnam
India
China
Kenya
Australia
Russian Federation
UAE
Hong Kong
Singapore
South Africa
United Kingdom
United States
Brazil
Monaco
Saudi Arabia
Switzerland
+170%
+150%
+140%
+80%
+70%
+60%
+60%
+40%
+40%
+30%
+30%
+30%
+20%
+20%
+20%
+20%
2016—2026
STaTuS DriverSStatus can be achieved through varied and multiple ways such as
Experience sharing The status experienced though sharing unique experiences.
StorytellingThe status experienced through the ability to share stories about brands/experiences.
Brand associationThe traditional status achieved through purchasing or experiencing a branded product.
Rare identified networks
Increasingly important to today’s consumer, status is derived from an inconspicuous understanding within luxury subgroups of brands and experiences unique to this subgroup.
Brand appreciation/experience attributesA genuine appreciation of the luxury experience, with no need for recognition or sharing. Purely for the individual self.
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window of affluence. This is the segment that celebrates luxury in a new way, holding onto traditional values associated with luxury brands while embracing everything modern that luxury in the new age can provide.
Gen Xers are in their affluent years today and have both the capacity and the desire for new luxury products and experiences. With Millennials driving the purchasing “conscience”, Gen Xers are likely to also be seeking luxury products that hold true to some Millennial ideals.
This is a generation who remains engaged with traditional print-based marketing, yet is more addicted to social media than Millennials.29 They research purchases online, have significant touch-points in their purchase cycle (which includes their children from younger generations who question the ideals of the Millennials).
This is an incredibly sceptical demographic who has grown up with traditional methods of advertising, yet cannot be influenced by hype or trends. They value ethics, integrity, and uniqueness, while holding precious the ideals of tradition and heritage. They will look for the best
deal, but also greatly appreciate quality, craftsmanship and the traditional ideals of luxury. They are generally loyal once a product meets their expectations and will share this on social media. Gen Xers truly are the bridging demographic for luxury products and services during the next 10 years.
According to luxury travel network Virtuoso, while Baby Boomers spend more overall on luxury travel, it is Gen Xers who are spending more each day they are away30. Gen Xers represent approximately 41.9 per cent of the luxury retailing segment in Australia.31
Baby Boomers and Beyond — the luxury substantials
Baby Boomers represent 24.5 per cent of the luxury retailing segment in Australia32 and account for more than half of Australia’s wealth and are therefore a key market for the luxury industry.33
Boomers have made their money, established their luxury lifestyles and are driven by a search for new experiences to celebrate their freedom. “Baby Boomers are today
far less interested in goods than they were before, and less interested with consumption in general ... As they get older they’re more concerned with ‘What experiences do I need in what’s left of my life, what legacy do I leave in the world, what do I leave my children, what contributions have I made?’.”34
As the generation to redefine so many social norms, they expect to be represented as ageless in the market and take offence if misrepresented or excluded on account of their age.
Boomers appreciate craftsmanship and beauty. They are attracted to the values and integrity associated with the luxury market and value the stories behind the brands. They place significant value on the personal relationships they have with a brand and while slightly less active on social media than other generations, remain highly influenced by trusted word of mouth. They have adopted the purchasing of products and experiences online, with 73 per cent comfortable paying for things on the internet.35 As such, Boomers remain a vital demographic to luxury brands, but require a combination of both online and offline approaches.
Source for generational segments | EMMATM, conducted by Ipsos MediaCT, 12 months ending April 2017Source for the brand story | Millennials and the New Luxury. MSL Group PBJS, October 28, 2015. Retrieved from http://www.slideshare.net/PBJS/millennials-the-new-luxury;
Luxury Goods Research Presentation. The Economist Group. June 2015. Retrieved from http://marketingsolutions.economist.com/sites/default/files/Luxury%20presentation_site%20(5).pdf
g ENEr AtIoNAl SEg mENtS — PoPul AtIoN SIzE ANd At tItudES Ag rEEd to
Population size 2.5 million 2.6 million 2.5 million
Free time is more important than money 59% 63% 59%
Success is important to me 74% 65% 56%
Food is one of my passions in life 41% 42% 39%
Luxury is important to me when
choosing furniture for my home 26% 30% 29%
I often research online
but end up buying in store 58% 59% 56%
I am comfortable paying for
things on the internet 81% 80% 73%
Millenials
– the luxury reinventors
(AB’s age 18-34)
Gen X
– the luxury celebrators
(AB’s age 35-49)
Baby Boomers & Beyond
– the luxury substantials
(AB’s age 50+)
thE br ANd Story
It’s about access over ownership. 77% prefer a pared down lifestyle
with fewer possessions
Luxury symbolises success & achievement. More open to trying emerging label brands
Value luxury experiences over products. If given money to treat themselves to one
thing, 69% would opt for a trip to an exotic location or an activity they’ve always
wanted to try vs 11% on a fashion item
Millennials The luxury reinventors
Gen X The luxury celebrators
Baby Boomers & Beyond The luxury substantials
Brand stories that deliver extraordinary experiences or inspire to help them
continue on the road to success and aid in reaching their goals
Brand stories that showcase the uniqueness of the brand
and tap into the exclusivity and status this audience seeks
Experiences that integrate the brand’s story and delivering an experience
that respects their identity and values
insight insight insight
Brand story Brand story Brand story
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S E C t I o N F o u r
economic overview
17The international outlook — growth is evident but slowedAccording to the Bain & Company Luxury Goods Worldwide Study of 2016, the luxury goods market reported a four per cent growth and is worth €1.08 trillion in retail sales. The international market saw a shift from the consumption of goods towards the consumption of experiences such as travel and gastronomy, with hospitality, fine wines and spirits, and fine food being among the best performing categories. Luxury cars also remained a top performing category.36
Internationally for the first time since 2001, growth in local consumption of luxury has outpaced tourist consumption, and brands that recognise unique cultural difference within a globalised travel market can capitalise on both these markets.
According to Deloitte, there are four key elements of growth for the global luxury market: increasing wealth; increase in international travel; the importance of the Millennial consumer; and digital developments.37
1. Increasing wealth and the growing middle class
By 2020 there will be 3.2 billion middle-class consumers globally and this increases to 4.9 billion in 2030.38 There has been an increase of 155 per cent in the number of millionaires internationally since 200039 and an increase of 41 per cent in the number of Ultra High Net Worth Individuals (those with $30 million or more in net assets) during the past decade, with this figure likely to increase an additional 43 per cent during the next decade. There are currently 2024 billionaires around the world (an increase of 45 per cent on the previous decade). 40
across all luxury categories, growth is shifting toward emerging markets. While China, India, Russia and Brazil have provided the luxury market with growth during past years, new markets such as Peru, Columbia, Ethiopa, Zambia, Kenya, Tanzania, Bangladesh, the Philippines, Sri Lanka and Indonesia will increasingly contribute to the growth of the
international luxury market.41 India, Mexico and the Middle East also offer further growth potential.42
The 15 fastest growing emerging markets will provide 90 per cent of the growth in consumption of luxury goods in the next 10 years (led by China).43 Much of the growth in emerging markets is concentrated in a limited number of megacities. Approximately two thirds of the global economic growth by 2025 will be concentrated in the world’s top 600 cities. Projections suggest that there will be 60 megacities by 2025 where GDP will account for 25 per cent of global GDP exceeding $250 billion.44
According to McKinsey, the luxury women’s ready-to-wear market in emerging countries will grow from a less than 10 per cent share approximately 10 years ago to 32 per cent in 2025. And in other categories such as luxury spirits and high-end cosmetics, the share of emerging markets will nearly double in the next decade.45 McKinsey also states that these markets will have grown three times faster than mature markets. The top 20 cities based on their forecasted market size in 2025 for some of the key prestige categories are:
Source | The glittering power of cities for luxury growth. McKinsey & Company, September 2014. Retrieved from http://www.mckinsey.com/industries/retail/our-insights/the-glittering-power-of-cities-for-luxury-growth
F A S h I o N
Paris. Tokyo. Milan. London. New York. Moscow. Osaka. Los Angeles. Rome. Seoul. Singapore. Dallas. Chicago. Madrid. Nagoya. Miami. Sydney. Mexico City. Washington, DC. Saint Petersburg
S P I r I t S
New York. Los Angeles. Chicago. Washington, DC. Houston. Dallas. London. Mexico City. Shanghai. Beijing. Moscow. Philadelphia. San Francisco. Miami. Boston. Atlanta. Seattle. Phoenix. Tokyo. San Diego
b E A u t y
Hong Kong. Tokyo. London. New York. Moscow. Shanghai. Beijing. Paris. Los Angeles. Taipei. Singapore. Osaka. Seoul. Chicago. Shenzhen. Madrid. Dallas. Milan. Dubai. Rhein-Ruhr, Germany
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2. International travel
“Spend by people travelling accounts for 40 per cent of the personal luxury market.”46 Given the accessibility and prevalence of international travel, the same experience worldwide will no longer meet the expectations of the international luxury consumer. There is increasing demand from luxury consumers to create different and unique localised experiences from around the globe which ultimately can provide new opportunities in the prestige market.
“In order to cater for tastes and satisfy demand from emerging markets, Moët Hennessy launched a pair of fizzy wines made in India, Chandon Brut and Chandon Brut Rosé. Hennessy will also launch its first Chinese-grown wine in 2014. Meanwhile, both markets are improving homegrown brands – in India, the well-known Sula and Fratelli vineyards also offer resort stays; the Chinese are now the world’s biggest consumers of red wine (IWSR survey by Vinexpo) and are employing the skills of wine experts from Europe to improve their vintages.”47
Chinese travellers are still top consumers. Chinese travellers remain the fastest growing nationality segment for the luxury market and despite a slowdown in the Chinese economy, remain a key growth area for international travel.
Most Chinese travellers who buy luxury goods are aged 45 or under and use social media, mobile and other digital options to learn about brands and to interact with luxury
branded content. As such, in 2016, China’s spending habits accounted for about 31 per cent of the world’s luxury goods.48
Chinese tourists spend more on luxury products when travelling internationally than what they spend locally as luxury products trade at a premium at home. And while luxury companies are addressing this differential, (for example, Chanel recently addressed the Chinese-European price difference, stating that its worldwide prices will not fluctuate more than 10 per cent above its global Euro benchmark)49, the Chinese tourism dollar still leads.
3.The international Millennial consumer
“demographic disruption is the
biggest challenge that luxury brands will
face over the next 10 years.”50
PAmEl A N . dANzIg Er , uNIt y
mArKE tINg — SPE AKEr , Author ,
mArKE t rESE ArChEr
According to the United Nations, 200,000 million Millennial tourists generated $180 billion in annual tourism revenue, an increase of nearly 30 per cent since 2007.51 And Chinese Millennials are not indebted with student loans and are less likely to have housing costs or mortgages. By 2020, there will be 300 million Chinese Millennials (compared with 80 million in the US).52
4. Digital developments
E-Commerce is now the third largest “luxury market” globally behind the US and Japan, with eight per cent market share.53
Mobile devices now account for the majority of traffic (57 per cent) to luxury sites with luxury shoppers more likely to be on a smartphone or tablet than the average internet user.54
According to researchers at McKinsey “…expect luxury’s share of online sales to double from six to 12 per cent by 2020 ...” and by 2025, “…the online share of total luxury sales to be 18 per cent”55.
The australian opportunity
The Australian economy is forecast to grow 2.8 per cent in 2017 and 2.9 per cent in 2018,56
being a more stable environment than many economies around the world. And despite some low consumer sentiment during 2016 and variations in the performance of the retail sector, the luxury sector in Australia increased by five per cent during 2016, on account of the contributing factors to the country’s wealth, and the population of High Net Worth Individuals, including the ability of Australia to attract HNWI from other countries, particularly China.
Six key elements contributing to strong growth in the Australian market.
1. The increase in real household discretionary income, with Australian consumers willing to pay for superior, high-quality products.
2. International travel to Australia and the decreasing Australian dollar. Specifically, Chinese shoppers will continue to be strong consumers of luxury goods in Australia with tourism from Asia contributing as much as 30 per cent of the luxury market. The China outbound market continues to be the fastest growing market in the world and for Australia, the largest inbound market based on both expenditure and number of arrivals.57 Tourism Australia has estimated expenditure from
Chinese Nationals could increase from AUD$8.3 billion up to AUD $13 billion by 2020.58
3. International travel from Australia and Australia’s growing appreciation of international luxury brands.
4. The increasing presence of international luxury brands and experimental labels in the Australian market, particularly in Sydney, Melbourne and Brisbane. The global influx of luxury companies is expected to continue for the next five years.
5. International trends reaching Millennial consumers in real time, driving consumer demands in the luxury sector. “… younger consumers are becoming increasingly conscious of fashion and luxury, especially
as they are continually exposed to the extravagance of celebrity lifestyles through film, media and social-networking platforms.59 “This trend has been reflected in the rise of emerging labels and experimental brands that target the younger cohort, with a host of international designers and labels reaching Australian shores through luxury boutiques or smaller flagship stores.”60
6. Multichannel strategies increasingly being adopted by luxury brands. Internet retailing remains the fastest growing channel for luxury brands with many brands committing strong investment to their Omni-channel strategies as 85 per cent of Millennials and 75 per cent of Baby Boomers are ready for Omni-channel interactions.61
The international factors The Australian landscape
Increasing wealth and growing middle class
• 25 years GDP growth
• Increase in real household discretionary income.
• Global influx of international brands and experimental labels
International travel
• Increasing inbound tourism market
• Decreasing Australian dollar
• Increase in volume and value of Chinese consumer
• Emerging-markets opportunity
• International luxury brands offering uniquely Australian experience.
• Increasing Australian international travel leading to an increasing appreciation of international luxury market
Millennial consumer
• Global citizenship of Australian Millenials
• Debt-free Chinese Millennial tourism market
• Millennials driving the experience economy
Digital developments
• Real time consumer demand for international luxury products and experiences
• Multichannel strategies for Australian luxury industry
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prestige category forecasts RetailingMany of the above overriding factors mean the luxury market retailing revenue is forecast to grow by 7.5 per cent across 2016-2017 with revenue of $1.8 billion62, despite there being weak consumer sentiment in the market. Moving toward 2021-2022, the industry is expected to outpace GDP growth with an annual rate of 8.4 per cent compared with 2.5 per cent GDP growth.
While international growth is being fuelled by the growth in luxury e-commerce, a large percentage of the market desires an exclusive shopping experience and brands that can harness both their online capacity and their unique personalised experiences will continue to prosper. The opportunity for boutique establishments with a wide range of brands driven by celebrity culture and the Millennial market will see the luxury segment remain strong in the Australian market.
Food and wineInternationally, investment-grade wine was the top investment choice according to the Knight Frank Luxury Investment Index.63 In Australia, fine wines/Champagne and spirits increased five per cent in 2016.
Source | Luxury Goods in Australia. Euromonitor, November, 2016
TravelToday, the luxury-travel consumer is increasingly seeking unique destinations often defined as those that are changing or rapidly disappearing. Destinations such as Cuba, the Arctic and the Great Barrier Reef and those offering active holidays such as South African safaris, Vietnam and the Galapagos Islands are forecast to grow. According to the Virtuoso Luxe Report, cruises, exclusive experiences, customised local experiences and multigenerational travel are increasingly preferred.64
According to Cruise Lines International Association (CLIA), the number of Australians taking an ocean cruise worldwide last year reached a record 1.06 million passengers (an increase of almost 15 per cent on the previous year). Reflecting the growth of this industry, Sydney alone hosted 336 cruise-ship visits in 2016-2017, an increase of 10 per cent year-on-year.65
The appeal of Australia as a travel destination is also helping fuel the local hotel boom. In 2016, the number of accommodation stocks available in Australia passed the 100,000 room mark and more than 9000 extra rooms
are forecast to be added in 2017-2018. The last time Australia saw this level of growth in hotel accommodation was prior to the 2000 Sydney Olympics (where an extra 7500 hotel rooms were added between 1998 and 2000). Furthermore, accommodation stock in Australia is forecast to grow by 30 per cent between 2016 and 2021.66
Real estate Australian luxury real estate (the top five per cent of city housing markets), grew by 11 per cent to June 2016, the strongest regional growth internationally.67
AutomotiveSales of new luxury cars in Australia grew by 11 per cent year-on-year in 2016 compared with an industry growth of two per cent.68 Luxury vehicles now account for 9.5 per cent of all new vehicle sales69 and according to the Commsec Luxury Vehicle Index, record sales were recorded by Audi, BMW, Ferrari, Jaguar, Lamborghini and McLaren in 2016.70 Interestingly, the luxury category to draw the most number of comments on social networks is not ready-to-wear apparel or fashion accessories, but cars, according to a McKinsey study.71
Growth forecast 2016 – 2021
Designer apparel and footwear (ready-to-wear) 16.2%
Fine wines/Champagne and spirits 16.2%
Luxury eyewear 8.9%
Luxury jewellery 10.8%
Luxury leathergoods 23.3%
Luxury portable consumer electronics 3.5%
Luxury timepieces 14.6%
Luxury writing instruments and stationery -9.1%
Super premium beauty and personal care 10.8%
ForECASt g roW th oF luxury rE tAIl
CAtEgorIES IN AuStr AlIA : 2016 -2021
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prestige trends
23“T he essence of luxury will thrive as a meeting of minds and a fusion of opposites. It’s the
meeting of the care and craftsmanship of the source material with
technological vision. But it will be driven by the need to be ‘me’. It’s applying the next generation of
technology and remodelling with groundbreaking production value.”
— NICK SmIth,
PrEStIg E ANd lIFESt ylE
dIrECtor , NE WS CorP
Trends driving the luxury market beyondWhile luxury is still about status, in this new world, luxury consumers “want to ‘be’ rather than ‘have’,”72 because it is less about what someone owns and more about who
someone is. As such, “the emerging luxury consumer is less interested in amassing status products than in test-driving special, singular experiences and cultivating a balanced lifestyle that includes plenty of time for family and friends.”73
And with consumer tastes and behaviours constantly changing, luxury brands “must adapt with culture and evolve in unique ways that move people emotionally”74, because those consumers are expecting more and more — “a high price tag now must come with careful thought and deep purpose. Luxury brands today must show they care about tomorrow more than their bottom line.”75
With the global economic and political landscape changing more rapidly than ever, “the longer-term strategic challenge for luxury brands will remain the epic shift towards more varied, complex, individualised and meaningful
forms of luxury consumption”76 that is “curated with a human-centric dimension where brands are validated by people, not the other way around.”77
As the luxury consumer is a mobile one — technologically and physically — the maintaining of an honest connection means luxury brands must increasingly “think local and learn to connect on deeper cultural levels, to ensure continued custom and loyalty.”78
As Toby Bottorf, vice president of Continuum and part of the Audi on Demand creation team says: “What the new, more demanding luxury consumer is looking for is more authentic experiences. And digital tools have enormous potential to deliver these three crucial qualities of experience: essential simplicity, storytelling value and magical convenience.”79
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“modern luxury is deeply, inherently and organically intertwined with digital
technology ... It is shifting from timeless to timely,
from status symbol to cultural code, from
product to service, from opulent to meaningful.” 80
ANA ANdJElIC, SENIor vICE
PrESIdENt ANd g lobAl Str AtEgy
dIrECtor , hAvAS luxhub
Prestige intelligence — where technology becomes the luxury. No longer is the luxury market lagging in technological advancement; it is leading it. In fact, the “silver bullet”81 for luxury retailers is now “redefining the business they are in”82 in order to take advantage of increasing connectivity and the rise in the number of connected affluent consumers.83 Quite simply, luxury has firmly stamped its logo onto tech.
We’ve seen Samsung partner with de GRISOGONO and Apple with Hermès, and products “from handbags with built-in battery chargers to designer dresses with live Twitter feeds.”84 Burberry is considered “a master of social-media marketing and storytelling”85
leading by example with their partnerships with Snapchat, Google, DreamWorks Animation, Instagram and Apple TV.86
With “burgeoning demand for all things connected”87 and a prediction that by 2020 half of all web searches will use voice or image search,88 luxury will move from lagging to leading. For example, we can expect to see luxury travel goods incorporate inspired functionality such as fingerprint locking, built-in global-tracking, Bluetooth speakers, self-weighing scales, SIM cards and Wi-Fi hotspots – “as luxury goods and high-end travel go hand in hand, this is an obvious match made in heaven.”89
trend — prestige intelligence
Luxury wearables
saw a 60.2%
growth in 2015/201690
Credit:iStock.
See now, buy now Augmented and virtual realityInnovation and integration utilising Augmented Reality (AR) and Virtual Reality (VR) technologies will drive the “see now, buy now” approach through trial and experience.91 Tommy Hilfiger’s Fifth Avenue, NYC flagship store had VR headsets for shoppers to view and shop from the label’s fashion show92 while London’s Covent Garden partnered with AR app Blippar to provide consumers free access to an interactive discount map, table reservations and scavenger hunts across the area.93 Chinese e-commerce giant Alibaba has created Buy+, a VR mall for stores such as Macy’s, Target and Costco where shoppers are able to make purchases by simply nodding their head.94
robotics X people Artificial intelligence servicesConnected households with intuitive devices that monitor basic needs and replenish without thought is a true time-saving luxury and will drive brand loyalty but remove the potential for immediate personalisation.95 California-based robotics company Savioke’s smart
robot butler, Charley, is a “Relay” model room-service robot servicing patrons of the luxury Crescent Heights Ten Thousand building in Los Angeles. Charley works through a mix of artificial intelligence, planning and perception algorithms, and human intelligence (it includes a call centre).96
invisibility adorned Going beyond wearable tech The fusion of fashion and technology will lead to the evolution in production where hand and machine work intrinsically together to approach “wearable technology from a creative aspect rather than purely functional”97. For example, the desire for privacy and control playing out in the physical world is revealed in the ISHU scarf, which features light-reflecting anti-flash technology to make the wearer invisible in a flash photograph. It’s already a favourite of celebrities such as Cameron Diaz.
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3D epicureans 3D printing delivering intricate creationsFoodini by Natural Machines is an Internet of Things appliance that specialises in printing a very wide range of foods into elaborate designs. Ingredients are placed in reusable stainless-steel capsules to allow recipes and designs to be uploaded from anywhere. This enables the creation of dishes that are just not possible to make by hand and as such, is predicted to revolutionise the world of cuisine.98
Secure luxury Luxury data protectionTotal personal data security — where the demand and the solution are created by tech — is emerging as a powerful form of luxury. According to a 2016 Knight Frank Wealth Report, 39 per cent of Ultra High Net Worth Individuals globally say “online privacy and security is an issue of concern for them when it comes to the creation and preservation of their wealth”99. Blockchain technology security will help combat counterfeit goods100 while brand apps will drive customer security. For example,
Bulgari partnered with WISeKey to create its Vault app for payment and smartphone security unlocked via TouchID and face recognition with personal information stored in a high-security Swiss Alps bunker.101
Connected tech Travel brands will use connectivity and technology to cater for luxury customers, such as using Linen Technology Tracking – a chip that uses radio frequency ID technology to track the whereabouts of hotel-room towels via sensors so housekeeping can gauge how often a guest would like their room serviced without asking them. New apps can track if you’re running late for your flight and communicate with all levels of your itinerary – from changing flights to updating your hotel concierge. But there will also be a shift towards helping create a sense of exclusivity by curating something on a specific and personal level, such as Onirikos, a boutique Italian destination management company and concierge who “design ‘non-Googleable options’, from dinner in Venice on the roof terrace of Peggy Guggenheim’s to a private visit to an excavation under the Vatican.”102
“An unsustainable piece of clothing or jewel is, in the end, anything but flawless. As we all wake up to that reality, the
luxury companies have no choice but to act.” 103
ANdrE W WINStoN,
Author ANd SoCIAl ANd
ENvIroNmENtAl CoNSultANt
The Transparent purpose — why luxury brands must live and breathe responsibility, sustainability, ethics and empathy. “The value of an object is no longer just in quality and cost of materials, nor even in workmanship, provenance and exclusivity. Today, it needs to be part of a sustainable ecosystem; this means caring about the planet, community and future generations.”104 The globalisation of luxury has an impact socially, environmentally and in terms of biodiversity. Combined with an increasing consumer demand for transparency, the backlash against “authenticity” and a growing disconnect between idealism and reality, and luxury brands now have a greater need to transparently
embrace social responsibility, sustainable production and also ethical innovation.
There is a very clear move towards “broadening the definition of quality to include environmentally and socially positive methods of production as well as focusing on innovative design, craftsmanship and fine materials.”105 And this is becoming even more central to the requirements of the luxury consumer, with “brand trust” topping the list of sustainability factors that influence purchasing for global consumers.106
It’s more than just experiencing luxury without damaging society or hurting the environment; the transparent purpose is about honesty, giving back and making the world a better place. And this honesty must be intrinsic to every part of the organisation’s identity.
But luxury brands cannot rest on their current corporate social responsibility and sustainability missions, because with consumer tastes and behaviours constantly changing, they “must adapt with culture and evolve in unique ways that move people emotionally”107 because these same people are expecting more and more.
trend — the transparent purpose
Two in three are willing to pay more for sustainable
goods108
68% are prepared
to pay more for products and services
from companies committed
to a positive social and
environmental impact109
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Kering’s material effect Sustainability in actionIn 2012, French luxury group Kering published a four-year plan with specific targets for carbon emissions, use of water, ethical sourcing and eliminating use of PVC. One initiative to manufacture responsibly-sourced raw materials amassed up to 2000 alternative materials, with Gucci pioneering regenerated cashmere using fibres from offcuts to create new lower-impact cashmere without water or chemicals. The group also developed a new method for leather tanning using no harmful metals, resulting in reduced water and energy consumption. What this demonstrates is that “luxury and sustainability can be combined: if one considers the definition of luxury as related to know-how, heritage, rarity, transmission, respect for materials, human rights
and quality, then you tackle the very fundamentals of sustainability.”110 In fact, sustainability reinforces some of the core values of luxury, including craftsmanship and noble materials and “a high price tag now must come with careful thought and deep purpose. Luxury brands today must show they care about tomorrow more than their bottom line.”111
Diamond promises Ethics and biodiversity entwined The De Beers Group responsibly source their Forevermark diamonds from mines in Africa where almost 180,000 hectares of land surrounding them are set aside for conservation. They also support local female entrepreneurs and contribute to the provision of good-quality healthcare and education.112
individuality celebrated Embracing diversity“I am 27 years old, live in New York City, I am in a wheelchair and I am fucking beautiful,” says Julian Mercado.113 Increasingly, images and messages are celebrating individualism and diversity as part of an increased awareness and empathy inherent in the social awareness of Millennials and younger generations. Another example is Australia’s Madeline Stuart, who became the first professional model with Down syndrome and who has twice walked the runway at New York Fashion Week.
Sustainable epicureans The driving forces behind the new fine dining Nora Pouillon pioneered organic cuisine in 1979 in the United States with her fine-dining eatery, Restaurant Nora, to champion local and organic produce in Washington, D.C. For almost 40 years she’s been a leader in the sustainability movement and today she’s also on the boards of five environmental organisations and a partner in a sustainable fish business.114 Sustainability will continue to define the luxury food realm, from Blue Hill’s Dan Barber’s stance on food waste to Noma’s René Redzepi’s use of indigenous ingredients both in his flagship Denmark restaurant and his pop-ups in Sydney and Tulum, and in his new Noma, opening later this year, where “the kitchen will not just adapt to the seasons but be defined by them.”115
Credit: Instagram @ madelinesmodelling_
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hyper experiences — where personal brand immersion and “sensploration” takes luxury to the next level“Luxury 3.0, where sensploration, experiences and savoir faire rule supreme … where consumers will revert back to such old-school concepts as locally sourced food and beverages, traditional craftsmanship, bespoke tailoring and more.”116
“From a societal point of view, we are witnessing the pendulum swing from the concept of ownership to experience”117 and as such, luxury is now central to the experience that a product can deliver. As such, those products must meet the expectations of a customer’s desired lifestyle experiences. In fact, growth of luxury experiences was five percentage points more than
the growth in luxury goods in 2016, with the best performing categories luxury cars, luxury hospitality, fine wine and spirits, and fine food.118
Modern luxury is also about time and what people get out of that time,119 presenting a clear opportunity to maximise the experience during interaction120 with “transient, intangible, service-dominated experiential luxury.”121 In fact, “much of experiential luxury is one-off and unrepeatable. This makes the moment of experience ever more important; particularly for those trading up into it”122 and can be supported in part by mobile data, which can help “deliver the most hyper-personalised experience.”123
Sharing on social media has revolutionised luxury experiences with those consumers able to “own”
their moment externally.124 “These captures are also opportunities to create something that has the appearance of permanence out of something transient; a small sense of ‘ownership’ in something that is impossible to own.”125
Ultimately, “a simple, essential experience does not try to be everything to everybody. It has a point of view and focus. The mechanics that enable the service are invisible. Choice is smartly restricted. Offerings are just right, often to the individual.”126
trend — hyper experiences
79%would choose a luxury
experience over a luxury item127
Money can buy what money can’t buy The ultimate travel experiences“In 2016, Iceland’s Secret Solstice Festival included the world’s first concert inside the dormant magma chamber of a volcano. While “more reasonably-priced tickets” sat at about the US$200-300 mark, a “cool US$1 million” ticket upped the ante on luxury festival experiences with round-trip flights for six in a private jet from anywhere on earth, a luxury six-room villa for the week with in-villa dining by a top Icelandic chef, and 24-hour chauffeurs.128 But it was the suite of private experiences for the entourage of six on this ticket that elevated this to a hyper-luxurious travel experience. An aerial tour of Iceland, a whale and dolphin watching tour, Midnight Sun glacier walk and snowmobile experience (with helicopter transfers, no less), private visit to the Blue Lagoon, and access to all festival VIP soirees among other included luxuries. And not to forget the Secret Solstice Midnight Sun Boat Party, glacier concert and an intimate concert at their Reykjavík villa.129
Hyper experiences like this are the new height of luxury, coming as they do with high bragging rights. It also delivers on the “uniqueness” criteria, offering more than just another festival. Studies by travel company Amadeus reveal that “the more accustomed a traveller, or a regional market of travellers, is to luxury, the higher they will need to travel up the pyramid for their expectations to be met and for their idea of luxury to be fulfilled … and the new era of luxury travel requires brands to constantly monitor their expectations, and adapt accordingly. In other words, new luxury is real time.”130
Time to inspire Intellectual experiencesRolex partnered with TED on a tablet app by creating a functionality called Inspire Me, where users could discover talks within a given topic and timeframe. The average viewing time was an impressive 24 minutes, revealing the luxury of on-demand.131
Luxury on demand The experience economyAnother example of the shift from the product economy to the experience economy is the Audi On Demand service, which allows customers to rent a chosen car from their fleet. It is then delivered to their door, complete with personal concierge. Catering company Hunter VIII Hunter launched the Drop Off, an app allowing Londoners to order a dinner party to their door. In less than 24 hours, users can create their ultimate dinner party including food, wine, flowers and table settings plus downloadable playlists and video tutorials on food presentation.
vision of beauty Brand immersion Chanel “decided to declare its vision of beauty at the Ritz Paris”132, building on the landmark hotel’s long association with Coco Chanel, who took a suite in 1937 and stayed for 34 years. This temple of beauty immerses customers in Chanel’s world of luxury inside one of the city’s most luxurious hotels for a unique and authentic Chanel experience.133
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“citizens of the globe134 are ultra-aware of their state of wellbeing and are interested in what they
can do to maintain it and improve their health and balance, even when faced with accelerated stress.”135
— brIAN PovINEllI ,
g lobAl br ANd lE AdEr , WEStIN
hotElS ANd rESort
The Transcendent Self — the luxury of betterment and self-actualisationSelf-improvement luxury is now largely about status, especially when it comes to Millennials who are driving this trend. Luxury consumers will “seek further betterment, moving to yet another level of self-improvement, combining the notion of self-actualisation with true luxury indulgences, where self-improvement and self-indulgence meet in the one experience.”136
The Transcendent Self focuses on more than just the meeting of the physical and the mental, but the belief that self-actualisation is faster, smarter and more exclusive, and all the better if the experience can be documented and shared. Success will come to those brands who can combine solutions to problems that represent self-actualisation because luxury consumers now express these needs through their yearning for new
experiences “where self-actualisers run marathons and status seekers take luxury vacations.”137
“Returning luxury to its roots — something precious, rare, and most importantly, invested in emotional value” is helping redefine luxury in the travel industry, where the word has long been overused. Small Luxury Hotels of the World said “small has never been bigger” and larger luxury hotel chains have listened. For example, InterContinental is opening a hotel in Venice in 2018 with just 55 rooms. Guests staying in small hotels also tend to want ultra-immersive experiences, says Jack Ezon, president of Ovation Vacations. “Clients are asking us to create experiences for them that will help them grow as people and as a family. A beach resort is no longer just about pampering yourself; it’s about connecting.”138
“As the luxury sector continues to attune to an economy motivated by services, experiences and the possibility of personal connections … modes of engagement and even products rooted in a sense of imaginative, meaningful purpose — including those that explore a more spiritual, wellbeing-focused outlook — will have a significant resonance.”139
trend — the transcendent self
94% of Millennials, 84
per cent of Baby Boomers
and 81% of Gen Xers made
self-improvement commitments.140
Marathon luxury Hotels for health seekersThe Mandarin Oriental Barcelona created a luxury offering for those running in the Barcelona Marathon. Their Marathon Package includes a personal coach to assist with stretching, a preview of the final three miles of the course on the day before the marathon, spa treatments and a late checkout.141
heli-yoga Connection in the desert For those visiting Las Vegas — a city that built its reputation on the notion of decadence — Maverick Helicopters has partnered with a local yoga studio to offer a heli-yoga class on the red rocks of Nevada’s Valley of Fire. Wireless headphones transmit a customised playlist as well as instructions throughout the class.142
Survival condos Luxury bunkersLuxury nuclear bunkers are being developed underground at an old nuclear missile site in Kansas, USA. The “Survival Condos” start at US$1.5 million and are
“nuclear-hardened bunkers that are engineered … to accommodate not just your physical protection but your mental wellbeing as well”, says the developer Larry Hall. He is exploiting a growing trend by catering to those who want every aspect of their lives — even personal security in time of disaster — to be luxurious in nature.143
Time for fitness Wearable fitness designed Capitalising on the fascination with the gold Apple watch, Samsung and de GRISOGONO collaborated on a $US15,000 luxury watch that tracks physical metrics. Samsung Gear S2 by de GRISOGONO is a limited-edition luxury smartwatch wrapped up in a diamond-set gold bezel and with a black sharkskin strap. Adding to its exclusivity, the watch was available to view only via appointment at de GRISOGONO boutiques.144
Credit: iStock.
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“It’s really important to be disruptive and do things that actually are kind of a little scary and bold ... you’ve
got to push yourself and push yourself out of your comfort zone.” 145
— ChrIStoPhEr bAIlE y,
ChIEF CrE AtIvE oFFICEr , burbErry
Disruptive Collaboration — capitalising on the emotional investment luxury consumers have with brands How we collaborate has profound implications for how we live and work and “we are now living in arguably the most transformational time in human history; and it is digital disruption that is rewriting every part of our lives.”146 For example, many luxury brands are now collaboratively designing with hotels and luxury residences, with the likes of Armani, Bulgari and Versace all taking up residence in that realm. “And the possibilities are endless for how far a brand would like to take it in the space. The opportunity to extend a brand’s reach and fully immerse customers with an authentically branded experience can be a great way to build affinity among its customer base for years to come.”147
“Collaborations, whether product or artistic, will be key in the next five years, with co-creation changing the emotional investment consumers have in product.”148 Examples include luxury British resortwear brand
PRISM’s PRISMoji app that features emojis of all its different products and some celebrity faces;149 Net-a-Porter’s collaboration with Cathay Pacific that allows passengers on the new A350 flights to shop online mid-flight; and Dolce & Gabbana’s limited-edition line of fridges for Smeg inspired by medieval art and their native Sicily.150
“We need to think not only about creating something for the consumer, but also about empowering existing businesses and creating more, not fewer, opportunities. A collaborative company is one that works alongside established companies and, rather than trying to crush or destroy incumbent business models, helps to drive them forward through new innovations.” 151
“Not all innovations are disruptive, even if they are revolutionary. The introduction of automobiles was not originally a disruptive innovation. Cars were considered to be expensive luxury items that did not disrupt the market for horse-drawn carriages”152 but can luxury brands disrupt and capture their own secondhand market? And can unusual alliances plus secondhand luxury create a truly innovative market disruption? We believe they can and will.
trend — disruptive collaboration
opposites attract Yoga meets beerCuriosity Lager was a limited-edition craft beer created for Lululemon by Canada’s Stanley Park Brewing that “honed in on a particular subset of fans and gave them an exclusive, meaningful experience” prompting two fanbases to crossover153 says Doug Devlin, Stanley Park Brewing’s marketing director. “Just because you’re a yogi, doesn’t mean you won’t have an occasion for beer, and we’re certainly interested in talking to that crowd … I think Lululemon, by extension, is interested in talking to a more male beer-drinking crowd. It’s a nice way for each of us to take what it is we do to a new consumer.”154
The new vintage Secondhand market sets offThe online economy has seen the secondhand market for luxury brands recently emerge strongly. For upper premium brands it represented €16 billion in 2014.155 While this market threatens new product sales, it alternatively turns luxury goods into durable products with an increasingly set resale price, hence increasing their value. The secondhand market also enables mid-income, aspirational luxury shoppers to afford the most expensive brands.156
europe in new York Creating the spa that sparkledLa Mer’s journey began when Dr Max Huber unlocked the renewing power of the sea and his cult luxury brand has since joined forces with French crystal maker and nascent hotel brand Baccarat to launch its first-full-service spa. Spa de La Mer opened within the Baccarat Hotel & Residences New York in July 2015 and is designed to resemble a European seaside village.157
When aston met Dom Ultra luxury brands combineAston Martin released a new model that features a removable hand-made bespoke cellar designed to fit three bottles of the 1998 vintage of the most famous Champagne in the world, Dom Pérignon, plus two flutes and bottle openers. The Milan-based marque promoted its Plenitude Special Kit across Italy but kept the price and materials top secret.158
Credit: Carscoops.
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“What is luxury for you is not for me. my mother would have said
that luxury is a nice dress and a nice jewel.
I would say it’s time, it’s space, it’s silence ... it’s really something quite personal.” 159
— ElISAbE th PoNSollE dES PortES ,
g ENEr Al dIrECtor , ComIté ColbErt
True individualism — taking luxury from personalisation to individualisation. “When searching for more individuality and originality, everyone wants to distinguish themselves from others somehow ... To become unique, we often have to individualise totally normal products and services. Many people look for distinction in niches.”160 And it’s an important lesson for the luxury market.
The automotive industry is a leader in this trend, with its luxury manufacturers highly competitive with their bespoke offerings. BMW states that “individualisation is the ultimate form of luxury”161 and create limited-edition luxury models through its Individual Manufactory program. In stark contrast to technology’s ability to expand individualisation, customisation is key to wooing modern consumers and for some manufacturers such as Mercedes, human workers are reclaiming the space on assembly lines.162
“Part of customisation’s appeal for consumers is the opportunity to play a part in the broader narrative of a brand.”163 Customers of Salvatore Ferragamo can create their own version of the brand’s driving shoe and in Burberry’s first accessory customising service, people can design their own classic cashmere scarf from the brand’s Scarf Bar.164 In the luxury wellness industry, London’s Bodhimaya claims to be
“a pioneer in the individualisation of wellness” as the “only wellness retreat or spa to offer genetic analysis that looks at gene expression and not just the genetic blueprint.”165
From those FOMO enhancers to the concierge of the future, “Individualisation is achieved when customer intention is anticipated, understood, and actioned in the moment,” says Kristi Mansfield, CX strategy and transformation director, Oracle APAC.166 Brands must “structure experiences around customer journeys” and “ask how customer data can inform each interaction.”167
trend — true individualism
My fat Duck Heston’s individualised diningWhen Heston Blumenthal re-opened his The Fat Duck restaurant in the UK, he began to ask diners to submit information about themselves during the booking, allowing the building of diner profiles to tailor the meal to individual experiences. “The menu is a map of the diner’s journey, which revolves around childhood feelings of adventure, discovery and curiosity. This may be the reason why the diner will not know what dish awaits them until they begin the journey … and adds a personalised touch so the diner will walk away with lifelong memories of an experience tailored for them.”169
professional holiday pics Connecting the professionals with travellers The Flytographer app connects travellers with professional photographers, who not only take extraordinary photos but share insider info about the destination and reveal the most stunning and often secret backdrops for their photos. Guests who stay at the Fairmont group of hotels and resorts receive special access to Flytographer to ensure they take home stunning high-end photos of their holidays.170
86% say luxury is in
the eye of the
beholder168
Credit: The Fat Duck landing page.
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“When you’re working in a luxury brand like chanel, rarity and exclusivity are important, so
sometimes I’m trying to sell, believe it or not, fewer handbags so we
don’t banalise the product ... Bottom line is important, don’t get me wrong,
at a luxury brand like chanel, but really our focus is on the quality of our products, on the beauty of our image, on the special designs
that we have, on providing incredible customer service.” 171
— mAurEEN ChIquE t,
FormEr CEo, ChANEl
rarity reclaimed — returning one of the core pillars of luxury to the centre stage. Perhaps the clearest breakdown of modern luxury today is what lies between “true luxury” and “mass luxury”. While the market will always benefit from both groups of consumers,172 it’s the opportunity to reclaim luxury as something rare that is driving a movement towards true luxury. Richness is growing everywhere in the world thanks to fast economic growth and rising middle classes in emerging markets but “luxury must never be made too accessible if it wants to remain the dream of those with growing revenues and wealth.”173
Dana Thomas, author of Deluxe: How Luxury Lost Its Luster, says “Luxury was a natural and expected element of upper-class life … and it was produced in small quantities — often made to order — for an extremely limited and truly elite clientele”174. Luxury was traditionally associated with a form of rarity but while luxury products have become more attainable, we are witnessing a move back to rarity in the prestige luxury sector through offerings such as bespoke experiences because “discerning shoppers want to know the provenance of and celebrate beautifully crafted products.”175
From César Ritz to Cristóbal Balenciaga and Coco Chanel to Yves Saint Laurent, the legends of luxury were artists and innovators.176 We are now a hyper-connected culture and “consumers want luxury products at a time that’s convenient, that speaks their language and that understand them as an individual.”177 So how do we keep the traditions embodied by the big names of luxury alive in an era where the rapid advancement of technologies such as 3D printing is fast-tracking mass production?
French luxury house Kering says it best: “For the customer, luxury is lived through contrast. The rarity of luxury is not just in its limited supply and exclusive access, but also in the rarity of our experience of it. Otherwise it is a high-priced, high-quality commodity. For the trade, luxury highlights the outer limits of what is possible. Others then follow in line and the whole profession progresses.” 178
trend —rarity reclaimed
When minimal means more Subtle signals and anti-brandingFrom Tom Ford’s discreet Private Blend fragrance collection to the lack of branding on Bottega Veneta’s leather bags, anti-branding creates its own exclusivity, appealing to a “select group of people who are very luxury oriented and appreciate minimalism.”180 “Now that luxury brands have spread to the middle class through diffusion and accessory lines, services such as Rent the Runway, fast-fashion copycats, and high-quality counterfeits, logos don’t signal wealth the way they once did.”181 Louis Vuitton, Michael Kors, Tesla and Audi have downsized, hidden or made logos optional, Emirates revamped its plane layouts and boarding system so Economy passengers no longer see First Class perks while Patrón has reduced the gilding on its tequila bottles.182
experimenting with history A decadent new Champagne Moët & Chandon’s pioneering MCIII is one of the few cuvées that blends Grand Cru vintage Champagne into still wine. The incorporation of three vintages of sparkling wine into a blend of oaked and unoaked still wine is extremely rare in Champagne because of the difficulty and expense in getting it right. Moët’s chef de cave, Benoît Gouez, says the house’s collection dates back to the 1830s and it has saved more bottles of vintage than any other house. The 30 miles of caves beneath its winery in Épernay gives Gouez the advantage to experiment in this manner.183
Credit: iStock.
179
30% of luxury brands
are at risk of “losing
their exclusivity” 179
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My Legacy Label — the intangible benefits of storytelling and sharing this throughout the generations. Luxury goods hold their value and can last a lifetime and as such offer both a tangible and intangible value for future generations. Generation X, in particular, grasps this value and is driving the shift from tradition to legacy. In doing so they are evaluating luxury products from a future perspective both financially and emotionally. In Australia in particular, the current challenge of housing affordability and lack of investable assets for younger generations means the appeal of “investable luxury” is fast growing. The feeling of leaving something for future generations is increasing in appeal. And it’s not hard to understand why: in the past 35 years, French leathergoods brand Hermès’s classic Birkin handbag has increased in value by more than 500 per cent.184
“T he art of storytelling is how luxury brands
have remained relevant and have created the special position that
they hold on our culture. T he huge changes that technology has brought
about in recent years have affected not only the way these brands communicate with consumers, but also the way consumers are getting involved in the stories of the brands
they love.” 185
— thINK WIth goog lE
Luxury brands are not selling a product. They’re selling a lifestyle, heritage and status, and the product is rarely the focus of the story, which is why authenticity is critical to the narrative. “Luxury is all about storytelling, whether it is the history of the brand, the dream of the new collection or a wondrous new location”186 and as such, giving luxury consumers something to tell and then share is intangible.
Brands don’t need to have a long heritage to be able to tell a story, however in the era of content marketing, luxury brands must rise beyond to differentiate their true brand identity. “Content strategy is not your brand story. It cannot replace the ethos and the defining point of view of your brand.” 187 By staying grounded within their heritage, brands can be adventurous in their stories.
“Luxury brands were by default created by founders with vision, spirit and passion that attracted their first audiences and made them fall in love. Early luxury houses were arbiters of taste that worked with taste-savvy connoisseurs of culture who came to ateliers for the lush vibe and the stories of creation as much as they did for the goods.”188
All consumers now have easily accessible platforms with which to share their stories, and express their identity through those stories. This is because stories focus on experiences, something that is at the symbolic heart of luxury.
trend — my legacy label Jaguar Land rover’s The vanishing Game Combining user-generated content with a media partnershipJaguar Land Rover made luxury-brand storytelling a reality by commissioning bestselling author and Booker Prize nominee William Boyd to produce an original adventure novella. The Vanishing Game is a full-length, original online story that follows protagonist Alec Dunbar on a mysterious driving adventure across the UK. It’s brought to life on Tumblr through an innovative multi-sensorial experience comprising video, photography, animation, sound, music, and narration, and “spotlights personal driving adventures from actual Land Rover owners”.
“Also embedded into The Vanishing Game’s interactive experience are snippets of driving journeys from actual Land Rover owners, curated by the brand through the designated hashtag #WellStoried. When readers scroll over certain words and passages, the story will pause as these owners’ personal driving adventures are displayed on screen.”189
The Burberry way The art of storytellingBurberry’s Christopher Bailey says the British brand tries “to create product and design that is about craft; it’s about function, it’s about feeling. Clothes and product give you a feeling — confidence, a feeling of protection and security … It’s not just a coat. That coat has a story. The fabric for that coat was woven in this incredible factory in the north of England. Then that roll of fabric was driven to another factory, where somebody unrolled it and chalked it all out and cut it. Then somebody else started sewing it together. And that story began more than150 years ago and has evolved like this, so that you have this quite traditional old-fashioned craft but we’ve also put in a little RFID chip into the piece. So when you go to the Regent Street [London] store and are near a
RFID-enabled mirror, it turns into a screen and all of a sudden you can see the story about that roll of fabric and where it came from. People want the soul in things. They want to understand the why’s and the what’s and the values that surround it.” 190
Meet the makers First-hand storytellingHermès A Puertas Abiertas (Hermès Open House) was an interactive exhibition held in Mexico where consumers could meet and see at work the artisans who design goods for the luxury fashion house. To coincide with the exhibition, the Mexico City Hermès boutique displayed a trompe l’oeil design showcasing the house’s workshops in France.
Celebration of ageless beauty Appreciation of great design spans generations Fashion designer Dries Van Noten’s Fall 2017-18 ready-to-wear fashion show marked his 100th such runway with “a celebration of ageless beauty”191 featuring models such as Kristina de Coninck, Alek Wek, Guinevere van Seenus, Carolyn Murphy, Tasha Tilberg, and Esther de Jong. The models ranged in age from their twenties through to their fifties and the show was a true display of the “cross-generational appeal of great design.”192
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key takeouts
43Luxury is personal: the meaning of luxury continues to evolve and is moving towards the discovery of a deeper sense of self. A key challenge for marketers and brands is being able to capitalise on this new shift towards the self-actualisation of luxury yet also cater to the status needs that remain.
Generation and life stage still play a large role in influencing the luxury purchases of consumers. Understand which consumers are of most value in terms of both number and value and explore key partnerships with brands that can help you engage with your consumers most effectively and synergistically.
While Millennials are the future luxury consumers, all too often brands overlook Gen Xers and where appropriate should capitalise on their number and spending capacity as they are primed to spend during their “window of affluence” life-stage.
Status remains a key driver for luxury purchases but can be achieved through varied and multiple ways such as experience sharing, storytelling, brand association, rare identified networks and an intrinsic appreciation of luxury attributes. Which status-pheres motivates your prestige consumers?
There are eight luxury trends outlined in this report. on which trend/s can your brand best capitalise?
Prestige Intelligence. Technological and innovative improvements have become an expectation of today’s prestige consumer. How can your brand leverage technology in a meaningful and purposeful way?
The Transparent Purpose. Luxury brands today must live and breathe responsibility, sustainability, ethics and empathy. It must be honest and can’t appear as tokenism.
Hyper Experiences. In today’s “always on” world, prestige consumers are seeking heightened experiences that tap into their senses and help them reconnect with the present. In what ways can your brand deliver a truly unique and elevated luxury experience?
The Transcendent Self. Prestige consumers are seeking self-improvement and betterment in various ways. How can your brand help prestige consumers connect with themselves on a deeper level?
Disruptive Collaboration. Disruption has become the norm. Can you increase your brand equity and revitalise your brand by exploring opportunities with other beyond-the-norm brands, potentially tapping into a new customer base at the same time?
True Individualism. Going beyond personalisation to individualisation. What role can your brand play in consumers’ customisation-meets-self-discovery journey?
Rarity Reclaimed. With a significant proportion of luxury brands losing their exclusivity, exacerbated by the wave of mass-tige, what initiatives can your brand undertake to help return rarity to the centre stage?
My Legacy Label. What are the tangible and intangible values your luxury brand/product holds for future generations? How can you help consumers tell their “Brand Me” story to future generations?
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28 Older Millennials’ Luxury Spending Climbs. Business of Fashion. September 17, 2015. Retrieved from https://www.businessoffashion.com/articles/news-analysis/older-millennials-luxury-spending-climbs
29 Nielsen study cited in Generation X more addicted to social media than Millennials Report Finds. The New York Times. January 27, 2017. Retrieved from https://www.nytimes.com/2017/01/27/technology/millennial-social-media-usage.html
30 Gen-X is finally getting into luxury travel in a big way. Business Insider Australia. February 19, 2015. Retrieved from http://www.businessinsider.com.au/gen-x-is-finally-getting-into-luxury-travel-in-a-big-way-2015-2
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35 EMMATM, conducted by Ipsos MediaCT, 12 months ending April 2017 (Base: AB’s age 50+ years)
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69 VFACTS, Federal Chamber of Automotive Industries, 2016 (NB: the self-classification of “luxury” cars include: Alfa Romeo, Aston Martin, Audi, BMW, Bentley, Ferrari, Jaguar, Lamborghini, Lexus, Lotus, Maserati, Mercedes-Benz, McLaren, Porsche and Rolls Royce)
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82 Luxury Brands must redefine the way they do business. The Guardian. September 10, 2015. Retrieved from https://www.theguardian.com/media-network/2015/sep/10/luxury-brands-retailers-china-economic-slowdown
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131 Culture Vulture Luxury Edition 05. Mindshare Retrieved from https://www.mindshareworld.com/sites/default/files/CultureVulture-Issue%2005-Luxury_TO%20VIEW.pdf
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134 The survey sample consisted of more than 6000 frequent global travellers from the United States, China, Mexico, India and the United Arab Emirates.
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