Luxury Society spoke with a panel of industry experts to find out what’s in store for luxury in the coming twelve months.
2012 was another dynamic year for the luxury industry. China officially overtook the United States as the world’s biggest consumer nation of luxury goods for the very first time. Wealthy investors in Asia and the Middle East snapped up European luxury brands, as European conglomerates intensified acquisition of suppliers and reinvigorated dormant heritage brands.
India added a local sourcing clause to foreign direct investment in retail, making it difficult for luxury brands to independently enter the local market. In Argentina, luxury goods brands led a mass exodus from retail as duties, taxes and customs delays made it impossible for many to receive stock.
Instead many luxury fashion houses concentrated on entry into ‘hard luxury’ categories, increasing their offering of branded fine jewellery and timepieces. This is when they took a break from legal battles surrounding counterfeit, copyright and everything in between.
But what does all this mean for luxury in 2013? How will the Chinese consumer change the game? How will the price of precious metals impact timepieces and jewellery? Where is the digital world headed next? We spoke with a panel of industry experts to gauge their predictions for the coming twelve months.
A Men’s Market In China
Male consumers will continue to drive luxury growth in China in 2013 explains Avery Booker of Jing Daily
The Chinese male shopper has long been the backbone of China’s luxury market, as government officials and businesspeople alike have continued to propel the controversial tradition of high-end gift giving. But while we anticipate male consumers to maintain their perennial demand for watches and automobiles this year (regardless of recent anti-corruption pushes), a shift is clearly afoot.
Recent studies have repeatedly indicated that the rising number of upper-middle-class male shoppers – with annual salaries averaging around $81,800 – is showing a greater interest in more individual luxury segments such as apparel, leather-goods, and personal accessories. This is definitely a trend that brands should keep in mind when planning for the year ahead.
“ Gift giving is no longer the singular driver of male luxury purchases ”
Gift giving is no longer the singular driver of male luxury purchases, as Coach China president & CEO Jonathan Seliger recently observed. Said Seliger, “Chinese men have become even more enthusiastic about following fashion trends and have started attaching more importance to their outward appearance through the use of ornaments and personal decoration.”
These personal “ornaments” and “decor” include watches, neckties, bags, suitcases, eyeglasses, jewellery and even skincare products. What makes this increasingly individualistic male consumer segment an important one, however, is their consumer psychology.
Contrary to female shoppers who, according to LS:N Global Research, exhibit more “emotional spending habits and are more vulnerable to the impact of an economic crisis,” male shoppers tend to be a “more rational and stable performance consumer market,” which is good news for brands that have developed new strategies to cater to their male shoppers.
Further Reading: Jing Daily
An Upwardly Mobile Digital World
In 2013 consumers will become accustomed to accessing content anywhere, at anytime, according to David Sadigh of Digital Luxury Group
Mobile consumption is growing at a very fast pace in both mature markets such as Europe and the US, but also in emerging markets like China and Brazil. It’s probably the first time since we entered into the digital era that a technology (mobile) is gaining such momentum, at such a huge scale.
To illustrate this we need not look farther than Facebook, which is receiving more than 500 million monthly users from mobile, more than 7 times the size of the entire French population. And this is just the beginning. 2013 will see a major increase in mobile penetration for several reasons. Smartphone and tablet penetration will continue to grow globally, but even stronger in emerging countries.
Also, the bandwidth on mobile will significantly increase – with many countries providing 4G/LTE access – and prices may also start to decrease because of the high level of competition. But most of all, people will get used to having access to the content they want at any time, from nearly anywhere.
“ Facebook is receiving more than 500 million monthly users from mobile ”
For brands, this represents a tremendous opportunity for creating unique brand experiences, which go far beyond having an app. In fact, we see “app fatigue” with brands offering apps that consumers seem to not really see the benefit of. And when consumers do download the app, our numbers show that they do not use them as often as brands would like.
What we envision is that luxury brands will have to be more pragmatic in the way they craft their mobile strategies, and make sure that they provide fast and customer-friendly content, allowing customers easy access to relevant information (for example, the opening hours of a boutique) without having to dig through a mobile site or install an app.
Last – but not least – mobile commerce. The numbers show that for urban transactional shoppers, valuing convenience and speed above anything else, mobile will become an essential channel in 2013. In a market like the US, trusted retailers with proven mobile platforms and strategies will be ideally positioned to take advantage from this growth.
Further Reading: Digital Luxury Group
A Time for Integration in Fashion
Fashion brands will need to further integrate customer service with enriched digital storytelling explains Elizabeth Canon of Fashion’s Collective
In the fashion and luxury industries, a move toward more meaningful and distinct brand communications will be very important in the coming year. Many brands, even the most iconic, have lost a sense of identity. It’s not uncommon for a luxury fashion brand to think of itself as sophisticated, classic and chic. But that could apply to a multitude of brands.
As new brands emerge, and national brands begin to expand out globally (like we’re starting to see in China), customers become more savvy about their purchases, and identifying with what a brand stands for will become an even more important part of the decision making process.
At Fashion’s Collective, we call this a move toward storytelling, but it really means owning a point of distinction and finding novel, interesting ways to convey that story appropriately for each platform.
“ Many fashion brands, even the most iconic, have lost a sense of identity ”
I think the difference going forward is that storytelling will begin to go hand-in-hand with customer service. No one in luxury really likes to discuss customer service because the assumption is always that, as a luxury brand, there is an innate high degree of service. But now customers create on-demand experiences with brands that span more platforms than ever, and the result is that gaps in customer service are exposed.
Someone might see a product in a magazine and type it into a search engine, only to get no search results. That product might not yet be added to the brand’s ecommerce website, or it might not be merchandised properly. In-store the sales staff may not be aware of the editorial coverage or the item in question. It’s also possible that product was never even produced.
All of these present pain points for customers. Just as storytelling now applies to all platforms from storefront to pinboard, internal alignment across departments is necessary to provide good customer service. As other industries deliver strong customer service in this way, people will expect that luxury brands go above and beyond.
Further Reading: Fashion’s Collective
Precious to Prevail in Fine Jewellery
High-end jewellery collections will continue to comprise the most precious of stones believes Maria Doulton of The Jewellery Editor
The high price of gold and other precious metals has made its mark on mid-price range jewellery. Solutions to making more with less have led to a flourishing of light and airy jewels, often employing open-work techniques and light settings, such as Chopard’s Imperiale collection, or exploring alternative materials such as exotic woods or gold-plate, of which we will see more in the new year.
I suspect there will be a continued interest in coloured precious gem-stones, as witnessed with Tiffany & Co’s 175th anniversary collection that focused on the stones the house has brought to the world, including morganite, tanzanite, kunzite and tsavorite. Diamonds will always be popular but with a strong element of design or a mix of stones.
Likewise the appetite for coloured diamonds remains high with record prices achieved at auction for coloured stones. At Bonhams in Hong Kong in November 2012, a 43.16-carat Ceylon sapphire ring by Van Cleef & Arpels achieved a new high of $1.5 million (est. $650,000) or US$36,000 per carat. There was also the successful tender of Rio Tinto’s Argyle Mine pink diamond auction in London this winter.
“ High-end jewellery collections appear to grow in strength and value as the world economy shrinks ”
High-end jewellery collections appear to grow in strength and value as the world economy shrinks. The proliferation of high value jewels on display at the Biennale des Antiquaires this autumn is proof that this is a growing segment of the jewellery market.
With new exhibitors such as Bulgari and Wallace Chan at the Biennale, this is an area that still has potential to attract more jewellers as well as clients. In both watches and jewellery, a strong emphasis on craftsmanship is transmitted by virtually ever brand and where relevant, heritage is a key message in the marketing mix.
Enamel work, intricate carving and exquisite setting skills are areas that can be highlighted to distinguish a brand as the jewellery world becomes ever more branded and the luxury groups are looking to make their mark in this territory.
Further Reading: The Jewellery Editor
Bigger is Better for Superyachts
Superyachts will get bigger and bigger, and 2013 will encourage new cruising patterns, explains Belinda Liversedge of The Superyacht Group
The niche nature of custom made superyachts resists straightforward trend analysis. The beauty of superyachts is that each creation is unique. Yet, craft designers speaking at the SuperyachtDesign summit in March, agreed we are heading in the direction of bigger yachts.
Two 100m plus yachts are scheduled for delivery in 2013, including Lurssen’s Project Azam, the180m yacht which will beat Abramovich’s superyacht Eclipse,162.5m as the world’s longest. “My feeling is that there are more of the monster projects being ordered this year,” said Ellie Brade, who compiles the Superyacht Report’s Global Order Book each year.
“Nobiskrug, Oceanco, Lürssen, Fincantieri, even Feadship for the first time, are all building above 100m”. Interiors wise, the gold-encrusted, ostentatious decor of yesteryear is becoming less common. The development has been driven less by designer preference than by maturing tastes of superyacht owners.
“ Two 100m plus yachts are scheduled for delivery in 2013 ”
In terms of where the yachts are choosing to berth and cruise, it is no surprise that yachts are staying in typical spots: France, Spain, Italy, Greece, Croatia and Turkey. But factors including changes in taxation and a logjam in France’s marinas could encourage new cruising patterns from 2013.
Superyachts are not like real estate, they can move. So, we saw this summer that Italy’s IVA tax on charter fees prompted yachts to change their itinerary to avoid tax and something similar could happen in France when VAT is added to charter from as soon as summer 2013.
New superyacht marinas in the eastern med tailored to owners and superyachts needs – refit facilties, larger berths and amazing varieties of services from infinity pools to trendy beach clubs – could also see them tempted away from marinas in the western med, many of which have far more out-dated services.
Further Reading: The Superyacht Group
A Woman’s World in Watchmaking
Watchmakers will continue to develop mechanical pieces for women and focus on their most iconic products, according to Maria Doulton of The Jewellery Editor
Don’t expect this to be a year of astounding mechanical innovation or eye-popping designs but a follow-through of last year’s strategy of consolidating strong products. Case in point is last year’s (2012) launch of the Cartier Tank Anglaise, a variant on a well-tested theme to mark nothing less than the Tank’s 100th anniversary.
When models are launched, such as Jaeger-LeCoultre’s recently arrived round watch for women, the Rendez-vous, they are carefully considered as opposed to opening brand new markets for the brand. In this case, the Rendez-vous filled an obvious gap in Jaeger-LeCoultre’s offering, dominated by men’s watches and the iconic rectangular Reverso for women.
Expect designs to be refinements of past winners, with great attention to materials – think carbon coatings, silicon components and new high-tech alloys – and an emphasis on craftsmanship.
“ I am hard pressed to think of a luxury brand that doesn’t offer an automatic women’s watch ”
The role of ‘complications’, particularly in men’s watches, is subtly shifting not so much to dazzle with amazing feats of mechanics, but to create practical and useful watches such as those incorporating alarms, dual times or chronographs and opening up this world to a wider audience.
The mechanical women’s watch is here to stay, and I am hard pressed to think of a luxury brand that doesn’t offer an automatic women’s watches, a complete reversal of the situation only ten years ago. Expect to see more mechanically sophisticated watches for women.
A continued emphasis on craftsmanship is on the cards, to the extent that in a bid to differentiate a brand, arcane skills are dusted off and brought to the glistening showcases of watch shops around the world. Last year, straw marquetry dials had a revival, so anyone’s guess what long-lost craft will be in vogue this year.
Increased Consolidation in Wealth Management
Both wealth managers and luxury brands will continue to focus on core assets, explains Nicola Ko of Ledbury Research
The most significant trend we expect is further global consolidation in 2013. This year has seen global wealth managers and luxury brands consolidating their operations, and we expect this trend to intensify in the coming year.
The focus on markets where a competitive advantage is held is manifest in the recent disposals of non-core assets by a number of wealth managers. One such example is Merrill Lynch selling its non-US business to Julius Baer. This is due to a perfect storm of rising regulatory compliance costs, pressure to strengthen balance sheets and economic uncertainty.
In a similar vein, the increasing focus by universal banks on their wealth management units – as seen with recent restructuring at UBS and Credit Suisse – is likely to increase as banks search for reliable income streams and less capital intensive operations.
“ The focus on markets where a competitive advantage is held is manifest in the recent disposals of non-core assets ”
Luxury brands have also been exiting specific markets that are not conducive to growth. There has been a mass exodus of luxury brands from Argentina due to its unfavourable import taxes and restrictions. Similarly, many luxury brands are delaying entry into India because of its lack of premium retail space, which limits scalability.
Such barriers, which may have been seen in more optimistic times as small hurdles to overcome in order to gain access to potential new markets, are now cause for many brands to reassess and rationalise their footprint.
This is consistent to what we predicted for 2012, when we expected a more considered approach to brands’ expansion plans. This is especially true for emerging markets – Looking at the footprint of 7 of the top global luxury brands in the BRIC economies, growth has clearly slowed. In 2011, the number of outlets of these 7 brands grew by 21%; in 2012 it shrunk to 9%; and we expect this to fall further in 2013.
Further Reading: Ledbury Research
To further investigate the industry year by year on Luxury Society, we invite your to explore the related materials as follows:
Published on 07 Jan 2013 under Data & Analytics
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