A lot of emphasis is placed on eyeing the future, but when it comes to strategy, there’s plenty for luxury leaders to learn from looking back.
Luxury leaders and executives need to carefully think which their future strategy will be. Many are the challenges and changes that the market is going to face in the years to come.
At least these are the lessons that we have gained discussing with luxury stakeholders in the recent ‘IE Luxury Barometer’ study.
The ‘IE Luxury Barometer’, from the Observatory for the Premium and Prestige Market and IE Business School, illustrates the 10 most important issues for the luxury and prestige sector which influenced their agenda in 2014 and that will condition their priorities in 2015.
“ The IE Luxury Barometer illustrates the 10 most important issues for the luxury sector ”
Traditional luxury intelligence had normally been concentrated on identifying consumer perceptions. However some other knowledge areas need to be involved as well. This report has not been designed to identify market needs, potential products or customer desires.
Quite contrary, the study has been tailored to bring more light to the fundamental strategic challenges that luxury leaders had in 2014. We also consider that the understanding of these topics also provides a good approach to the issues executives will likely face in the coming years.
To get the full picture of the strategic issues that luxury firms experienced last year we have surveyed a selected panel of 40 experienced professionals and executives with real decision power.
To obtain a wider perspective, the panel members have been selected from different fields of expertise. This has given us the vision of the different stakeholders of the industry. Of course luxury senior executives have been a fundamental source (63%), but also we have included other luxury specialized stakeholders from the academia (19%), investment firms (8%) and media (10%). Therefore this is a study to extract the perspectives of experienced professionals for the benefit of executives. This is why we consider it a report from experts to experts.
It is important to briefly highlight the methodology employed. The first stage of the research consisted in asking the expert panel to select their top priorities upon a selection of almost 30 hot topics. These hot topics where extracted from a universe of eight different areas of complexity.
The research was finished with a second stage where we gathered a third part of the expert panel on a face-to-face working session to evaluate in-depth the initial results. That was an extraordinary experience to gain additional insights from the experts and to review the preliminary results with much more depth.
Eight essential topics as identified in the ‘IE Luxury Barometer 2014’
The strategic issues that luxury stakeholders surveyed identified as a priority of their agendas for the period in question are:
1. Luxury Brands Create Memorable Experiences
2. Luxury Surrenders To The Internet
3. New Audiences And Generations – New Values Of Luxury?
4. Protecting Exclusivity
5. Product Personalization
Creating a memorable experience appears to be the clear priority for luxury firms. This applies equally to service and product based companies. Companies need to enhance their ability to stay closer to the consumer and engage with them.
The product itself and the point of sell need to be leveraged to a level where the consumer is not only buying a product but actually living an extraordinary moment. But beyond that, the experience should become a fundamental part of a firm’s “raison d’etre”.
Burberry’ interactive Regent Street store in London
We purposefully asked to the expert panel the impact of Internet from different managerial angles. Issues like ecommerce or digital communication where asked independently since the market has faced several novelties in 2014. We have seen the evolution of ecommerce, but also luxury firms embracing tools like We Chat that allows one to one conversations.
In this way we wanted to understand where the role of Internet lies and if any aspect had a predominant role. The answer, clarified in the face-to-face discussion, has been clear in this matter. All these issues represent one reality, the need of a single digital strategy.
We believe that this will be also a very important strategic task for luxury strategist, particularly in the years to come. Gone are the days where Internet was denied, or even the recent years where the approach towards it was perhaps shy or unorganized. The next years will be characterized by a significant role of Internet. But it should be properly understood, as this it is not only a matter of increasing web sales or open innovative web sites.
It is about designing a comprehensive and meaningful digital strategy that involves all parts of the company. One piece of advice would be, considering the top priority, to examine how the digital strategy helps building or enhancing the creation of a memorable experience.
Customers in Sydney shop the Karl range by Karl Lagerfeld using Net-a-Porter’s Live app
New consumers are entering the market, which is a nice growth opportunity. However their conception of what luxury should be is perhaps different. While not straying too far from their current strategies, luxury firms need to pay a close attention to understand younger generations of consumers, particularly the so-called millennials.
This issue being a top five priority unveils its importance and shows how this is no longer a secondary issue.
New values and beliefs could actually redefine the buying process or the consumption pattern. But also, and perhaps more importantly, this could modify the appreciation of certain products and the expectation of what luxury firms should deliver.
It is very interesting to observe this aspect as a priority. Accessing younger generation does not necessarily imply to offer a lower category or a more accessible product. The research has revealed how protecting exclusivity is considered to be essential. Indeed this is a very intriguing balance.
It is clear by now that the luxury market has reached an unprecedented size. Companies need to start thinking about their core capabilities and how to protect the reasons why they claim they are a luxury firm in the first place. Keeping a close eye in the protection of the value proposition stays at the top of the list for luxury stakeholders.
This provides an interesting message to luxury leaders on the brink of entering new categories or designing new products. While innovation is, and should be, fostered (as also identified as the sixth priority), the message is that this should not be done at the expense of the exclusivity foundations. This might also be of particular interest for executives dealing with situations where signals of excessive growth appear or mixed feelings about future growth sources are encountered.
Chopard S/S 2015 High Jewellery Campaign
Ultimately there is nothing like a one-off product, a product or service designed for and delivered to a single client. So, despite the fact that we may see the market increasing and more and more luxury consumers entering the market, the role of ‘made to measure’ should not be forgotten.
This does not necessarily mean that luxury firms should focus exclusively on personalization. It is also possible to enhance the portfolio for selected products. This is a very challenging task, however, and being able to personalize also comes with specific skills and service.
It is far more complex than selling a product, as it might imply an evolution of the business model in terms of capabilities and operations. Yet,personalization seems to be a very valuable path in conveying the firm’s values in a more competitive marketplace.
Customised designer fashion by Tinker Tailor
The top five priorities show a valuable perspective for luxury senior executives and suggest relevant aspects to keep in mind when looking ahead and designing their future strategies.
This research is aimed to be an approach, from the viewpoint of professionals and experts, to a summary of the key topics that affected the luxury and prestige sector in 2014. It is neither exhaustive nor exclusive.
Ten factors constitute a perspective. By delimiting the whole reflection, we were able to focus, although we are aware that the topic list does not finish here. The top 10 priorities were rounded out by the following issues:
6. Innovation in the process and product categories
7. Tourism reinforced as a key driver for growth
8. New values and beliefs associated to the concept of luxury
9. Environmental and social responsibility
10. Access to key scarce resources, including talent
To further investigate brand strategy on Luxury Society, we invite your to explore the related materials as follows: