Welcome to 2016. To kick off the #LuxuryDebate this year for Luxury Society, luxury marketing agency and Knowledge Partner Cocoon Luxury looks at the key trends set to take the market by storm in the months ahead.
I think we’ve all agreed that the luxury market is not what it was. The rise of emerging economies and the growing global middle class has changed luxury beyond recognition. The last 10 years has seen a relentless period of unprecedented growth for the global luxury market as a whole. Bullish and undeterred, luxury was still growing whilst the global economy was starting to shrink, but success has been patchy, and many luxury sectors such as leather goods and apparel have actually been registering a decline in sales.
When you scratch the surface, luxury growth in recent years has been largely sustained by emerging markets such as China and Russia. But rapid growth necessitates rapid change. New opportunities have changed traditional market norms, forcing luxury brands to adjust and adapt.
“ After a few difficult years, 2016 is the time to make luxury pay ”
As brands and marketers we need to believe that we are at the very beginning our journey not at the end of it, and that after a few difficult years, 2016 is the time to make luxury pay. So what will be the hot topics of 2016 that will help us make that happen?
Tech’s appeal to the luxury audience is clear – the world’s wealthiest people are also the most likely to own the best tech, and everyday items such as phones, tablets and phablets have become luxury products in their own right.
The technologies that drive these devices are relatively democratised, so the real differentiator for the luxury audience comes in the look, feel, design, and adornment of the hardware. Take the Apple Watch, a companion fashion tech product which can’t be used without an iPhone in close proximity. Add an 18-carat rose gold case and you aren’t left with much change out of £20,000 – plus a very happy luxury consumer.
“ In this nascent market, the real future of wearable tech probably hasn’t been invented yet ”
What will the future of the luxury wearable look like? No-one really knows. At the moment, it’s mostly chip technology that transfers data from one point to another. In the really cutting edge, wearables data is biometric, but in the main the market isn’t that sophisticated yet.
The reality is that in this nascent market, the real future of wearable tech probably hasn’t been invented yet and that’s both simultaneously exciting and frightening in equal measures.
The luxury audience is becoming less interested in attaining status from labels or from a price tag. So if luxury brands can’t compete on monetary value, they need to find worth and substance elsewhere.
That’s why brands in the luxury space are enticing luxurians with mass debate. Armani has curated tweet talks, whilst Chivas hosted a debate on luxury at the V&A; to interrogate luxury from aesthetic, conceptual and cultural perspectives. The audiences were thrilled – because in one hashtag and one evening respectively, Armani and Chivas became more than just brands, they transformed into thought-leaders.
We’ll see more of this in 2016. The luxury audience is intelligent and curious, so you have fashion brands looking to the world of history to curate their collections and tell their developing story, or car manufacturers delving into cartography to map out famous car journeys and keep their audience fixated on the joys of being behind the wheel.
After all, it’s the worlds of history, science, art, geography, philosophy that provide inspiration to the luxurian in their own daily analysis of the world. Brands should take a leaf out of their audience’s book if they want to create the kinds of stories worth discovering.
“ India’s population of ultra-high-net-worths is growing at an impressive rate ”
In 2014 the Indian luxury market rose 25% year on year, and is forecast to grow 86% in constant value by 2018.
Ignore it at your peril. There are a multitude of reasons for this, but one of the biggest is that India’s population of ultra-high-net-worths is growing at an impressive rate.
This is helping home-grown brands thrive – indeed three India companies made the 2015 Deloitte Top 100 Luxury Brands list, in the form of watch brand Titan and jewellers Gitanjali Gems and PC Jeweller. But Western brands are also trying to crack this market too.
“ Whilst this consumer base is eager to be impressed, customers are also ready and willing to switch allegiances ”
These brands are seeing success by diversifying their products and services for the Indian market, going beyond providing the classics and tailoring for a unique culture. In fashion, Hermes, for instance, provides a bespoke Sari collection, whilst the likes of Gucci, Chanel and Jimmy Choo are grabbing a slice of India’s burgeoning wedding market.
How will things change in 2016? Well, whilst this consumer base is eager to be impressed, it also means we have customers ready and willing to switch allegiances on a whim. Brands therefore need to recognise the need to build loyalty. That starts with data and research – so far so underused in this market.
In 2016 you’ll want to meet HENRY – the gatekeeper to the luxury market and the future of ultra-affluent consumers.
HENRYs (High-Earners-Not-Yet-Rich) are currently defined by household incomes of £100k – £250k and, being predominantly aged between 25- 34, provide a huge opportunity for luxury brands.
Although HENRYs spend almost half as much on luxury purchases in comparison to ultra‐affluents, the number of HENRY households is considerably higher (by approximately seven times), making the market around four times more valuable.
HENRY males, in particular, are increasingly turning the heads of brands. With their high disposable incomes, highly driven attitudes and a desire to spend on exclusive products and the best experiences, this demographic is driving luxury brands to expand their offerings and boost the service that they provide.
“ HENRYs prefer to spend it on experiences and lifestyle enhancing products ”
Men now make up 40% of the luxury goods market, according to Bain & Co. Dior, for instance, has recognised this growth by recently opening its first menswear flagship store in Paris.
And as attitudes shift, priorities shift too. Contrary to traditional spending habits such as investing in a property or saving for a wedding, HENRYs prefer to spend it on experiences and lifestyle enhancing products.
Men’s fashion site MR PORTER is a prime example of a brand that does a great job at speaking to affluent males. It delivers engaging content, a swift service and style that go far beyond the average shopping experience. Which ticks all of the boxes in the eyes of HENRYs.
“ This demographic is disrupting the luxury market ”
It’s clear this demographic is disrupting the luxury market, so for 2016 brands need to reassess how they connect and communicate with HENRYs, and what it means for them.
The sharing economy has taken the business world by storm. It may have grown out of the global recession, but it has now firmly cemented itself into the future of the economy, with examples like Uber and AirBnB being the stars of the show. It’s already begun to happen, but in 2016 this trend is going luxe.
The theory behind the sharing economy is very rational: people understand the costs and benefits of owning a product versus simply using it. The experiences and the activities that we take part in shape who we are.
The new generation of HNWs want multiple experiences and options. They have a desire to be spontaneous, without the pressure of permanent ownership. Whether that’s flying via private jet to Ibiza one weekend, staying in a luxury ski chalet the next, or hopping on a yacht a few weeks later – all with a luxurious wardrobe to match.
An example of a brand thriving from this trend is Onefinestay. Dubbed the “luxury Airbnb”, it provides private luxury home rentals, with the average guest dishing out more than £400 per night.
The company recently received £26 million in financing and is rapidly growing, with an impressive portfolio six times larger than The Ritz, The Plaza, George V and Hotel Bel Air combined.
“ It’s this sense of variety, uniqueness and individuality that the next generation of affluent is looking for ”
Or, if you fancy taking to the skies, Victor offers private jet travel with a click of a button via its app, taking the burden out of buying and renting a jet. It recently received £5.5 million in investment, and boasts more than 15,000 members around the world and has access to 7,000 aircraft and 40,000 airports.
It’s this sense of variety, uniqueness and individuality that the next generation of affluent is looking for. Traditionally luxury goods may have been a reflection of our identity, but experiential luxury is now seen as a true reflection of ‘brand me’. Uncovering unique experiences makes us much more individual than owning the physical goods themselves.
It is often assumed that all brands are online, but one sector is still a step behind. Luxury.
A staggering 40 per cent of high-end brands still do not sell via the web, according to Bain & Company. Historically luxury companies have been hesitant to make the online leap, with fear that it signifies the contrary to a luxury retail experience – lacking intimacy, personal touches and above all, exclusivity.
“ Exclusivity has always been the traditional heartland of luxury brands, so successful moves to sell online will leave this perfectly intact ”
But the next generation of luxury consumers are here. They are younger, digital-savvy and have higher expectations of brands. Not only do they expect brands to be available online, but they also expect a seamless experience to go with it.
Exclusivity has always been the traditional heartland of luxury brands, so successful moves to sell online will leave this perfectly intact. By fashioning online boutiques that showcase exclusives, rather than the full product range, consumers remain eager to buy.
This ‘fear of missing out’ on a limited range intensifies traditional exclusivity to create a new kind of demand, so brands can retain their elite status. Hermes online boutique does not include their highest value pieces – the Birkin and Kelly bags. Instead, consumers are directed in store, where specifications can be discussed in person.
Meanwhile, having built their brand on a personal, bespoke experience in store, Gieves and Hawkes have not shied away from digital expansion. Rather, they have embraced it.
Their ‘father and son’ video was distributed cleverly across digital channels to ensure that it was seen by the next generation of gentlemen – millennials – whilst keeping a foothold on their crucial heritage.
Far from marking the death of authenticity and style, the online world can facilitate new evolutions. And in a sector that has always praised being at the top of the pack, this can be no bad thing.
To further investigate luxury brand innovation on Luxury Society, we invite your to explore the related materials as follows: