What or who is the luxury consumer today?
For some, the gold taps are gone. For them, luxury is shifting to something more sophisticated. But for others, gold taps — even gold cars — are the height of I've-made-it bling.
The "luxury consumer" and the "luxury market" are common misnomers. While the 50-something housewife in Westchester County might buy the same watch as the Millennial entrepreneur in Chongqing, and while the motivational triggers will have similarities — to stand out, to mark their financial status, and their sophistication — their specific motivations are worlds apart.
"Luxury goods used to be valued because of their emphasis on craftsmanship and the intrinsic value of the brand," says luxury expert Hana Ben-Shabat, a partner in A.T. Kearney’s Consumer Goods and Retail Practice, in an article called The New Luxury Consumer? Think: Multiple Consumers for The Robin Report. "Today, intrinsic value continues to play an important role, especially to Millennials. But there is a segment of consumers (mostly in emerging markets), that prefer flash and fashionable glitz over classic craftsmanship."
So we should always refer to "the luxury markets" and the "luxury consumers". ("Luxury is becoming less of a status symbol in the UK" according to the fourth edition of Albatross Global Solutions and Numberly’s ‘The Journey of a Luxury Consumer’ report. More on that if you scroll down the page here.)
NB: Our founder, James Wallman has been working in the luxury sector since 2007, with brands including Burberry, Dunhill, and Louis Vuitton. Click here to hear this thoughts on the future of luxury at an event he and his team curated, held at Dunhill's Bourdon House in 2010.
Luxury in the 21st century is for far more people. Here are some key considerations to connect with luxury consumers in first world, rich countries:
Just as lions have thicker manes, howler monkeys have louder howls, and birds of paradise have ebullient feather displays and dances, so humans need to stand out. In a consumer culture, the way to express your power is to stand out is through the ritual purchase and display of consumer goods.
As Scott Galloway at NYU Stern School of Business points out, "Rich people are the most boring in the world." So if you can entice the right tastemakers, the other luxury consumers will follow.
We exist in a time of too much stuff — see James Wallman's book Stuffocation, and the enthusiastic reaction to it around the world. Luxury consumers, who are more likely than most to have enough stuff, are leading the charge from materialism to experientialism. For more on this shift, consider investment firm KKR's statement to investors in early 2016: "we believe that a major decoupling within retail sales is now occurring, with consumers choosing to spend on “experiences” rather than “things.”
Author Scott Carney writes in his forthcoming book, What Doesn't Kill Us, "experiences may be the new luxury". This is also explored in new documentary film Rise of the Sufferfests, many can own a piece of today's luxury world, but not everyone can attain.
The old-school, majority of luxury consumers want it all: to have big homes, to consume as many experiences with bragging rights as possible. But, influenced by the Digital Nomads, and those in the tech scene, the leading edge is preferring to have fewer, but more wonderful things. Smart fashion and luxury brands now "offer consumers perennially stylish, high-quality clothing and design products designed to last well beyond a single season", according to NY-based JWT Intelligence in an article titled The Luxury of Less.
Being seen to care about the environment is essential — especially if it's fun at the same time. Witness the success of Tesla.
We live, for most people, in a post-privacy world. But for the few, privacy is still possible. You simply have to pay for it. That can come in the form of a super-yacht, or attending a private event. Consider the money-can-buy experiences provided by concierge companies such as BlueFish and Quintessentially.
People are living far longer lives. For the first time, there is a suggestion that longer than 100 years is not only possible, but probable. This is radically changing people's perceptions of how they should live. These longer lives will create new life stages — as London Business School professors Lynda Gratton and Andrew Scott point out in their new book, The 100-Year Life: Living and Working in an Age of Longevity. Instead of the three stages of education-work-retirement, they propose that we’ll be living seven or eight stages. (Which makes it sound as appetising as an 8-course tasting menu, as opposed to the 3-course set menu.)
If you're living much longer, you need your hands, your knees, your memory to work for much longer. Luxury consumers will be the first to invest in next-generation healthcare including personalised medicine.
There was a time when marketers thought rich people would prefer personal service — and they do. They just happen to also be human and sometimes prefer not to talk with someone, and always expect their experience to be as enhanced as possible — by whatever means possible. Digital is an enabler: of service, customisation, experience. Consider the VR/AR efforts of luxury brands.
There is a suggestion that luxury consumers are less concerned with exclusivity. We believe this reflects the democratisation of what luxury means, and reflects a shift in the meaning of luxury. A global report by Albatross Global Solutions and Numberly, called ‘The Journey of a Luxury Consumer’ (the fourth annual version) found that 86% of people say quality is the most important attribute of a luxury good, taking the number one spot from exclusivity. The number of people naming exclusivity as the key attribute of luxury products dropped 15% points to 52% this year.
Many of today's and tomorrow's luxury consumers are entrepreneurs — and if they're not, they've been struck by the new idea that entrepreneurs = heroes. Even if you don't like Travis Kalanick, you have to admire him, right? And the same for Brian Chesky? This means that if luxury houses take a similar "lean startup" / "customer discovery" approach to creation, they will be thinking like their customers.
The global middle class globally will increase from 1.8 billion in 2009, to 3.2 billion by 2020, and 4.9 billion by 2030. Around 85% of this growth is expected to come from Asia. These stats from the Organisation for Economic Co-operation and Development (OECD).
These trends in luxury suggest these are the opportunity areas to look for success and differentiation:
The way to stand out in today's world is ever less through objects, and ever more through experiences. Consider the MARS acronym to wellbeing, and the "From MARS" 5-star Experience Rating — and work out how your offer measures up on each of the five points of the star.
Wherever possible, connect your products and services to your customers IoT-enabled lives. Add a layer of data, with open, easy to use APIs, so that whichever device they use, and however they run their life, it's easy for them to share the data, insights and stories created through your product or service.
Today's tastemakers can reach more people, more quickly than ever before. They are no longer the old media stalwarts, so you have to see who's who on the social media of the day.
This can work two ways. One, appeal to someone so that your product can stay with them whatever life stage they're at. Two, target the new lifestyle markers. Target people as they live in the separate seven or eight life-stages. Luxury care home creator Hadrian Healthcare, which creates care homes with in-house chefs, cinemas, even ballrooms, reported an increase in profits of 21% in early 2016.
Humans like to belong. It makes them feel good. Spending on something that has a purpose adds a intangible, but very visible twist: make the person look good aesthetically and morally, and you have a customer who'll keep coming back. Witness the success of TOMS shoes (which aren't very comfortable, yet ubiquitous). This socially aware "BOGO" model — "buy one give one" — will make its way into other areas, even real estate. Canadian organisation World Housing is partnering with two real estate developers WestBank and Bosa. For every condo someone bought at WestBank's 375-residence Vancouver House and for every condo at Bosa's Pacific Gate in San Diego money goes towards building homes in slums in Cambodia and Manila.
If trench coats and cars and food can be personalised thousands of different ways, so can your product or service. Don't think this (only) means personal service. Do realise it means crunching data to think ahead of your customer. Gather personal data, parse it, use event-triggered communications and be inspired by Nir Eyal's Hooked model — especially the magic of variable rewards — and cognitive computing to surprise and delight in exactly the right way, to the right person, and at the right time.
Bring the worlds of VR and AR to your customers, and you'll excite and entice them with the future.
Adopt the ideals of the lean startup movement. Be prepared to run small batches with your best customers to test the market. (NB We recognise this is a total turn around to the luxury ideals of yesterday.)
Create using the magical, 21st century patina of 3D printing, and mix this new form of output with old. Experiment with 3D printing in your best customers' home: install 3D printers so that they can download and 3D-print that day's jewellery.
Many big tech companies are spending billions on the internet of things. How do your products and services connect with the IoT? How can you offer a luxury service in an IoT era?
Have multiple offers, multiple brands for different luxury consumers. "Those luxury brands that differentiate themselves by targeting and engaging all their key consumers will help usher in the next golden age of personalized, customized luxury," says AT Kearney's Ben-Shabat. Mulberry's move into more affordable luxury has boosted profits — see Mulberry bags larger profits after price cuts.