The disruption of the luxury market is happening now—how will retail rise to the challenge?
Today, we live in a dislocated world where there is a growing disconnection between luxury brands and consumers. Economic shocks, political uncertainty and reduced demand in emerging economies have curbed years of boom in the luxury industries. Growth for 2017 is expected to remain rather flat.
Underlying the seismic shifts in the luxury market are evolving consumer dynamics with the proposition of luxury itself. The easiest way to observe this shift is to look at the discrepancy in the relationship Baby Boomers had with luxury and that which Millennials and Generation Z are having with luxury. New need-states are emerging, and many heritage luxury brands are challenged with evolving their proposition.
Luxury was once built around the desire to express worth to ourselves and to others. L’Oréal’s timeless tagline, “Because I’m Worth It,” encapsulated the Boomer need to “keep up with the Joneses.” It was a simpler time, and the goal of luxury was rather singular: to message a higher station in life to anyone willing to take notice.
The recent problems at Ralph Lauren symbolize the antiquated nature of this philosophy, as kids today are not romanticized by the country club set. It is simply not a motivating concept. According to RTG Consulting, “about 62 percent of Generation D (as in digital, those under the age of 20) no longer equate success with financial wealth.” This begs the question, what is success equated with, if not luxury and wealth? As the architects of Wall Street, Boomers are tied up in the outward markers of luxury as proof points of their earned or inherited status.
Today, with more Millennials than Baby Boomers in the workforce (according to Pew Research) and Generation D quickly making their mark, there is a clear transition from what luxury meant to what it means today and will mean tomorrow. That meaning is less singular and, instead, much more complex, elusive and abstract.
“I think the new codes of luxury are being defined by the next generation that want to spend their money on a sneaker, a T-shirt or a fun handbag,” says Stuart Vevers, creative director, Coach. “They want something that reflects their lives and personalities, but still has the fantasy of fashion.”
According to Leanne Wierzba, co-curator of “What is Luxury?” from the Victoria and Albert Museum in London, “The shadow of the 20th century is forcing this realization that we have to form other types of values. These values are no longer centered around the individual or conspicuous consumption or having more and having the best.”
There is a new value system emerging that has splintered the notion of luxury into a kaleidoscope of experiences and associations more closely related to access, freedom, privacy, humanity and legacy than elitism, status, image, brand and heritage.
Considering that “85 percent of luxury spending will be by Generations X, Y and D by 2025,” according to Cara David, managing partner of YouGov, luxury brands will need to embrace this new value system to align their brand ethos and pipeline with the future luxury consumer.
Here are some of the norms we can (and should) expect:
Access Over Elitism
We live in a post-ownership age, where access to high-end experiences, material goods and destinations are more commonplace. This form of access mingles UHNWI (ultra high net worth individuals) with those who reside closer to the middle. As a result, the value of luxury is coming into question. The standing argument is that the more accessible a luxury experience is, the more the dream, and subsequent value, of luxury is destroyed. But, the access we are afforded in the digital age is changing that positioning. With 60 percent of luxury purchases influenced by digital channels, according to Boston Consulting Group, we must recognize that access is the key, not the barrier, to success.
Freedom Over Status
In a cashless, digitized world, true luxury is found in the feeling of being unburdened. Why buy when I can rent? Why drive when I can Uber? Why live in a big house when I can buy a tiny one and travel the world? There is a more tangible aspiration tied to the untethered feeling of freedom than to the weight of objects associated with status. This also aligns with a younger mindset riddled with agile identities. Consumerism can feel like a weight to be carried when really, younger consumers are not embracing debt. According to The New York Times, “households helmed by someone 35 years old or younger currently hold the lowest level of credit card debt since the Federal Reserve began collecting standardized data in 1989.” People assume that Millennials are reckless with money, but the trajectory tells us a different story. Younger Millennials and older members of Generation D—those ages 18-24—save a quarter of their salary each month, according to a recent study by Experian.
Privacy Over Image
In uncertain times, intangible values—such as privacy and security—are starting to fill up the vessel of luxury, as these modern needs are becoming more exclusive and valuable unto themselves.
A recent article in The New Yorker shined a light on how the notion of survivalism has expanded to affluent leaders in Silicon Valley and New York—think technology executives and hedge-fund managers. These cohorts are preparing themselves for the worst, buying islands and furnishing them with the necessities of modern private living. Talk about luxury.
Furthermore, the term “stealth wealth” has come to define consumers with strong discretionary spending power who prefer to buy fewer, more high-quality objects that signal to those in-the-know but exclude others. This is a form of soft power that is less ostentatious and a clear departure from the splashy signaling of our past.
Human Over Brand
There is a rising backlash happening with luxury, where consumers are questioning the validity of the fantasy worlds luxury brands have perpetuated for decades. Images of “Zoolander”-type faces in exotic yacht-ridden destinations are not as aspirational as the images we see attached to new more disruptive luxury brands populating Instagram and Snapchat. Newer brands like Glossier center on stories that are more real, human, even gritty. They celebrate the individual and make real people the true north of their marketing, helping to grow their tribe quickly through selfies and authentic lifestyle imagery, versus fake luxury clichés.
Legacy Over Heritage
“A lot of what has been sold under the luxury ticket isn’t luxury at all,” says Dilys Williams, director and professor of Fashion Design for Sustainability at the London College of Fashion. “What you are buying has been made in China and made quickly. The heritage stuff is fake authenticity.” As a result, the go-to positioning of heritage is now coming into question.
There needs to be a clear departure from relying on heritage-only communication to incorporating values and behavior that leave a lasting legacy. A big part of this shift is recognizing that sustainability is a must, not a lust, for Generations X, Y and D. “Whole System Thinking”—the notion of creating a closed-loop positive ecosystem—is an imperative for the luxury brands of tomorrow.
Kering, for instance, recently collaborated with Parsons School of Design on a new app called My EP&L, which promotes sustainability awareness among new fashion designers crafting tomorrow’s luxury brands. By working with students today, they help enact sustainable luxury behaviors tomorrow.
The New Value System
There are many choices luxury retailers can make to tap into the new consumer value system. After all, while online shopping is growing, about two-thirds of consumers still prefer to shop in physical stores, according to Euclid Analytics. Humans want to “see, touch, feel and try out new items,” especially Generation Z and Millennials, who, contrary to popular belief, actually prefer to shop in brick and mortar. Retail is the strongest tool that luxury brands have to retain value and build desire. With attention spans getting shorter and shorter, the immediacy of retail can’t be beat.
Seamless Total Retail
Give demanding luxury consumers a smooth cross-channel shopping experience that transcends the transaction. Consumers today demand the ability to seamlessly switch from home computer to smartphone to store with little to no stress. With this being more reflective of the fluid way consumers move between the digital and physical worlds on their path to purchase, it is imperative that retailers mirror this modern behavior.
“E-commerce and digital strategies are important focuses, including how to interpret and implement in the boutiques to further support sales staff and enhance client servicing,” says Diana Bernal, store planning and construction director, Richemont North America Inc. “The immense and rapid access to information and increase in technology have changed retail; however, I don’t think it has changed the perception of luxury. Luxury continues to include the expectation of high-quality products, engaging shopping environments and exceptional client services. These elements enable sales associates to have better conversations and create customized experiences.”
We are seeing more online stores opening brick-and-mortar locations that learn from their digital experience, mimicking the speed and ease of online shopping in-store. For instance, Amazon sells books in their retail locations with the front of the book facing the consumer, not the spine.
London beauty store Fabled by Marie Claire stocks the content on Marie Claire’s beauty website in a physical store. The design is “phygital,” meaning it combines both physical and digital, allowing people to experience the products in-store and simultaneously research them through digital means. According to Amanda Scott, managing director of Fabled by Marie Claire, “We wanted to create a standalone beauty boutique that broke the mold of the traditional beauty retailing model” through experimenting with lots of test and play and digital integration.
Break Category Conventions
Unlock new consumption models by driving exploration and subsequent re-appraisal. Tommy Hilfiger changed the game by leveraging a “see now buy now” approach with his runway shows in both New York and Venice Beach, Calif. This sense of immediacy is exciting and demands action from consumers enticed by the world of fashion luxury.
For 2017’s New York Fashion week, designers such as Tom Ford and Rachel Zoe staged their own customer-led shows in their own locales, free from the restraints of the fashion calendar.
This is a wonderful way to surprise and delight consumers who have a high level of expectation from their retail experiences. Neiman Marcus opened an in-store Rent the Runway boutique in its San Francisco flagship, while Nordstrom’s pop-up Hermès boutique makes their iconic scarves, normally encased behind glass, available to touch and experience. “We wanted the customers to be able to try things on without the intimidation of them having to be unlocked or completely serviced,” says Olivia Kim, vice president of special projects, Nordstrom.
Culture as the New Cachet
To break through, building cultural capital is key to creating a new form of value for tomorrow’s luxury consumers. This is best done by deepening cultural relevance through activations and communications that reflect a brand’s values, crafted in new modern ways. We see luxury retailers respond by bringing in potent cultural forces that have made a name for themselves outside of fashion.
So how do cherished luxury brands find relevance within a new generation of consumers? “Techniques such as storytelling continue to be a great way to introduce the rich maisons’ histories and appreciation for craftsmanship to new generations,” Bernal notes.
Helmut Lang recently hired Isabella Burley, editor in chief for Dazed & Confused, to act as “editor in residence” and help manage the brand’s creative output. This type of innovative thinking will no doubt result in palpable and intriguing content, as it will be built through a cultural eye that spends its days interacting with Millennials and members of Generation D.
For the last two seasons, Gucci has welcomed street artists like GucciGhost and Coco Capitan into their design process and are co-opting culture in their final products and visual language. This taps into Gucci’s pioneering spirit of playfulness and experimentation by embracing the street artists who love them. It also opens the brand up to a new audience who speaks “culture” in its many dimensions.
This meta-nod is a clear marker that we live in disruptive times where luxury brands must be agile and participate in the revolution, not behave as though it doesn’t affect their bottom line. In a luxury retail environment where change can be slow to occur, this is an imperative. It’s time to break through and move beyond the fantastical intangible luxury world of yesterday. To succeed tomorrow, luxury brands must engage in the fast-moving, game-changing cultural realities that surround consumers where they work, live and play. In order to innovate a way forward, find inspiration in what Coco Capitan wonders: “What are we going to do with all this future?”
It is up to you to find out.
Meg Asaro has worked in the strategic and design worlds for almost 20 years, codifying semiotic storytelling and trend foresight to prepare her clients for the future. Using bespoke and unconventional methodologies to unpack her thinking, she reveals innovative opportunities to help brand growth and relevance.