Who are the luxury consumers of the future ?
This article offers a summary of a section of GLOBAL POWERS OF LUXURY GOODS 2019 Deloitte Report supported by a critical analysis done by the author, Victoria Da Silva, who is a student of Strategic Design and Management at Parsons Paris- The New School. It will help you will find insights about the shift operated by the luxury customers of the future.
The role of luxury has shifted over history, and we can see it gradually evolving again in our present time. The reason being is so the luxury industry can keep up with the desires of today’s consumer. In the past, luxury was a mark of people in power, such as the royals and the nobles. Therefore, luxury embodied hierarchy. Now, with the development of the industrial revolution, democratization, and capitalism, luxury has evolved to fit today’s ideologies. Today, luxury is something that is in reach of the majority; luxury can be accessible to all.
With the democratization of luxury, the industry faces new general trends. In recent years, the sale of luxury has been highest at wholesale stores, online stores, and airport stores. Further, among these, accessories remain the largest selling category. It is indeed the most accessible luxury item, giving any consumer the chance to buy in on the dream.
How to categorize the luxury customers of the future?
The new consumers targeted by luxury brands are the Millennials and Generation Z, i.e. the consumers of the future. These luxury houses indeed want to establish relationships with these customers now to guarantee their loyalty later on. A distinct group of consumers identified, HENRY’s, are High Earners Not Yet Rich. These consumers have developed highly specific characteristics that will influence their purchasing decisions. However, the luxury industry must make sure the characteristics of the consumers align with those of the companies. By analyzing the new consumer persona, the general industry trends and changes in marketing dynamics will also become evident.
What is their consumer persona?
The new consumer persona is technologically savvy, and technology is an aspect deeply integrated into their everyday lives. The luxury industry has embraced this new revolution by becoming specialized in digital marketing. In this field, brands are devoted to their social media accounts, where frequent Instagram posts have become a potent source of advertising. With the rise of social media, the luxury industry has also taken advantage of the social media influencers born. Known as “influencer marketing”, these celebrities avidly post on their accounts about certain brand products. Besides, e-commerce is also becoming more relevant as these consumers prefer shopping online, from the comfort of their own home.
What do the future customer of luxury desires?
In an ever-growing world, consumers of today have the desire to feel individualized. The luxury industry has taken the responsibility to meet these customer aspirations by introducing personalization in a myriad of ways. Indeed, the design of personalized products gives consumers a chance to own a one of a kind item, providing emotional attachment to the owner, therefore encouraging purchasing. Personalization also comes in the form of a luxury experience. If a consumer is shopping online, the creation of chat boxes on e-commerce websites have transformed the personalization a customer can experience digitally.
This is admittedly where the luxury industry is using design thinking to their advantage. Although the personalized experience is important through the online platforms, it is also a principle that must develop into the traditional way of buying, the in-store experience. Luxury houses have trained their sales representatives to be welcoming to any and all customers (not just those of high class) and to give individual attention to clients. To acquire long-lasting customer relationships, the sales representative takes the extra step to keep in touch and make sure the client is satisfied with their purchase. The goal of these relationships, from a company’s perspective, is to stimulate the return of the customer.
What are the major consumer shifts to look out for?
One of the most drastic shifts in the consumer mindset, creating the most impact on the luxury industry, is the growing power of customer moral values. Certainly, consumers of today greatly value ethics, and this sought-after merit has begun to influence their purchasing decisions.
As a result, Luxury brands are now expected by the consumers to have sustainability, animal welfare, ethical production, labor practices, and overall positive impact on communities as their top priorities. This new factor is causing the market dynamics of the industry to evolve, as companies have to review their value chain. They have to alter their ways of extracting raw materials, manufacturing their products, and even how they advertise these products to the public.
A key example of this evolution is the anti-fur movement in the fashion industry. In the 1980s, fur was a key icon of luxury. Today, consumer attitudes show that they no longer have an interest to wear or purchase fur products. The detrimental effects they have on animal cruelty now outweighs the attraction for the style. In 2018, the Business of Fashion released an article naming a list of brands from the luxury industry who listened to their new consumer base and implemented anti-fur policies. Those on the list included Farfetch, Net-a-Porter, Gucci, Michael Kors, Versace, Furla, and Burberry. The revolution does not stop there; London Fashion Week of September 2018 became one of the first significant Fashion Weeks to show zero fur on the runways.
This decision implies that the status symbol of luxury is transforming; consumers are rewriting their definition of luxury.
The general momentum of the industry
Understanding the trends in the luxury industry reveals many new insights on where the future of the industry goes. In terms of product, the luxury industry is seeing the fastest growth in the cosmetics and fragrances sector. The Estée Lauder Group was the most influential contributor to this trend. Coming in second, the multiple luxury group is the next fastest-growing sector. The top four players in this sector are Tapestry, Kering, LVMH, and Chanel.
New entrants in the industry are one of Micheal Porter’s five forces that influence competition. And this year, among the luxury industry, a memorable new entrant is Chanel. Chanel is a private company, that published its financial statements for the first time in 2018, placed at number 6 of the Top100 in the Deloitte report. The threat of new entrants is a topical factor in luxury.
Discussion & Debate
It is now crucial to interpreting these findings on luxury, compare it with other sources, and relate it to the future of luxury. The Global Powers of Luxury Goods 2019 Deloitte Report was very thorough in its goals of comparing the financial standings of the top 100 luxury brands. However, its emphasis on one factor led to the absence of others. The crucial social standpoints and real-world observations of the luxury industry were only briefly communicated.
Let’s then bring in another report, Bain and Company’s Luxury Goods Worldwide Market Study, Fall-Winter 2018. It is possible to connect the financial standings from Deloitte to the physical observations of Bain and Company. Together, these reports evidence that the luxury industry is doing well, and growing. The consumer is making most of their purchases towards the shoes, jewelry, bags, and beauty sectors, which one can bundle into an accessories category.
As seen in the above summary, consumers are now attracted to online shopping. And this observation comes from a report which came before the global COVID – 19 pandemic. It is indeed obvious that with the rise of social distancing and quarantine, e-commerce will continue to thrive. By and large, the Deloitte Report allows for the implementation of the present evolution into those of the future.
The luxury industry will most probably continue to see changes in their core, including further goals of sustainability, ongoing emphasis on the digital revolution, and the design of non-existing creative services and products. This is effectively their only way to continue attracting consumers, whose attention declines very easily due to the ever-changing global dynamics of today.