The world of luxury consumerism and luxury retail is changing at an impressive pace, according to the latest report from the US-based Luxury Institute, which has compiled a list of the top luxury retail trends that are expected to characterise the market during 2008.
According to Milton Pedraza, CEO for the Luxury Institute, the main trends will be:
- Old guard passes the baton to a new generation
Throughout Luxurydom the founders, family members and their trusted lieutenants who built the grand luxury behemoths and boutiques alike have begun to retire, to sell, and consider family legacy and philanthropy. The new generation of leaders who will inherit these brands must not seek to merely replicate old business models. Attend luxury conferences and you hear the same old messages, strategies and tactics, with lively debate on whether or not to sell to the masses, or on the internet. Attend a Silicon Valley conference and you will understand that the luxury industry lives in another world, detached from its consumers (who have already moved beyond Web 2.0 and into community). As a result, expect innovative luxury leaders to take the leap into new worlds.
- Luxury rediscovers great service as a differentiator
As economic slowdown in the US impacts the luxury industry, particularly those who sell to the affluent masses, luxury firms will rediscover or perhaps discover, that mainstream millionaire consumers, not just celebrities and heirs, require great service to earn their loyalty. With so many luxury categories inundated with brands vying for the attention of the same consumers, luxury CEOs will begin to allocate resources to continuously train their well-intentioned, but generally unskilled, salespeople and customer representatives who must prove competence and trustworthiness to discerning customers. Luxury Institute surveys show 29% of wealthy consumers have had a problem with a luxury firm that required resolution in the past year. Ironically, getting luxury firms to admit to problems was one of the biggest problems.
- The luxury access revolution, phase three
A few years ago, the Luxury Institute predicted the advent of the "Luxury Access Revolution" - an accelerating phenomenon at every price point on the luxury-spend spectrum. Jets, yachts, vacation homes, autos, vineyards, golf clubs, even typically less pricey items such as handbags, jewellery, and watches, were embracing membership - all selling variety, convenience and utility, without the hassles of ownership. The organisation also predicted that brash entrepreneurs would drive the first phase of innovation to be eventually overrun by better-capitalised luxury brands. Right on cue, in 2007, many entrepreneurial providers of these membership models merged, consolidated, or disappeared. Next, top luxury brands and original manufacturers will take over, leveraging their trusted brands, synergistic offerings, fixing flawed business models, providing direly-needed transparency, and using vast resources to legitimise these access models for the mainstream affluent and the wealthy. For all those savvy millionaires waiting on the sidelines, it may finally be time to become a member.
- Beyond concierge services
It seems that these days everyone provides concierge services, along with their product or service. From credit card companies to private banks, concierge services are the rage. Well, expect these commoditized, low-margin services to begin to morph into high-fee, high-value consulting services, worthy of the name. Companies such as Quincy Consulting Group are reshaping the industry, applying a McKinsey-like model to serving the seamlessly personal and professional needs of the wealthy. While they will not manage your assets, they will handle many critical needs beyond the basic restaurant and theatre reservations call-centre model. They will, for example, plan a wedding, charter a mega-yacht; find a trained nanny, a competent wealth manager, a trustworthy art dealer, and so on. They will bring in specialists to help execute each task, and manage the project. Most importantly, they will do so in an objective, independent manner not been typical of most concierge firms, which have created conflicts of interest by steering clients to "preferred" suppliers. Concierge services will never be the same again.
- Philanthropy industry shake-out, phase two
Bill Gates and Warren Buffet's entry into big-league philanthropy did not just create the "alms race" that was predicted by The Luxury Institute. Their participation, and the trend they started, have brought with them great media attention, and a level of accountability, that has lifted the veil to expose the incompetence and, sometimes dishonesty, that plagues a large segment of this tax-sheltered industry. What these icons of efficiency have done is to bring upon charities a level of scrutiny and transparency that will force out bad apples and eliminate conflicts of interest. New transparent models of philanthropy, often web-based, will accelerate the trend so that the neediest can benefit from this generosity.
- Luxury brands to embrace communities of raving fans
If any brands have truly devoted, emotionally invested fans, it is the luxury brands. However luxury firms, many of which are trapped in traditional media, have failed to listen to, engage, and create a community dialogue among their most ardent fans (read: customers; current and future). Could it be because when you inspire fans to have a sincere dialogue online, and make it transparent and public, you tend to lose the level of brand control that you had before? You have to earn the right to facilitate a community dialogue with good, old-fashioned trust. Giving up control to communicate honestly with the customer community is exactly what leading luxury brands will do. By creating a community of fans, and listening to the good, the bad, and the ugly, and then acting on it, the best luxury brands will begin to enhance the experiences of their customers in ways loyal customers want, and will begin to co-create products that their customers desire. That will be extremely hard for many luxury brands to do. Expect more than a few to wither.
- Mass scalability is hard without a good service experience
It seems that those luxury brands racing to transform themselves into affordable luxury (a contradiction in terms, by the way) by making deals with mass retailers, have forgotten that their business model is not just about stamping out more luxury "widgets". Quality production may be scalable when you serve the masses, but which ones have forgotten that part of the experience of luxury is the great, over-the-top, personalised service? Walk into any mass retailer and indulge yourself in the service levels they provide. That may not be the service level you want your luxury brand name to be associated with because, in a transparent world, consumers tend to share and rate their experiences and define your brand for you. Expect some luxury brands to head back toward Madison Avenue to try to recover damaged reputations.
- Luxury retailers eliminate marginal brands
Top luxury retailers (such as Nordstrom, Neiman Marcus, Barney's, Bergdorf's, and Saks) have long prided themselves on being expert guides to luxury for their wealthy customers. But brands such as Vivre have created inroads by becoming curators, delivering connoisseurship, and a higher level of consistently unique and exclusive offerings. Next, expect retailers to go up-market and start to eliminate marginally luxurious product lines as they embrace and experiment with unique, new designers who wish to remain bespoke. Luxury retailers will earn their curatorial stripes with their wealthy customers once again.
The Luxury Institute is an independent ratings and research institution that presents marketers and retailers with the "voice of the high net-worth consumer". The institute publishes several publications on luxury trends, high net-worth consumer rankings, ratings of luxury brands, and best practices.