In these troubled times, many experts predict the death of luxury, but true luxury purveyors will do what luxury purveyors have done for centuries in down cycles: execute the fundamentals as defined by customers' needs and desires, consistently and extraordinarily well.
Genuine luxury purveyors know that luxury is, and always has been, a cyclical business. They see 2009 and beyond as a golden opportunity to deliver on the luxury fundamentals, to radically innovate, continuously adapt their offerings and business models, and position their brands for long-term leadership.
It is largely due to the resilience of luxury brands that many of them span centuries, while most other industries' brands don'. Here are some of the main trends that The Luxury Institute predicts for 2009 and beyond:
- Accelerated internet activities: the Luxury Institute has been presenting the empirical case directly from the voice of the wealthy consumer for luxury brands to make their websites the centrepiece of their online and offline strategies since 2006. Nevertheless, the traditional luxury industry has been slow to adopt Web 2.0. The economics of this will become much more compelling as the downturn makes opening stores and traditional advertising economically challenging.
- A move toward recognising the influence of Generations X and Y on technological adoption and M-Commerce. According to a Luxury Institute Wealth Survey of luxury consumers and mobile device usage, 22% of consumers have executed a transaction via a mobile device, while 21% have made a payment via mobile. Those doing so tend to be under 45 years-of-age, but significantly wealthier, with household net-worth of more than US$5 million.
- Price matters. The idea that more expensive items, regardless of quality, service and functionality, appeal more to wealthy customers that cheaper equivalents, will be shown to be wrong. Most of the wealthy are self-made, and have sacrificed to earn every cent while delivering great quality and service to their own customers. They will use both sides of their brains while shopping.
- High-end philanthropy will increase. The Luxury Institute expects that many discredited Wall Street executives will turn a new leaf in an effort to save family legacies and reputations and get into the high-end philanthropy game.
- The Luxury Institute's research has documented the rise in relevance of Corporate Social Responsibility. Wealthy consumers have increased their preference for socially responsible brands from 51% in 2006 to 57% last year. Expect that number to rise dramatically by 2009. Luxury consumers will demand that luxury brands serve not just them, but society as a whole. They will require luxury brands to be ethical with all constituents; charitable in ways that make a difference to their beneficiaries; and eco-friendly in ways that can be documented. It might mean we will see, among other changes, a reversal in luxury charity events where 80% of proceeds go to lavish fun for the attendees and 20% to the beneficiaries.
- In the midst of the current financial crisis (and the populist backlash on unearned financial services wealth) many wealthy consumers are a bit confused and feeling a bit defensive about luxury, even if they have money to spend. Consequently, many wealthy consumers will opt for classic luxury that is unique and exclusive, with exquisite artistic design, craftsmanship, and quality, delivered with impeccable service. Personal shoppers, travel agents, realtors, car dealers, interior designers and others who have earned the ironclad trust of clients over the years will have the advantage of creating customer experiences that indulge, but don't overreach, for their loyal clients.
- The financial meltdown has its roots in a crisis of confidence that began in real estate as far back as 2006. Trust in formerly trusted institutions has declined precipitously. Luxury too, is down, partly because some purveyors have forgotten what true luxury means to the customer. As online communities, social networks and ratings hubs dot the Internet landscape, expect luxury consumers to look extensively to their own trusted peers for guidance on what is, and, what is not, true luxury. These now-wiser consumers, who are reeling from loss of net-worth and income, will scrutinise luxury brands far more carefully going forward, and will rely on authenticated, validated and certified ratings to make purchasing decisions. They will expect luxury brands to be transparent, and to independently authenticate claims, such as country of origin, quality, customer referrals, and social responsibility, like never before.