Luxury Industry Isn’t What It Used To Be
Real estate agents can learn much from the Luxury Institute’s survey of affluent consumers. While not specific to real estate, it provides a glimpse of what luxury buyers want in the coming year.
According to the Luxury Institute, a number of trends will reshape the luxury industry in 2019. Companies will focus on intense, sustained growth, and legacy enterprises that hope to rest on their laurels will be disappointed to find that consumers are not as impressed with brand heritage as they used to be. How the latest and greatest gets communicated is evolving as well, with consumers more likely to be swayed by consumer-to-consumer channels than ever before.
1. Big luxury brands set their sights on alpha growth
Alpha growth is a Wall Street metric that measures a large company’s ability to grow faster than its competitors, usually in high double digits, for a sustained period of time. Luxury companies that demonstrate alpha growth foster test-and-learn co-creation and collaboration with consumers, influencers, and other members of the brand’s global ecosystem.
The third move is to leverage technology and data to communicate the brand’s story and engage in open dialogue with the entire ecosystem. In 2019, more luxury management teams will break the traditional luxury rules and gear up for alpha growth. It’s far better to go for alpha than chase small incremental improvements in a world of high-risk, exponential and accelerating change.
2. Legacy luxury brands re-examine the value of brand heritage and history
Luxury industry brands that used to be able to boast of a long history are finding that pitch less effective. Millennials, Gen X, and even baby boomers see brand heritage as a far less valuable luxury brand attribute. In the Luxury Institute’s annual 2019 State of the Luxury Industry survey of affluent consumers, brand heritage and history rank sixth to superior quality, superior customer service, superior design, superior craftsmanship, and exclusive products.
The reality is that luxury consumers only care about the brands that have created value for them in the last 24 hours. Luxury brands that continue to lean heavily on heritage without radically reinventing themselves for relevancy are destined to be discarded, especially by a rapidly growing global affluent millennial population.
3. Luxury begins to pivot from product innovation and technology innovation to people innovation
The luxury goods and services industry historically has invested heavily in product development. Major brands are now pouring billions into data, analytics, A.I. and other technological innovations in an effort to remain relevant. Unfortunately, most luxury and premium brands are borrowing from the playbook of mass companies and using these enhancements primarily to determine how fast they can automate, and how fast they can eliminate jobs.
But brands such as Moda Operandi, Fusion Academy, and Hello Alfred are leading the way in re-humanizing luxury across several goods and services categories. In 2019, look for luxury brands with enlightened leaders to see technology for the commodity that it is, and begin investing in people innovation, realizing, at last, that it is, by far, the biggest ROI opportunity in luxury in the age of A.I.
4. Affluent consumers continue to lose trust in Facebook and other social media brands
In a 2018 survey on technology brands, Facebook was rated lowest for emotional intelligence, according to affluent consumers. One in five affluent consumers reports actively discouraging friends, family or other people they care about from using Facebook.
Media coverage of Facebook tells of numerous actions that put its users at risk, so one can understand why adult affluent consumers, who have so much to lose from being hacked, or having their privacy violated, are abandoning the platform. Look for consumers to continue to abandon, or curtail participation, in the most egregious social media sites in 2019. Expect the savviest luxury advertisers to follow suit.
5. The local luxury consumer-to-consumer sales channel takes off
Most luxury goods and services brands think of their distribution channel options as comprised of three choices. They can go the wholesale/third-party approach, develop their own retail/sale force channel, or they can sell via e-commerce. Now, new simple, effective app technologies such as Replika Software and others, are facilitating the development of the fourth channel, a network of devoted brand customers who become local influencers and sell directly to friends and family through apps that connect to the brand’s website.
This approach, within ethical boundaries, is far more personal and effective than using celebrity influencers. Look for this consumer-to-consumer channel to emerge rapidly in several luxury goods and services categories in 2019.
6. From omnichannel luxury to Omni-personal luxury
Today, customer segments and channels have become the standard and easy way for luxury industry brands and their partners to attempt to categorize and interact with consumers. Customers, especially millennials, who understand what technology enhanced with emotional intelligence can do, think in terms of individualized, seamless brand relationships akin to the relationships they have with friends and family members.
The Doneger Group calls the new emerging way of interacting with consumers Omni-personal. This means seamless relationships comprised of respectful nonlinear touches that make sense to the customer and add measurable value. Look for a focus on the real-time, adaptive orchestration of data, algorithms, devices, and people to design and deploy genuine Omni-personal experiences that lead to long-term client relationships and dramatic sales gains.