This year, according to Bain & Company, a leading advisor to the global luxury goods industry, the global luxury market is on target to hit 223 billion € ($278 billion).
A snapshot:
- Chinese consumers are the top & fastest growing nationality & spend 3x more abroad than they do locally
- Middle Eastern spending is up 11%
- the American luxury market is "increasingly influenced" by tourists
- tax-free shopping + Global Blue (a tourism shopping tax refund company headquartered in Nyon, Switzerland) in Europe has dramatically impacted luxury shopping by spendy tourists (image)
With so much spending being driven by rich people shopping abroad, the growth of touristic purchases means that the who visiting the location to drop a bundle of cash is far more important than the where. “With such cross-pollination of luxury spending, it no longer makes sense to think only in terms of geographies," says Claudia D’Arpizio, a Bain partner in Milan and lead author of the 13th edition of the Luxury Goods Worldwide Market Monitor (2014). "This new mind-set has important implications for luxury brands. It requires that they think about their product offering from a more global perspective, with the concept of seasons, a key pillar of this industry, becoming increasingly obsolete...With local trends and tastes representing only part of the picture,” she adds, "the focus is shifting to consumers."
People are the new people, it seems. "The human being is en vogue again," agrees Luxury Institute, which monitors the global high-net worth demographic. "Online-only and multi-channel retailers are developing personal shopper teams aimed at supporting their most valuable customers (top 20%) who may require a guided or curated experience with a trusted expert." In fact, the tourist with money is increasingly being seen as the preferred segment because after their initial in-store experience, online channels can then be used to retain them. This is the opposite what generally happens with digital outreach; typically, if someone's first experience with a luxury brand is online, conversion is abysmally low and attrition sky high. "Even if it is boring, low-tech humanity," continues Luxury Institute, "there is innovation in delivering a customer-worthy online buying experience, and it looks a lot like the offline experience." (image)
What's so interesting about the offline versus online experience, I think, is that retailers seem to be dealing with different shoppers entirely. Online shoppers, observes Bain, crave "variety and assortment" and want to spend their money in a "multi-brand e-environment"; consumers shopping in real life "prefer a monobrand environment." Bain predicts that by 2025, luxury consumers will no longer be content to simply be marketed to, but want an active role in shaping what's being sold to them. "Not only will ‘Luxury 2025’ consumers be at the center of the customer experience; they will be the center of luxury itself – a critical part of the ideation, creation, and sales of luxury."
(image)
Welcome to the impending Age of You, as the global consultancy Interbrand has dubbed this longterm trend. While human-centric and focused on in-person interaction, this trend is being driven mostly by advances online. “As consumers and devices become more connected and integrated, the data being generated is creating value for consumers, for brands, and for the world at large,” says Jez Frampton, Interbrand's Global Chief Executive Officer. “As a result, brands from all categories and sectors will get smarter—with products and devices working in concert with one another, across supply chains, and in tandem with our own individual data sets." Data collection done right can actually double customer retention amongst the top 20% of customers, who drive 70% of sales, confirms Luxury Institute from their own case studies. "Brands will have to rehumanize the data, uncover genuine insights, and deliver against individual wants, needs, and desires," continues Frampton. "Brands that seek to lead in the forthcoming Age of You will have to create truly personalized and curated experiences, or what we call ‘Mecosystems,’ around each and every one of us."
As an FYI, here's another snapshot, this time of some of the more interesting lifestyle brands that currently dominate life and are creating tomorrow's blueprint:
Apple: worth $118.9 billion (+21%) - world's #1 brand
Google: $107.43 billion (+15%)
Facebook: (+86%) In 2013, Q2 earnings were $562; this year, thanks to ad business on mobile phones, they were a staggering $1.4 billion. FB acquired Oculus VR for $2 billion and messaging service WhatsApp for $19 billion, providing clear signals of what they have planned for the longterm future.
Amazon: (+25%) Amazon Prime has, at times, garnered more than a million subscribers in a single week. A content licensing agreement with HBO is helping position it to dominate the entertainment sector.
Hugo Boss: The German fashion house celebrated its 20th anniversary with an exhibit at London's Saatchi Gallery. The festivities included a microsite illustrating 20 "iconic" Hugo Boss items along with 20 international artists. This innovative blend of art and commerce reflects a shift in their strategy, backed up by a move away from selling through partners to running its own stores. Small wonder they were one of the strongest performers in the apparel sector over the past year. (image)
Louis Vuitton: Estimated by Interbrand to be valued around $24 billion, LV is no Apple or Google, but it's worth more than twice its nearest luxury-fashion competitor (Gucci - at just under $10 billion)...for whatever reason. This anomaly I put in the category of either there's no accounting for taste or there's one born every minute. You decide.
- Lesley Scott
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