The luxury market is facing many unknown challenges, which mean profound changes. Slower growth, increasing turbulence. While industry insiders remain optimistic about the prospects of their own companies, they are far less optimistic about the outlook for the luxury industry as a whole.
A world of uncertainty
The growing uncertainty about how the economic forces at work will affect affluent and high-income consumers is causing them to be cautious. The conventional wisdom that the affluent are immune to the ups and downs of the economy has already proven wrong in the 2008-2009 recession, and luxury insiders fear that another global downturn is on its way.
Instability in global markets and political upheavals are threatening a looming recession. Even rich people hold back when things are uncertain,” insiders commented. “Luxury goods are purchases that can be postponed. The chaos around them only makes them cower and wait,” said another.
Consumers are looking down
Many luxury brands are feeling the competition from cheaper premium brands offering comparable quality at reasonable prices. “The spread of low-end retailing has damaged the high-end. Even consumers who could afford the budget for better things are turning to the cheaper brands,” says one insider.
Younger consumers, even as their income and ability to afford luxury increases, are increasingly pursuing conscientious consumption. The luxury resale market is often mentioned as a business model perfectly suited to their values, but even those who can afford to pay the full price for first-hand brands are attracted to the second-hand model.
The model of presenting consumption, which previous generations had adopted, has been replaced by a responsible model. Brands that do not have something truly unique will not succeed.
The opportunity: back to what made luxury great.
A widespread concern in the luxury industry is that luxury has lost its meaning: There are too many companies peddling so-called “luxury goods”. The market has been diluted because companies create a product ad hoc and call it luxury.
However, those who understand the meaning of luxury recognise the main pillars of luxury – quality, craftsmanship, design, attention to detail, uniqueness and authenticity. Luxury must be reinterpreted, from labels and flashy consumption to a search for goods and services that are personal, authentic, unique and sustainable. The challenge is to convey the true values of luxury.
The challenge: Digital marketing may boost sales, but it threatens the integrity of luxury brands
Business investment in advertising and marketing is a signal of confidence in the market. Many have been disappointed by the social media. Although Instagram and Facebook are the most used social channels, only 25% of Instagram users and 14% of Facebook users rate these channels as very effective.
Social media and the rise of celebrity culture and paid influencers have created brands that dilute the world of true luxury. Influencers pull down the perception of what luxury is. They do not embody exclusivity, rarity or craftsmanship.
The opportunity: raise the status of luxury brands
Digital advertising may be efficient, but its effectiveness in communicating the true luxury value of a brand is questionable. Print is not only more haptic, but also gives luxury brands better control over the visual language, the message and therefore its potential impact on target consumers than the many different digital screen displays. Print readers also tend to be more engaged when reading a magazine than with the multitasking that is common in digital message consumption. The keywords are:
Sustainability
The luxury second-hand and sharing-market as well as laboratory grown diamonds illustrate the opportunities for companies to create sustainable new business models that respond to consumers’ growing concerns about sustainability.
Personal experience
Every luxury consumer is an individual who wants to be treated in a way that recognises his or her specificity. Individual design, personalised travel and other tangible services are the highest expression of this. Customers are looking for experiences and luxury that tell a story. They find them in handmade, handcrafted products and personalised services.
Craftsmanship and quality
The future of luxury is to return to its roots of craftsmanship and quality. The idea of craftsmanship does not only apply to luxury goods. Luxury and adventure brands also follow a craftsman’s approach to the professional services they offer, whether at home or on the move. This craftsmanship guarantees quality. A broad cultural and social diversity will challenge brands to attract a diverse creative audience and give them a voice. Those who get it will stand out and create more interesting and differentiated products and services. This is a great opportunity for new, emerging brands.
How can we help?
We love luxury and know what real luxury is. We are always looking for the unique and can show you where your range could be more unique. We look forward to taking you to Challenger and with you on the path to sustainable uniqueness.