The time of opulent luxury is over. Today luxury is more inclusive, more conscious and more positive. Welcome to the world of purposeful luxury
By expert Julia Riedmeier "Neo Luxury"
Author: Julia Riedmeier
Bain & Company estimates that the global personal luxury goods market will decline by 20 to 35%. Revenge spending is no longer of any help here. The desire for loud and accustomed luxury seems (for the time being) to be disappearing. Bling-Bling is exchanged for quiet luxury, one's own sense of wellbeing and that of society. Luxury is becoming more inclusive, more conscious, more positive.
What does the world need, what do I need? In XNUMX, especially during the lockdown, we have learned what we really need and what conscious consumption is. Some facets were thrown overboard after the lockdown, others were taken into the Next Normal. Even before the pandemic, changing consumer needs, information and purchasing behavior were already apparent. Mirrored in the NEO luxury trends like sustainability, mindfulness, digitalization, which were intensified by the movements of the last few months.
Luxury brands were required to think (even) more from the customer, to act in a more sustainable, digital and agile manner. But how exactly does the evolved luxury customer tick and what do these movements mean for luxury brands and their management?
Luxury consumers have become more demanding, more critical and consciously ask: where do the materials come from, where are they manufactured, who is behind the brand? What added value do products offer besides purely hedonistic consumption - what ecological and social contribution is made? The new luxury consumer motto is therefore to consume with moderation and caution. Less is more and if less, then also with more quality and substance.
A turn to minimalism and appreciation of materials, craftsmanship, the people behind the brand shape this movement. Luxury consumers consciously (more) weigh their purchasing decisions. To do this, look for authentic voices from the brand interest community online in the sense of user-generated content (UGC). Due to various digital possibilities, consumers as well as the brand interest group are able and ready to share their brand experience and, if given, also to show their misconduct, as happens on the DietPrada platform. The fashion industry in particular has taken it to extremes in recent years. As the enfant terrible of the sustainability movement, various drops and numerous collections per year have fueled the negative voices. This in combination with the handling of unsold, old collections.
True luxury products, on the other hand, defy disposable or trendy products, as they outlast time per se due to the design performance and material quality. Respectively digital vintage platforms provide solutions. The Second Life movement has become part of a sustainable lifestyle that is finding its way into the luxury industry and meeting demand. In the spirit of the Circular Economy the value chain can also be set up sustainably right from the start. Unsold inventory can also be rethought and products can be given a new life. Petit h from Hermès shows how it works.
Petit H Collection Hermes
Brand rules are shifting
In addition to the conscious and critical attitude of luxury consumers, there is the notion of being instead of belonging: Which brands fit into their life world, which ones understand them and pick them up right there?
The times of submitting to a brand dictate are over. In addition, luxury consumers have become more price-sensitive. The idea of the Lean Luxury business model picks up on this movement. Lean Luxury means eliminating what only causes costs but does not bring any added value for the consumer. This in the sense of (new) direct-to-consumer models, which go off the beaten track of the industry, sometimes not relying upon middlemen and even not a brand name. The customer becomes a co-creator and the brand him- or herself, since the (brand) manufacturer subordinates itself and becomes an enabler. At the same time, they also create a kind of community. For "people in the know".
Lean Luxury Concept Ruby Hotel
This is also relevant from an established brand perspective. Here, luxury companies can learn from DNVBs - Digital Native Vertical Brands - a variant of the direct-to-consumer models. Founded in the digital world, they cultivate a direct customer relationship right from the start, align their lean product portfolio and communication to customer needs and develop them further with the help of data. They show transparency in procurement and manufacturing processes as well as pricing. Plus, they manufacture their product responsibly and locally.
The purpose, the why is deeply anchored and becomes the guiding theme for a meaningful brand experience. But always authentic and without marketing chichi. Because the critical consumer observes and is ready to act on social media. Thus, in addition to classic luxury product features such as aesthetics, quality, hedonistic value, ethics, the purpose must also be given. For both, traditional and new luxury brands.
Moncler leads the global Dow Jones Sustainability Index as the industry leader for luxury goods & textiles
New rules of the game - new prices?
Due to the pandemic, we are increasingly in a redefinition of game rules, players and codes. The luxury industry is becoming more and more fragmented. But what do the latest developments mean for the pricing strategy of luxury goods, one of the traditional indicators and core elements of a luxury brand?
The lockdown has not only led to sales losses for luxury brands, but has also pushed up certain raw material prices. On the one hand, according to Bain & Company, the personal luxury goods market declined by XNUMX% in the first quarter of XNUMX. For LVMH, the largest luxury conglomerate with over XNUMX luxury brands, half-yearly sales were XNUMX% below the previous year's figure according to Handelsblatt.
On the other hand, according to Robbe & Berking, the price of silver has almost doubled since April 2020. Declining sales meet increased raw material prices. According to Reuters, luxury brands such as Chanel and Louis Vuitton have therefore already increased the prices of some of their top products in the middle of the year. According to Chanel, the price increase for iconic products and some small leather goods is 5-17%. Other luxury brands have announced or have already implemented price changes. Either pointedly or related to the whole assortment. But to what extent is this understandable for the consumer?
Source & Copyright by Chanel
In the past, luxury brands have continuously increased their prices. That was part of the game. The prices were rarely rational – emotion and exclusion were always part of the luxury equation. If prices rise far from the (annual) price increase, it is worth reflecting to what extent the decline in sales due to the lockdown, increased raw material prices and/or the increase in exclusivity of product icons play a role. It remains to be seen whether the price increases will misfire.
More than ever, luxury is on the move
This much can be said: If the maxim of profit is in the foreground and not linked to sustainable, social goals, it will be difficult to implement this strategy without headwinds. Profit is the oxygen for everyone. But not only for shareholders, but thanks to the NEO luxury trends also in terms of society, environment and stakeholders. More than ever, luxury is on the move. Where the formation of an otherwise static industry is heading remains highly exciting. What is certain is that continuity and classic parameters of a luxury brand strategy have come to an end.