NEW YORK, NY--(Marketwire - October 28, 2008) - As the Luxury industry enters 2009, some
luxury executives look like deer caught in the headlines -- paralyzed by
the terrifying headlines and by declining sales. Yet, 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. Here
are some trends we predict for 2009 and beyond:
1.) Traditional Luxury Dramatically Accelerates its Internet Activities in
Response to Innovators
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 centerpiece of their online and offline strategies since 2006.
Nevertheless, the traditional luxury industry has been slow to adopt Web
2.0. Meanwhile, innovators such as Gilt, Ideeli, A Small World, Portero,
Vivre, Couture Lab and several off-the-radar players such as Bespoke
Global, are gaining traction online via membership models, global
communities, and by aggregating categories of bespoke luxury designers and
producers in one-stop-shop destinations. Their economics will become much
more compelling as the economic downturn makes opening stores and
traditional advertising economically challenging.
Look for all types of traditional luxury goods and services providers to
begin to imitate the techniques of these luxury innovators, or to acquire
them.
2.) Luxury Awakens to the Influence of Generations X and Y on Technological
Adoption and M-Commerce
According to a Luxury Institute WealthSurvey 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 HH net-worth at
$5+ million.
Luxury should be leading M-Commerce innovation since it creates an enhanced
experience for all customer segments. Generation X and Y shoppers are
influencing the lightning speed with which consumers of all ages, including
boomers, are embracing mobile technology for on-the-go entertainment,
search, and transactions. Look for a few luxury innovators to make a more
serious effort to experiment with M-Commerce in 2009, especially
internationally, as luxury quickly discovers that it must seriously address
the mobile needs of the wealthy constituents of Generation X and Generation
Y, as well as the mobile needs of Boomers.
3.) Price Does Matter. Luxury will Appeal to the Rational Brain Again
In the recent boom, some in the luxury industry, and their cheerleaders,
deluded themselves into believing that the more expensive an item, the
greater its appeal to the wealthy, regardless of quality, functionality and
service experience. University research suggested that the more expensive a
consumer was told an item was, regardless of the fact that it was the same
quality as a much lower priced item, the more the happy chemicals in the
brain approached a state of bliss.
In times of economic crisis, that high can only last so long. Most of the
wealthy are self-made, and have sacrificed to earn every cent while
delivering great quality and service to their own customers. Like their
customers, they use both sides of their brains to make luxury purchasing
decisions. One empirical example: an October 2008 Luxury Institute
WealthSurvey shows that when it comes to luxury travel, the top two factors
influencing vacation destination decisions are: scenery and nature (58%),
and cost (56%). So, it's back to value-added luxury fundamentals in 2009.
4.) High-End Philanthropy Phase Three: Doing Good Becomes a Way to Salvage
Reputation for Discredited Wealthy
In 2007 we noted that Bill Gates and Warren Buffet's entry into big-league
philanthropy created the "alms race" we had predicted. Many billionaires
followed. In 2008 we noted that their participation, and the trend they
started, created a new level of scrutiny for ineffective philanthropies to
deliver results. While this trend continues, we now also expect many
discredited Wall Street executives to turn a new leaf in an effort to save
family legacies and reputations and get into the high-end philanthropy
game. It's not much fun for kids to have the wealthiest parents in private
school when everyone knows they made their money in a Ponzi scheme that
brought the world economy to its knees.
Repentant wealthy executives have begun to carve out new family legacies by
engaging in serious philanthropy. The search for redemption is part of the
human journey and the attempt by these super-talented executives to make a
difference in world-class problems will be embraced.
5.) Luxury will Embrace Corporate Social Responsibility as a Critical
Component of the Business Model, not Just a Slogan
For several years, the Luxury Institute's impartial research has documented
the rise in relevance of Corporate Social Responsibility. Luxury Institute
surveys document that 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.
The global crisis of confidence in governmental, financial and other
institutions will drive luxury consumers to 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.
The good news is that these enlightened practices will elevate luxury to a
new level in the eyes of all of its constituents, including young
aspirationals, who are even more sensitive about these practices than their
elders.
6.) Classic Luxury Spending and Selective Indulgence Coexist, Guided by
Trusted Advisors
In the midst of this financial crisis, and the populist backlash on
unearned financial services wealth, many wealthy consumers are a bit
confused and feeling a tad 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. They still
covet their favorite Lamborghini sports cars, Judith Leiber handbags,
Christian Louboutin shoes, Harry Winston jewelry, and Ritz-Carlton
experiences. That's good, because luxury spending has a strong and positive
multiplier economic effect on society.
At the same time, they are selectively looking for a few playful
indulgences in their favorite categories that they can enjoy in privacy
with family and friends. 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 curating customer
experiences that indulge, but don't overreach, for their loyal clients.
7.) Trust, Authentication, Validation and Certification Become Part of the
Luxury Lexicon
The financial meltdown has its roots in a crisis of confidence that began
in real estate as far back as 2006. Trust in credit ratings institutions
such as Moody's and Standard & Poor's, and in quasi-governmental
institutions such as Fannie Mae and Freddie Mac, and in financial
institutions such as AIG, Bear Stearns, Lehman Brothers, Merrill Lynch,
Morgan Stanley and even Goldman Sachs, has declined precipitously, as
indicated by their financial results and stock prices. Several paid the
ultimate price for this lack of trust.
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 scrutinize 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.
Finally, in these troubled times, many experts will herald the death of
luxury. If you are a true luxury purveyor, you will not flinch. You will do
what true luxury purveyors have done for hundreds of years in up, and down,
cycles: execute the fundamentals as inspired and defined by your customers'
needs and desires, consistently and extraordinarily well. Men and women who
achieve the best will always seek the best of everything. That is why
luxury has brands that span centuries, while most other industries don't.
Milton Pedraza
CEO
Luxury Institute, LLC New York City
www.LuxuryInstitute.com
Contact Information: Contact:
VISIBILITY
Len Stein
914.712.2610