The Future of Luxury
The future of luxury: tomorrow, like yesterday and different from today. In our search, Premium Beyond Digital, we investigated the trends and the evolution of Premium and Luxury Brands, a broad-defined, multi-domain sector, which is currently undergoing a lot of changes. In the words of our expert panelists, the traditional brand building in the industry is in shock, because marketers are forced to move from a traditional model of brand talking to the consumers, towards a co-created brand model, which is co-participated by consumers, influencers and customers. But beyond the brand-building model, there are a number of mega-trends, which are responsible for the evolution of the luxury industry towards its own future.
In our research, we identified three mega-trends defining the future of luxury: first and foremost, the de-materialization of luxury, which entails that our perception of luxury – and our definition of luxury – are changing and evolving towards a less material domain, with new forms of luxury emerging, in previously untouched categories. The second mega-trend is the return to authenticity, which is opposite to the direction of the previous 20 years, in which lateral marketing strategies and incremental business models based on – for example – licensing, expanded a brand across multiple domains. Pivotal to the growth strategy of many global luxury brands was licensing beyond its traditional categories, in directions which didn’t necessary fit the brand, but fit the business growth objective. Whereas we observe now a vector in the opposite direction, with brands returning to their own origins. Finally, the third and the last trend deals with innovation: due to the extensive emergence of digitalization, which is challenging the notion of product category and adding the dimension of services and connectivity to traditionally unconnected domains. Innovation really is gearing towards the raison d’être of the brand.
De-materialization of Luxury
Traditionally and historically, luxury belonged to four domains: food, fashion, leisure, and shelter. In essence, the luxury consumer used to distinguish oneself by the means of what one was eating, and clearly, where one was eating, what one was wearing, what accessories, what kind of traveling and leisure one was experiencing, and finally, where one’s primary or secondary residencies were located.
And while nobody disputes that this luxury consumption was built on sensorial and emotional experiences, this consumption was about material possession. Elitism was broadcasted and built around material possessions, and showing off is a matter of material possession, which is still easily observable in many emerging economies and as many developed ones. The future of luxury is going to be about experiences, which relate to immaterial possessions, in particular, to trends towards new domains of life, such as quality of life, time, space and balance. Luxury is going to be about self-discovery experiences of oneself, not about owning and showing off ownership.
As underlying validation of this trend, research proves that in developed economies, in particularly the uber-wealthy, so the top 1% of wealthy people within the population, are spending less and less money on material possessions, and more and more money in categories like education, health and retirement. This is the economic reason why more and more elite school are organizing premium and super-premium executive education programs for very exclusive types of participants. In addition to that, this trend is behind the fast growth of concierge clinics, which are all about luxury, first-class-type-of experiences in a clinic, whether for diagnostic, check-up or therapeutic visits. And, of course, this trend is also the force behind the emergence of a number of services, like experience-based journeys for affluent retired people.
The Return to Authenticity
The second trend, the return to authenticity, stems, on one end, from the need of luxury brands to re-establish relevance and focus – partially lost due to the cross-category expansion – but also from the need to stand out in a more crowded competitive landscape. So, brands need to fight for attention, and they need to have compelling, relevant stories.
On the other hand, because of the increased level of digitalization, brands have exploited all sorts of content into social media; and while they often try to stand out from their immediate competitors, aspiring to uniqueness in their own space, they tend to forget that the same positioning might be tapped from a brand from a another adjacent domain.
But, at the end of the day, the return to authenticity is also a return to craftsmanship. It’s not a story-telling excuse, it’s not a communication gimmick, and it’s a real journey towards the origins and the roots of the brand, going back to its foundational story and history. And from the journey to the origins derives a new approach to story telling, to the brand’s aesthetic construct, to the (original) relationship between consumers and the brand itself.
Raison d’être driven Innovation
And finally, the third mega-trend, impacting in the future of luxury, it’s Raison d’être driven Innovation. On one end, the technology digitalization is creating a technologically leveled playing field. In the category of smart-watches, there is a number of very limited Digital choices which brand owners can take. And this raises a problem of differentiation between two brands with the same operating System and processor: for example Apple and Hermes, which both have an iOS smart-watch operating system. Likewise Louis Vuitton smart watches offer the same technologies of Android smart-watches, often retailing at a tenth of its price. So, on one hand, technology is leveling the playing field, by risking of commoditizing the brands. On the other hand, luxury brands, thanks to the emergence of new luxury and the explosion of new luxury consumers, embraced the notion of luxury as a reward, by pushing the idea of luxury towards excess and greed. This is why brands must identify their own raison d’être, by looking at their history, heritage, and cultural identity; and then they need translate that into an innovation platform. The above-mentioned Louis Vuitton smart-watch offers a number of tailor-made applications for their own customers, in the domain of travel, which is the origin of the brand.
In a nutshell, it’s really about looking at what the origin story and the roots of the brands are, and, how the intersection of the two might offer a platform to the services and the ecosystems in which the brand lives.
In conclusion, the future of luxury is going to look much different: tomorrow will be different from today, but closer to yesterdays. It is definitely going to be less exclusive than it used to be in the past, but definitely more focused on heritage and authenticity, rather than on luxury as a physical reward.