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The luxury market is facing enormous challenges. It does not follow trends because they are temporary by nature and true luxury is timeless. But it keeps pace with society's evolution, since this mandatory for keeping relevance.
Nowadays, the main challenge for luxury brands is the change in mindset that the younger generation has brought to society and the market. A segment of the Y and Z generations have high purchasing power, diverse ways of thinking, and different lifestyles than those of their parents and grandparents’. Hence, they prefer brands that understand them and share their values. In a recent report, consulting firm Bain & Co. confirmed that these generations represent approximately 65% of personal luxury goods consumption worldwide.
The Nine-Step Formula
Luxury brands have understood this evolution and are investing in the Nine-Step Formula to seduce the wealthy Millennials and Gen Z clients.
Over the last decade, brands of excellence have perfected their digital communication. Chanel's Live Instagram Stories, Cartier’s short-movie production for social media featuring French Diva Catherine Deneuve and Hollywood star Remi Malek, as well as Jacquemus' Bambino Bag digital campaign are examples of how to do it right.
The ‘Phygital’ revolution - the interaction with technology within physical spaces - has also reached the luxury universe. Burberry stores have smart magic mirrors and digital displays, IWC's Zurich flagship store offers virtual reality interaction and live streaming to see the watch production in real time, and Ferrari accepts cryptocurrency payments.
Brands are increasingly providing experiences that allow clients to live the brand's lifestyle and develop a sense of belonging. Armani and Bulgari have hotels, Gucci has invested in restaurants, and Dior offers spa treatments in a boat, sailing the Seine River.
Unlike their parents and grandparents, young customers value the opinions of celebrities, with whom they share values. Thus, Dior invited Lewis Hamilton to be a brand ambassador, Aston Martin selected British actress Felicity Jones and Chopard partnered with Julia Roberts.
Collaborations between brands that share the same values enable to better communicate the desired image and win new customers. Lancôme and the Louvre Museum, Estée Lauder and Messika or Tiffany & Co. and Netflix, are collaborations that seduce the new generation.
Luxury and art both stem from creativity and, together, they generate value.
Porsche holds art exhibitions with emerging artists, Vuitton displayed a collection of leather bags at the Art Basel fair, and most luxury hotels have art on display.
Millennials and Gen Z live the moral values of diversity and inclusion, pressuring luxury brands to embrace them. At Expo 2020 in Dubai, Cartier presented the Women's Pavilion to discuss the role of women in society, Chanel appointed a Director of Diversity and Inclusion, and Bentley announced its goal of becoming the most diverse automotive manufacturer.
In a Nielsen study, 73% of millennials admitted to being willing to pay more for sustainability. This is probably why Panerai developed a watch with 98% recycled materials, Porsche has set the goal to reach carbon neutrality by 2030, and Prada has jewelry made from 100% recycled gold.
Young customers are buying pre-owned luxury fashion or renting luxury goods, leading brands to embrace the circular economy. Pre-Loved Luxury stores are proliferating in airports, and after decades of intransigence, Rolex is finally accepting authorized distributors to sell pre-owned watches, with a certificate of authenticity and guarantee.
These are times of transformation and evolution. I believe that luxury brands will overcome these challenges and will move forward, as they have done for centuries.
Luxury is a state of mind and a way of life. And it will always be so.
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