In the 2017 State of the Luxury Industry Study, sponsored jointly by Luxury Daily and Unity Marketing, the over 600 industry insiders surveyed identified the need for innovation a critical business priority for 2017. Because of the rapidly changing consumer marketplace and how the very idea of “luxury” is evolving, there is an industry consensus that innovating with new products, new services, new marketing strategies and new ways to engage with the affluent customers is key. But less clear from the survey is how luxury brands will execute against that need.
Yesteryear’s luxury is not necessarily today’s or tomorrow’s
Heritage luxury brands, many with a history that goes back a century or more, have their back against the wall when it comes to innovation. They cling to that heritage and fear innovation threatens it. Yet the world is changing, faster than ever, and what made luxury brands great then isn’t necessarily going to make them great in the future.
In the American culture, the world’s largest luxury market by far, as well as other Western nations, the traditional values and ideas that have defined luxury – aspiration, status, exclusivity, wealth – have taken on negative connotations, as this insider said in the survey, “The new luxury is not a showoff.” Other values that luxury brands have traditionally filled – quality, style, workmanship, design – are increasingly being satisfied by premium and lower-priced brands.
It has created an identity crisis for brands that compete in the luxury market, or as this insider said, “Luxury retailers and brands have lost their way.” The call is to find a new more relevant idea of what luxury means, not just use it as a label, but to convey real meaning.
This luxury industry insider expressed the challenges for the future of luxury brands, “There seems to be a wider demographic, and growing [base] of consumers looking for exceptionally made, sophisticated and well-priced merchandise. Why that is called ‘luxury’ is a question we should be asking ourselves.”
While the impact of the internet is often cited as the cause of the problem, as this luxury goods marketer said, “Technology and access to technology, continues to redefine luxury,” it is rather a symptom of the problem, not the root cause.
Luxury brands must adapt and put the consumer in the drivers’ seat. “With the consumer leading the way, that over the next two years the idea of the luxury market will evolve forward to reflect where the consumer demand will be, and in the process, redefine the very definition of luxury itself,” said this insider.
The call is for luxury brands to recognize that now the consumers, not the designers or brand managers, are the final arbiters of luxury. That means understanding that luxury has a new meaning for consumers who are looking for innovative ways to express and live a luxury lifestyle, which increasingly is about:
- Luxury that combines style and substance, think Canada Goose’s protective warmth and cutting-edge style;
- Luxury that delivers more value for the price, e.g. Knot Standard bespoke suiting;
- Luxury that is high quality and responsibly crafted, like Interior Define custom-made sofas;
- Luxury that is authentic, not a poseur, such as TheRealReal promises for the consignment goods it sell;
- Luxury that is democratic and inclusive, like Apple-Hermès watch;
- Luxury that is timeless and timely, think Montblanc Meisterstück ballpoint for modern writers;
- Luxury that is socially responsible, for example DeBeers’ Forevermark Diamonds being responsibly sourced and environmentally conscious.
The luxury brand innovation challenge
The essential innovation challenge for luxury brands is the need to balance tradition all the while effecting change. “The change in how consumers define luxury and the new path to purchase is dramatically redefining the marketing strategy,” as this insider said. “Luxury brands must be very agile and innovative in order to gain the favors of the new luxury consumer. Finding the right balance between innovation and tradition is a challenge for many brands.”
Regarding innovation, Peter Drucker reminds us that it is one of only two essential business functions that contribute to the bottom line:
Because the purpose of business is to create a customer, the business enterprise has two – and only two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.
Innovation is not easy; it is not fast; it cannot be dialed in or found by scanning a balance sheet or reams of data. It requires creativity in the form of human capital. Fortunately for luxury businesses, creativity is not a skill that is lacking. Quite the contrary.
Creativity is what gets a brand into the luxury game, and it is creativity that will keep the luxury industry and luxury companies successful in the future, as this insider expressed, “The dynamic and innovative nature of the industry generates resilience and resourcefulness.”
Thoughts for tomorrow
In closing here are some ideas about ways luxury brands can find inspiration for innovation:
- Consumers own luxury, brands don’t – Too many luxury executives I come into contact with have blinders on when it comes to defining what is, and isn’t, luxury. It’s a point of view all too common in the luxury market, where luxury is defined in the industry’s own terms and by extension the brands which compete there. But today the consumer, not the company, is in the driver’s seat defining luxury for his or herself, so brands need to broaden their perspective on what luxury means for the customer. This is the place to start to innovate.
- Engineer true innovation – Theodora Koullias, founder of Jon Lou, a company described as a “technology-centered fashion brand that creates smarter, more useful objects,” calls on luxury brands to hire technically-trained engineers to invent luxury objects that work for the customer, not just look good being worn by them. She points at handbags as being behind the times. “The handbag has ceased to continue to transform according to women’s needs,” she writes in Luxury Daily, which gives a woman no compelling reason to go out and buy another one. Koullias challenges the fashion industry: “A complete lack of innovation for so long is causing the industry to stall even as the world is becoming wealthier and women – primary spenders – are earning more.” Her solution is to apply engineering talent to innovate fashion around the changing needs of the customer, not more designers to apply a veneer to the surface.
- Push back on celebrity, bring forward the individual – Indicative of the industry’s style over substance approach, luxury brands have been rabid in their pursuit of the next hot celebrity to hook up with and carry them forward. But the true luxury customer isn’t a follower, but a leader, and doesn’t aspire to own some brand because so-and-so has it or thinks it’s cool. Dana Wood, a beauty journalist writing in the current issue of The Robin Report, talks pointedly about how celebrity endorsement of beauty products doesn’t drive brand engagement. It can even drive it away. Rather, real people who actually paid their hard-earned money to purchase a brand are now the holy grail of influencers. That’s the primary reason why L’Oreal ponied up $1.2 billion recently to acquire IT Cosmetics. IT was developed by a real girl, Jamie Kern, with real beauty issues, rosacea, that she isn’t afraid to show to the world on television. Kern is every woman and that is so much more powerful than using a movie star or supermodel to be the “face” of the brand. Who can believe that those beautiful people have beauty problems?
- Be real – True, real, authentic luxury is what the consumers with means hunger for, but too many luxury brands substitute style for authentic substance. For an authentic luxury brand, the deeper you go, the more real it gets. In a recent research project to define “Authentic Luxury,” sponsored by ROHL, the luxury kitchen and bath fixtures company, we arrived at three qualities that distinctly define it. First is the touch of the hand of the craftsman or product creator. That delivers the quality, workmanship and attention to detail the customer can feel. And the luxury carries its heritage, provenance, story and sense of place and time to connect with the individual. Luxury consumers today know true luxury when they see it and know when they are being sold a bill of goods. Innovation for luxury brands can’t take away from the three authentic touchpoints – touch, feel and place – but will enhance it with products, services and shopping experiences that deliver for today’s consumers.
Luxury brands can’t be caught in a time warp, or as Koullis warns, “being sold the equivalent of a horse and buggy” in evolutionary terms. Luxury brands must make the quantum leap to the now, presenting innovative ideas of luxury in line with the needs and expectations of today’s, not yesterday’s customers.