The Managing Director & Head of Global Business Development at The Luxury Network explains how current trends will shape the luxury realm in 2019
Economic uncertainty, geopolitical crises, rapid digital transformation, fast evolving consumer preferences – the luxury industry scene is a turbulent and challenging landscape. This means that it’s becoming increasingly difficult for luxury companies to keep up with competitors, understand why certain industries and consumers are moving the way they are and – maybe most importantly, – how they will evolve in the future.
One striking development is the UK fast becoming the most affordable luxury market in the western world. Despite market uncertainty due to Brexit, there have been few complaints from retail brands in London, where the fall in the value of sterling has had tills ringing, with overseas visitors spending heavily. Compared with China, prices in the United Kingdom are on average 22 per cent lower*. Meanwhile domestic luxury customers are also doing their bit to help- all major brands maintaining flagship stores in the capital – by reducing their shopping abroad due to unfavourable exchange rates, and spending more at home instead.
Sales in the UK have historically been driven by the growth in luxury cars, designer leather goods, accessories and beauty. However, it is expected that categories such as luxury hotels and other services in the hospitality sector will increase in relevance as consumers continue to look towards more luxury experiences over ‘things.’ “Consumers now demand sustainable, ethical, experiential and tech-focused goods,” notes Fflur Roberts, Head of Luxury Goods Research at Euromonitor International – a leading independent provider of strategic market research. “At a time when the political world is in turmoil and populism is on the rise, it will be less about showing off wealth and more about what we find meaningful.”
According to Euromonitor International, consumer values and priorities are being redefined, and five key disruptors can be identified in the luxury sector. As some areas of the globe become over-farmed, over-populated, or otherwise reach their maximum potential, others gain prominence for their unexploited potential. Fast developing economies of Asian and African countries are at the centre of what we refer to as ‘Shifting Market Frontiers’; China will account for eight per cent of all arrivals in the world by 2023. To ensure future growth, businesses will have to adapt to the changing demographic, economic and technological reality that brings new markets from frontier into the spotlight. Demand for more unique trips is set to rise, with one such example being SpaceX, which announced that it will take two passengers on a trip around the Moon in 2019.
Middle-class households in developed economies have not improved their standard of living and struggle to maintain their economic status, and will therefore continue to optimise on their limited resources with a focus on obtaining the most value for their money. Here, value is not solely about price, but also quality, authenticity and convenience playing an important role to the ‘Middle-Class Retreat’. Likewise, the accumulation of ‘stuff’ has become less important to this group, with trends on simplicity and frugality making a headway.
‘Ethical Living’ is gaining in popularity – sustainability is no longer being driven solely by NGOs, and is now closely linked to wider commercial activity. We’ve seen long-term charity affiliations become important caveats for luxury companies’ corporate social responsibility and marketing strategies, but the huge number of certifications indicate that obtaining one does not always indicate a true effort towards sustainability. Soon the entire production process will move into focus and companies that prioritise ethical business practices early will appear more genuine. However, in hospitality consumers are still prioritising nature and outdoors activities over eco-tourism and sustainable travel.
With 64 per cent of global consumers using the internet, connectivity is now the new norm and ‘Connected Consumers’ has become a legitimate term of characterising them. Digital connectivity has enabled luxury brands to reach new geographies and consumers. Digital access has likewise altered all aspects of life with consumers leveraging connectivity for all daily purposes and thus turn their data into a commodity in high demand. Brand loyalty is dying and staying competitive has never been harder. There is, too, a fundamental shift in consumer values towards luxury experiences over things that bring happiness and well-being, making brands focus more on the authentic, the local, the immersive, the stimulating and the social. Today’s luxury consumers simply seek to ‘Hunger For Experiences’. A great example of people demanding a unique experience is Null Stern Hotel, which has no walls, roof or bathrooms (see main pic), with rooms consisting of a queen bed with a pair of nightstands and lamps in the Swiss Alps.
But what does all this mean for the world of luxury in the coming year? Our appetite for luxury consumption won’t be slowing down any time soon – but it’s becoming less about wealth and more about mindful luxury. Wise brands should thus be incorporating a wellness and sustainability angle into their products and services, to drive consumer interest. Bespoke travel company Niquesa Travel predicts a significant rise in trips and experiences which enhance mental well-being travel; it is already ahead of the curve with its experiential travel including Lost & Found package, which sees clients spend a period alone in the wilderness, as a contributor to mental well-being.
“Trips are designed to help you find your authentic self,” says Mark Allvey, Managing Director of Niquesa Travel. “You travel with your guide to a remote undivulged wilderness location. As you both leave the helicopter, your guide will place a box on the ground before climbing back in. Watching the helicopter disappear into the sky, the realisation will dawn on you that you are now without your usual support structures – you’re alone and lost. So begins a transformational journey involving the physical, the psychological and the spiritual.”
Meanwhile in the real estate world, Robert Walker, Managing Director at Alexander James Interiors, believes that conjuring up a lifestyle with their work is more important than the tangible: “Despite many seeing Interior Design as a luxury, it is a necessity for our clients,” he says, “with both our corporate and private clients seeing home interiors as an important lifestyle concept, with the appreciation that the luxury residences are about far more than just bricks and mortar.”
Materialism, as a determinant of status, is likely to persist in the short term but a shift toward experiences will be more visible. This is also why we will see personalisation of products grow as well as the need to create emotional connections with consumers. Experience and the perception of it will become a more critical part of the consumer engagement quotation, and establishing and maintaining empathy will therefore become one of the most powerful ways to create strong, emotional connections with luxury consumers in the future. Brands should also to be seen to prioritise ethical business practices. Not surprisingly, transparency and ethical approaches throughout the supply chain will make them appear more genuine.
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*Deloitte Global Powers of Luxury Goods 2018