What are the key challenges for the luxury industry in 2018 ?
After posting flat figures in 2016, the luxury industry has returned to a robust 5% estimated growth in 2017, according to Bain & Company in the 16th edition of its Luxury Study.
Let's weigh in on some challenges that lie ahead for the luxury industry. Here are (at least) 11 challenges.
Some are about preserving/reasserting the fundamentals of luxury, some are about embracing innovation and shifting culture. Easier said than done.
Inspiration and creativity
That’s what keeps the flame alive, what fuels customers’ desire! To remain aspirational and inspirational, luxury needs to keep on being creative, meaningful and bold. This spans from product offering to communications, retail, digital. Fighting against banality, not succumbing to easy options, taking risks, delivering surprises and renewed enchantment...
Quality of the product: securing the sourcing, preserving the know-how, dealing with bigger quantities with no compromises on quality, maintaining local/national production as “made in …” products are sought after in the luxury industry.
Quality of the service: impeccable customer experience in store with sales staff, performance of delivery service, efficiency of contact centers, quality of the after-sale service, ability to solve customers’ problems … There are probably plenty of business opportunities in designing new services to customers.
More than ever, managing balances between opposites
Between sales numbers and a sense of exclusivity, exposure and discretion, immediate results and long-term perspective; being global and able to adapt locally, having authority and being able to listen, looking forward with faithfulness to the brand ‘s heritage…
Accelerating on the digital
With the digital, entry-barriers are lower for new comers that can disrupt well-established brand: see Air bnb and the hospitality market, or the digital native vertical brands in fashion. How do traditional brands compete?
Some luxury brands, especially the small ones, still lag behind on digital experience. Regarding their corporate website: quality of the design, performance of the navigation, brand story-telling, language options, store locator… How to perform with e-commerce, m-commerce ? How to make social presence not only intensive but also meaningful, not only product-oriented but also inspirational and engaging? How to manage media investment with key current issues such as ad blocking, visibility, fraud and brand safety concerns?
Ability to address new generations
Beyond digital, here are some differences between millennials and their elders that may challenge the classic luxury culture:
Classic frontiers of luxury are blurred. Sports, tech and wellness may enter in their definition of luxury.
Millenials tend to buy experiences over property.
They look for interactivity with brands: they want to be considered, to engage the conversation, to co-create.
Immediacy and impatience are key words.
How do luxury brands deal with this disruptive approach ?
Transforming a rather product-focused industry into a more customer-centric industry, at all steps of the customer journey. Before purchasing (especially with the online experience), while purchasing (e-commerce, in-store experience), after purchasing (delivery, CRM/loyalty, after-sales issues...). This often implies transforming the organization and the corporate culture and finding ways to engage all employees in this objective.
Big data, big issues!
What data and how to collect them? How to integrate them? How to analyze them, do it fast, and transform them into actionable insights? How to clean and update them? How to deal with privacy issues and GDPR? How to organize, what resources to dedicate (technical, financial, HR)? What about third-party data? Data security?
Bridging digital and physical channels, thinking about how on-line and physical stores can complement each other, identifying the customer on-line and off-line, making the customer journey seamless and integrated. This entails huge organizational challenges..
Online sales will continue to grow. Customers look for experiences. This context means that physical stores need some reinvention. Making the visit to the store worth it, making retail eventful, entertaining, surprising and non-substitutable. Cafés, exhibitions, events, artisans at work, personalization workshops or innovative pop up stores help brands make sure their customers leave stores not only with purchases but also with the memory of a great moment.
Luxury is expected to be a role-model in terms of environmental, ethical and social responsibility. Many luxury brands have embraced the subject and much progress has been made. There is still a long way to go towards becoming irreproachable and there are opportunities in leveraging sustainability in the product offering.
Addressing each and not all with unique or customizable products, personalized communication, personal relationship, tailored services and experiences… Customers search for differentiation and recognition. Niche brands thrive on these trends, what about the other brands?
Again, easier said than done.
Thank you for your reading. Please feel free to contact me.
(Article published on LinkedIn, 01.01.18)