With the dust settling in the wake of this summer’s Brexit vote, the luxury sector, like all industries, is looking to the future with more than a little uncertainty. While the long-term impact of Brexit remains unknown, forecasts have so far been pretty gloomy. Some industries seem set to weather the storm better than others, however, and the luxury sector might just be one of the lucky few.
One upshot of the falling pound is the boost that it has given to British tourism. While Brits themselves are straying away from jaunts abroad, the UK has benefited from wave after wave of savvy visitors with bank accounts not measured in sterling, eager to splurge with exchange rates so tempting. July saw a 7.1% increase in the number of international flight bookings to the UK, and August witnessed an even more impressive 36% surge in foreign spending on tax-refundable (big-ticket) items. American and Chinese visitors – normally big spenders – have contributed particularly heavily to this upswing, with flight bookings from Hong Kong rising by over 30% since the end of June, and Chinese shoppers – who typically spend three times more than any other nationality on luxury purchases when in London – making a staggering 270, 000 trips to the UK last year, up 46% on the year before.
But the lure of luxury can be felt closer to home, too. For those of us making trade-offs on where to save and where to splurge, the quality, heritage and cultural relevance enjoyed by luxury brands can help to cut through the noise of a crowded marketplace. The challenge for the luxury sector in the aftermath of Brexit is to tell the story of these credentials clearer than ever before.
Brexit, then, is less a threat and more an opportunity for luxury brands to take stock and reflect. June’s vote has made it clear that we are playing in a new marketplace with new customers. If luxury is to thrive in the future as it has done in the past, then it looks like a revival is on the cards.
Redefining luxury starts with an acknowledgement that luxurians are getting younger, with millennials now accounting for 45% of luxury shoppers. Despite coming to age in one of the most difficult economic climates of the past century, they purchase mindfully, pushing aside conspicuous consumption in favour of value with values. Out with quantity, in with quality investment pieces and brands with a clear point of view on issues such as supply chains, animal welfare and the environment. Indeed, millennials continue to be the audience most receptive to issues of social responsibility and environmental stewardship, with 73% stating that they would be willing to pay extra for sustainable products. Luxury brands have the personality and authority to lead this sort of social change, winning the loyalty of customers and creating distance between themselves and fast-fashion competitors in the process.
Millennial luxurians are also digitally savvy and expect the same of the brands they endorse. Half of purchase decisions for luxury goods are influenced by what shoppers hear or see online, yet
e-commerce generates only about 5-6% of total global luxury retail sales, with luxury brands only selling to 45% of leading markets. With online expected to drive 40% of global luxury sales by 2020, it’s high time that brands evolved to exploit these channels. The brands that will survive will be those that can tie traditional ideas of artisanship and creativity to disruptive new technologies and experiences. We are already seeing a blurring of online and bricks and mortar platforms as big-name brands bring online in-store through augmented reality innovations such as ‘magic mirrors’ that transport shoppers to catwalks, or advise them on which products would suit them best. Social media, too, is taking the luxury world by storm as brands such as Burberry and Alexander McQueen flock to Snapchat and Instagram to bring campaigns and runway shows into the homes and hands of shoppers. Wearables are the latest frontier in this digital drive, with 44% of Swiss watch executives pointing to smart watches as the “next big thing” hitting the industry. With wearables serving so many functions – from timekeeping to health tracking to contactless payment – it isn’t hard to see why.
This marriage of luxury and technology brings to light the central role played by customers in the visual redefinition of the sector. New luxurians are responding to hugely different category codes than those that have defined the experience of luxury for centuries before. Out with rich golds, dark tones and embellishment, in with clean lines, white space and minimalism. What is interesting here is the link between the value that today’s premium shoppers ascribe to time, and the way in which they look for products that fuse the traditional codes for ‘premium’ with those adopted by the efficiency-centric tech industry to denote ‘functional.’ Getting to grips with what this restrained, efficient aesthetic means for the future of luxury design will be a key imperative going forward.
Complementing this trend towards a new, tech-influenced aesthetic is the challenge of how to embrace the openness of digital without losing the allure of old-school luxury. Premium items are enticing precisely because they are almost unattainably desirable. The further we move into the digital space, the more shareable, commoditised and mainstream these become. With Snapchat and Instagram stories allowing the average Joe user to jump into the worlds of their celebrity idols in real time, the degrees of separation between everyday and luxury have become increasingly fragile and the category, as a result, is arguably losing the rarity upon which its very success is founded. Indeed, the commoditisation of luxury is visible across all sectors, from FMCG to cars to phones. For instance, where leather seats were once the reserve of premium car brands, these have now simply become a given. As the products and lifestyles to which consumers are exposed in the digital realm become increasingly aspirational, so do the standards that they expect from brands. This, of course, poses a burning question for the premium sector; what does the normalisation of these category codes mean for the future of luxury?
The answer seems to lie in a reversion to the past. It’s a careful balancing act – a struggle of the times, laden with irony. The new luxurian searches for and shares their purchase online to an audience of thousands, and yet still demands the veiled, coveted mystery that accompanies membership of a club reserved for such a privileged few. Brands can address this tension by elevating their offer to go beyond products and services to something tangible, immersive and unattainable to those behind a screen. Whether through personalisation – as with the bespoke Fragrance Lab developed by Selfridges and Campaign – or through a return to exclusivity – as with the rise of new paid-subscription social networks such as A Small World and Eleqt – experience is key.
Despite the turmoil caused by Brexit, then, it seems that a window of opportunity has been opened for luxury.
What is important is that brands act quickly to maintain the momentum injected into the sector as a result of temporarily lower prices and newer customers, whose discerning demands are shaping category codes at a pace not seen before. While the sector is innovating rapidly in the digital sphere, it is important that this does not lead to the neglect of traditional luxury appeal. Luxury consumers expect the same accessibility and ease of purchase from high end as they do from high street, but brands should be careful to ensure that digital acts as a facilitator, and not the essence, of the brand. Luxury has always been able to demand a premium because of the way that it makes people feel. Everything about the category revolves around exclusivity and one-on-one relationships – pampering the customer, tailoring the experience around them, making them feel exceptional – and digital, although integral in today’s climate, poses a threat to this old-school charm through its normalisation and commoditisation of everything that was once elusive and unattainable. Brands must reconcile the power of digital with traditional methods of storytelling and experiential branding to safeguard these age-old qualities, playing up to millennial cravings for a return to authenticity and craftsmanship as they do so.