Four Trends In Developing Luxury Goods

Changes are taking place at four levels: the evolution of the definition of luxury market, the change of consumer value, the rising of new markets in emerging economies, and the redefinition of luxury goods by social media.

Although the number of luxury brands is growing at a rate of two digits over the past two years, some major changes are taking place. If luxury products or service providers want to maintain long-term success, they need to make persistent efforts to make feedback on these changes and adjust their strategies in time.

Since 2011, the Boston consulting company has cooperated with professional research firm Ipsos and International Luxury Business Association to conduct a survey of 1000 rich consumers in eight developed markets (France, Germany, Italy, Japan, Korea, Spain, the United Kingdom and the United States) and four emerging countries (Brazil, Russia, India and China).

The survey found that the luxury market is changing at four levels: the evolution of the definition of luxury market, the change of consumer value, the rising of new markets in emerging economies, and the redefinition of luxury goods by social media.

The evolution of luxury market -- from product to experience

Compared to clothes and jewelry, they said they were more willing to spend money on the experience. They had shifted from "I and all my friends wearing Cartire jewels" to "I cherish the experience of spa with friends" - a rapid change from luxury products to physical luxury goods.

The survey shows that the total annual consumption of luxury goods is now up to US $1 trillion and 400 billion, including over $770 billion of luxury experience consumption, and nearly $350 billion of luxury car consumption. The remaining part is personal luxury consumption, such as watches, handbags and footwear.

Experiential luxury goods now account for about 55% of the total global luxury consumption, which is 50% higher than that of luxury products.

With regard to this "experiential" consumption trend, some luxury brands have begun to respond: LVMH group is developing the franchise of the Cheval Blanc hotel. Now they have opened a white horse estate hotel in the French ski resort Courchevel and Maldives, and plan to open more white horse manor hotels in Oman and Egypt in 2012. The Swiss watch maker IWC has a clock Museum in its headquarters, and in its flagship store in Hongkong, it can promote the pilot (Pilot) series watches. Customers can sit on a flight simulator equipped with large screen and surround sound to experience a "flight" trip.

But so far only a handful of enterprises have taken such measures, and the actions of enterprises are not fast enough.

The pformation of consumers to experiential luxury goods will continue. Luxury suppliers must be able to keep up with this important consumption trend.

Consumer value -- upgrading the distinction between popular brands

One of the important trends that luxury products and service providers need to face is that the value that luxury can provide consumers is no longer the same as usual.

First of all, traditionally, the consumer value of luxury goods is often associated with factors such as social status, wealth and so on. These factors are becoming increasingly unimportant to many consumers, and family, happiness and value are increasingly becoming the key points for their attention.

Meanwhile, another factor that has led to the shrinking of the value of luxury goods is the blurring of the distinction between popular brands and luxury goods, which makes consumers think that luxury goods are becoming more and more difficult.

In recent years, many famous designers have started working with popular brands and fast fashion brands, enabling people to buy goods that are not very different in appearance and luxury goods at a lower price. For example, products designed by Jimmy Choo and Versace can be bought on H&M shelves. If you search Google Karl Lagerfeld with famous designer, you can not only see him in Chanel.

You can also see pictures of him and his Macy s cooperation series.

Besides the designer's factors, the homogenization of advertisements also further reduces the attractiveness of high-end brands. What is often seen is that a star is advertising for luxury goods while speaking for the mass brand.

It can be said that luxury goods need to convey value information to people in a better way to show clearer differentiation.

The survey found that in the past 18 months, the focus of luxury communication has shifted from previous sexuality, status and wealth to new demands.

For example, the advertisement of luxury watch brand Patek Philippe is the main story of inheritance. Through the two roles of father and son, the father is described as the guardian of his son's watch.

At the same time, luxury goods are also looking for new ways to enhance the consumer value of their products and services.

For example, the price gap between popular brands, high-end brands, core luxury brands and super luxuries will vary greatly depending on the category.

In some areas, such as watches, these differences may be very large. But in other fields such as cosmetics, the price difference between luxury goods and general public brands is very small, and there is room for differentiation and value enhancement. Designers Tom Ford and Est e e Lauder have launched several times more expensive products than the general luxury cosmetic brands, and have won those rich women who have higher pursuit of high-end quality and uniqueness. Among them, the perfume Santal Blushfragrance is 4 times higher than the ordinary core luxury brand.

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Emerging markets and social media

The consumption map has changed, and new cities have become luxury consumption centers, such as Shanghai and Dubai.

Take China as an example. In fact, some top luxury brands believe that Chinese consumers contribute about 40% of their global sales. So they began to pour power in cities like Beijing, Shanghai and Guangzhou, and even Dunhill and Burberry began to expand in China's two or three tier cities.

However, the success of luxury brands in these markets requires more consideration, such as localization, including localization at the marketing level, whether your CRM system can grab Chinese fonts, locate and track consumers who are shopping on the global network, localization of service level, whether your shop can repair or replace products purchased by customers in other countries, localization of management level, according to our research, managers of emerging markets rarely appear in senior management of luxury goods companies, and many luxury brands' global marketing strategies are remote controlled by headquarters in Europe or the United States.

It can be said that luxury enterprises need to really study how to deal with the differences in every emerging market at the moment of global consumption map change, and integrate them well into global strategy.

The last challenge we need to face is the redefinition of the luxury sector by the Internet, especially social media.

In the past ten years, luxury brands have gradually entered the digital world. Especially last year, the attention of digital media has risen sharply. One example is that the number of luxury brands on Facebook has increased significantly.

A typical example is Burberry, which has surged from 600 thousand to 12 million from February 2010 to May 2012, and has launched iPad App.

However, although digital schemes can help luxury goods and customers interact better, they still pose many difficulties for them: for example, how can luxury goods adapt to the democratization trend brought by social media? How do they control their brand presentation on the Internet for luxury goods that are very concerned about shopping situations? Imagine a picture of luxurious luxury clothes that appears next to a picture of a classmate who is not very mainstream.

Therefore, although the brand has carried out many digital experiments, most of them still hold a conservative and "try what effect" attitude, rather than having a clear vision and complemented by well prepared strategies.

Now, this way of "trying to learn" still applies, but luxury enterprises should take a step further, integrating web display, digital store concept, LBS services and other digital actions into a complete business platform.