Millennials Redefining the Norms of Luxury Industry
By Dr. Sheetal Jain
Baby boomers have traditionally been the major spenders on the luxury goods across the globe. However, 85 percent of luxury growth is propelled by Gen Y and Z (Bain & Company Report) today. New age buyers are taking truncheon from boomers and disrupting the rules of the luxury industry. With the democratization of luxury and shifts in power and consumer preferences, the meaning of luxury is being redefined. This major shift is driving luxury companies to restructure their strategies to suit the peculiar preferences of new generation buyers. Brands need to understand ‘millennial state of mind’ and develop innovative approach to entice millennial shoppers. As these new luxury buyers are young, more progressive, more discerning, less wealthy and less loyal, it may provide huge challenge as well as great opportunity for the luxury companies. Therefore, let’s take a closer look at these new norms of the luxury industry and its implications for luxury brand marketers.
- Shift from Offline to Online: We all know that consumers’shopping journey has seen radical transformation in the last few years. The rise of internet has led to ‘ROPO’ effect which means ‘research online, purchase offline’ or vice versa. According to recent McKinsey report, one fifth of luxury sales globally will take place online by 2025. Therefore, E-commerce should be taken as an opportunity rather than a threat. A holistic, omni-channel approach should be implemented to provide consistent, bespoke purchase experience to the customers across all touch points, be it be offline or online, events, social media, advertising and PR. The engagement and interaction with customers across these multiple channels should be seamless and in alignment with each other.
As around 80% of the sales would still be coming from physical stores, it is noteworthy that stores wouldn’t lose their purpose. This poses a bigger challenge for retailers to provide immersive in-store shopping experience to consumers as they would only be willing to visit stores if some differentiated experience is provided to them. Therefore, it is critical for retailers to adapt new technologies to create a convergence between online and offline platforms to empower shoppers’ journey.
- Shift from Possessions to Experiences: A recent research reveals that at least three in four millennials prefer to pay money for an experience rather than a product. They would rather love to splurge on a lavish holiday or buy front row tickets for a concert than spend on purchasing a car or home. Therefore, marketers need to create seamless consumer journey that permits them to buy tickets, attend the show and share the experience across social channels. They should find ways of how more value can be added to consumers’ experience.
- Shift from Ownership to Shared Economy: Does a $3000 dress still a luxury product when you are renting it for a negligible price? Such questions certainly make the definition of luxury blur today. But, the new luxury buyers are changing the rules of the game. There is a growing trend of pre-owned luxury goods. Why buy a designer dress when you can rent it? Millennials with spending power are reluctant to spend on big ticket items. They rather prefer to live the moment than to own a product. They believe in the concept of ‘shared economy’. This makes it critical for the luxury companies to remodel their conventional businesses to remain relevant for the new age buyers.
- Shift from Self- Orientation to Sustainable Orientation: There is a visible shift from ‘conspicuous buyers’ to ‘considered buyers’. Today, consumers want to use the brands that care for environment. This makes it imperative for the luxury brands to shift from linear economic model to closed- loop circular model. Companies need to think of not just profits but also be considerate about people and planet. Realizing the importance of this concept, many luxury firms are redefining their supply chain processes and striving to reduce social and ecological problems through the use of sustainable technologies.
- Shift from Sales Assistant to Virtual Assistant: Technologies likeartificial intelligence, voice controlled shopping and augmented reality are set to act as ‘second sales assistant’. Interactive chatbots, virtual trial rooms and personalized recommendations through apps are emerging as must have tools to lure new-age buyers.
All these shifts are certainly going to reshape luxury landscape, thereby making it crucial for luxury companies to rethink their brand strategies in order to remain relevant in this disruptive business environment. Today, luxury buyers want the brands they use to reflect their concerns and aspirations for a better world. Through the use of technology and innovation, wider range of sustainable options could be created for the new-age luxury consumers.
(This article has also been published in Luxury Daily on July 20, 2018).