Indian Luxury Market: The New Beginning 2020 and Beyond

Covid-19 has caused havoc across all industries including luxury. Companies are forced to relook at their business models to survive in this new landscape. According to McKinsey report, the global luxury goods market is projected to contract by 35% to 39% in 2020. The only option left with the businesses is to adapt or die; pivot or perish. As quoted by Intel CEO, Andy Grove, “Bad companies are destroyed by the crisis; good companies survive them but the great companies are improved and reinvented by the crisis”.

Luxury companies across sectors, from apparel to auto; from hospitality to health and from food to fitness, have pivoted their business models to ensure immediate survival alongside long-term resilience and growth. Companies have resorted to new distribution channels, product line extensions, innovative services, altering product categories and repositioning themselves to rebound. Luxury industry has advanced five years in just three months.

The hospitality industry in India has been the slowest to recover. From Oberoi and Taj to ITC and Hyatt, all are trying to rediscover themselves to bring back the traction. Many have started providing contact-less services such as self-check in kiosks and digital key technology; door to door packages (pick up from home to drop at home); luxury vans with a butler and chef for nearby destinations; etc. As healthy living has become top priority for all, hotels and resorts are trying to reposition themselves by putting wellness at the center of their philosophy. They are offering wellness therapies, mindful menu, yoga and meditation sessions to rejuvenate the guests. Resorts are also trying to reinvent themselves as workcation destination to allow city dwellers to work from such destinations by spending an extended period of time at these resorts.

Few are experimenting with new revenue generating models. For example, Taj is bringing the dining experience to their guest’s doorsteps. They have lately introduced Qmin app for gourmet food online services. Similarly, fine-dine restaurant chain, Diva has launched the concept of   DIY kits for gourmet Italian dishes. CAARA, a catering company, has extended its online food delivery service to include gourmet groceries and Masala Library is sending chefs, servers and food to curate unforgettable moments for their opulent consumers.

Luxury concierge services have tried to put their best foot forward during the pandemic. They have provided all kinds of services to satisfy the whims and fancies of the uber rich- from private air ambulance charter to virtual session with celebrity chef and personalized videos for birthday wishes from client’s favorite Bollywood star.

Similarly, in automobile industry, from Lamborghini and Mercedes Benz to BMW and Tesla, all have been mobilizing their resources to make hospital ventilators, protective plexiglass shields and other medical devices. Mercedes-Benz India has redesigned the complete process of buying a car by making it possible to obtain your favourite Benz from the comfort and safety of your home, through their e-commerce platform ‘Merc From Home’. Demand for pre-owned luxury car segment has seen a surge. According to Big Boy Toyz founder, Jatin Ahuja, 75% of sales is happening via online platform. They have made heavy investment to create webstore that gives immersive online buying experience to their customers.

Luxury apparel and accessory makers such as Dior and Loreal have started making disinfectant gel at their facilities that originally made perfumes and cosmetics. Lately, the luxury British heritage label, Burberry launched reusable and sustainable masks with anti-microbial technology as masks has become not just new necessity for the consumers but a way to make style statement.  Similarly, many Indian designers like Anita Dogre and Shivan and Narresh have followed the suit. Delhi-based affordable luxury leather goods brand Damilano, which earlier used its e-store only to liquidate products on rebates, is now focusing on ecommerce platforms as a growth channel. Likewise, many other brands like multi-designer store Ensemble which are finding it difficult to pull sales through offline channels even after easing of lock down restrictions are resorting to invest heavily in technology to bring the inventory of its physical store to its webstore. With limits on the functions and celebrations, some brands have switched to more classic collection with a longer shelf life, while others have been working on smart casual collections. These brands are not only offering private client appointments for physical store shopping but are also providing personal shopping and styling sessions on Zoom or video chat. They are making all efforts to ensure health, safety and well-being of their consumers.

In the wake of coronavirus pandemic, fitness freak consumers have been restricted to go to gyms, therefore, the demand for home fitness equipment has visibly increased not just in India but across the globe. To capture this opportunity, Louis Vuitton has unveiled the most stylish range of at – home fitness equipment like dumbbells and skipping rope. With work from home becoming a new norm, they have also introduced a set of opulent playing cards under their homeware line to engage their patrons.

Many of these notions are surely there to stay in the post pandemic era. Therefore, investment in technology which empowers human is the need of the hour. As per a McKinsey report, after the 2008 crisis, companies that prioritized customer service witnessed a stronger rebound compared with the market average. It can certainly prove as a game changer for the companies in the current crisis scenario as well.

(This article has been previously published in ET Retail.)

6 Key Trends paving the way forward for Luxury Industry

Covid-19 has hard hit the luxury industry resulting in the biggest fall in personal luxury goods market since 2009. The industry has witnessed major transformation with digital being one of the biggest and most impactful one. Ecommerce has proved to be silver lining for many companies that were initially skeptical to embrace digital technologies. Last few months have seen a significant shift in the luxury consumers’ beliefs, values and lifestyle. The key question remains: Will the pandemic alter the way shoppers buy in the future? What will the ‘new normal’ look like?

Here are the 6 key trends paving the way forward for luxury goods industry:

Darwinian jolt: According to the recent Deloitte report, the leading 10 luxury goods brands sold more than the next 90 combined. The big luxury players are becoming bigger than ever while the weak are traumatized by the crisis; thereby resulting in massive consolidation in the industry. Many stressed players, such as, debt-laden multi-brand retailers and cash-poor independent brands are finding it difficult to survive. The exceptionally complex situation of 2020 undeniably increases the likelihoods of more mergers and acquisitions and consolidation within the luxury industry.

Note: In post-pandemic world consolidation of the luxury industry will further deepen. Leading companies need to be agile to grab the opportunities as weak players’ shutter.

First time digital buyers on rise: Covid-19 undoubtedly accelerated the speed of digitization as companies had no other option but to go ‘online’ to reach their prospects. Many consumers who historically purchased through physical luxury mansions have switched to online channels for the first time during the pandemic. Also, there is upsurge in the demand from buyers residing in tier 2 and tier 3 cities who had limited avenues earlier to buy their favorite designer labels at the click of their fingertips. As per recent report by Bain & Company, online luxury purchases were worth $58 billion in 2020, as compared to $39 billion in 2019, nearly doubling the sector’s share of the market for global luxury sales to 23 percent from 12 percent.

Note: In the post pandemic world, some of these buyers are likely to stick to digital.

Surge in serious buyers: The fear of Covid still looms large across the globe. Consumers are shying away from visiting physical stores. They are making focused, to the point visits to retail outlets to fulfil their luxury purchase requirements and not spending time on window shopping and browsing through goods in the physical stores. Further, ticket size of purchases has gone up due to decline in frequent visits. In addition, consumers have become much more informed and are very clear about their needs and preferences. Hence, marketers need to go extra mile to engage and capture consumer’s attention during these times.

Note: In future, brands need to inspire and motivate their buyers by innovative tactics- both offline as well as online.

Back to possessions: Today luxury consumers can’t travel. They cannot splurge money on lavish dinners or big fat weddings. In this scenario, affluent people are parking a good amount of their money on acquiring luxury goods. They are celebrating their special moments like birthdays and anniversaries by purchasing high-end labels. Possessions have become a way to feel good at the time of this crisis. Although, this trend will be more prevalent in short-term till experiential luxury again gain the momentum.

Note: Brand should take this situation as an opportunity to acquire new consumers by creating targeted, focused customer acquisition and marketing strategies

Pre-loved luxury taking lead –As per ThredUp’s 2020 resale report, 50% of individuals are decluttering their closets more than pre-covid times since they are spending more hours at home. Today, increasing number of young consumers are seeing the brands in their closet as not just a way to express themselves but also as a valuable tradeable resource. At the same time, pre-owned fashion gives the opportunity to cash-strapped aspirational buyers to live their dream of owning luxury goods without making big hole in their pocket. Recently, Italian fashion house, Gucci has collaborated with consignment site, The RealReal to expand their target audience in a circular manner. The luxury fashion second hand goods market is estimated to grow from $24 billion in 2019 to $51 billion market by 2023. Further, second hand apparel market is projected to overtake fast fashion by 2028.

Note: In the post-pandemic world, pre-loved luxury may become the new-norm.

Rise in ‘woke’ consumers: Young consumers are extremely concerned about people and planet. With the onset of pandemic, they are rooting for those brands that are aligned with their value system and beliefs. Nine out of ten Gen Z consumers believe brands have a duty to address environmental and social concerns. Therefore, growing number of luxury brands today are repositioning themselves as ‘care taker of mother earth’.

Note: In future, brands are expected to demonstrate increasing commitment towards sustainability.

Today, luxury companies in all categories are compelled to adapt and reinvent themselves in order to survive in the new luxury landscape. There is increasing need for companies to become ‘customer first’ entities to attract and retain their customers. Consumer expectations and buying behavior has evolved during the pandemic and luxury companies need to be on toes to remain in sync with the changing market trends.

(This article has been previously published in moneycontrol.com)

Implications of Covid-19 for Luxury Industry in 2020 and beyond

With all businesses and industries throughout the globe in massive chaos, there has been grave economic impact of coronavirus across the sectors from tourism to airline; from entertainment to education; from cruises to cars; from food to fashion and so on. Marketers across industries are trying to redesign their business models and luxury industry is no exception. As per the recent research by Altagamma in association with Boston Consulting Group, it is predicted that coronavirus can bring down global luxury sales between €30 billion to €40 billion. With store closures and customers stooping down in their homes, luxury markets has been severely hit. Major parts of the world, from China to Japan to Europe and US are struggling with weakening demand and disrupted value chains.

This crisis has resulted in paradigm shift in consumer behavior. From being reluctant to using masks and sanitizers to buying them at any cost; from loving to shop in-store to going digital; from enjoying classroom learnings to attending online sessions; from doing physical meetings to making decisions through videoconferencing and from attending glamorous fashion events to viewing live streaming at digital platforms. This change in behavior may become the ‘way of life’ and ‘new normal’ for consumers.

It’s known from the history, each crisis leaves a long term impact and deadly coronavirus is no exception to the rule. The great depression impelled a “waste not want not” attitude that dictated consumption patterns for years. Likewise, the outbreak of Covid-19 may move luxury consumers to assess things from a different outlook. It may alter the key motivational factors for luxury goods consumption. The beliefs, values and attitude of luxury consumers may drastically evolve leading to changing consumption patterns.

 Let’s look at the 3 major changes that this crisis will bring in luxury consumers in the long-term and its implications on the marketers.

  • Consumers’ may be driven to buy luxury for “conscientious value” rather than “conspicuous value”. In longer term, because of this crisis, people may be willing to spend more on sustainable brands that reflect their own values and beliefs. Buyers will show increased concern towards fair trade product consumption. They will put more emphasis on benevolent values which may result in ethical decision making. Affluent consumers will rethink and re prioritize their fashion consumption to make it less conspicuous and more responsive toward the society as well as the environment. There will be transformation from “what you wear” to “who you are,” within conscious luxury consumers, leading to rising consumer demands for product traceability, supply chain standards, product legitimacy and quality.

Note: This is great opportunity for luxury brands to redefine their business models and create products that are authentic and responsible. They must think deeper beyond loud logo strategy.

  • Consumers may indulge in hedonistic purchases which make them feel better in this stressful period. This has been termed as ‘revenge or retaliatory spending’. They will buy luxury products for ‘ego-centered’ values, that is, personal values such as health and well-being, hedonism and superior quality. Marketers should make efforts to provide comforting experiences to the consumers to help them cope with irrational fears. They must provide offerings which convey emotional values rather than ostentatious symbol of status and affluence.

Note: This is the right time for marketers to go much deeper to unravel what their brand stands for now and what it can mean in future. They must re-think how they can serve the needs of affluent consumers purposefully and create meaningful content to inspire, engage and entice consumers.

  • Fear of infection has hard hit luxury shopping malls. People are staying more at homes and buying products online rather than physically going to crowded locations. In long term, this may lead to permanent change in behavior of consumers and online luxury buying may become a new norm. (Just like after demonetization episode in India, consumers who were most reluctant are also gradually embracing digital mode of payments). Therefore, retailers should provide more meaningful online experiences to connect with the consumers.

Note: Online luxury buying will become more attractive in future. This slowdown is right time for luxury brands to equip themselves to digitize the processes and upgrade their systems and technology. This will enable them to develop operational efficiencies and provide personalized experiences to the customers.

The luxury industry remain hopeful to bounce back to previous consumption levels after the pandemic ends. This is the perfect time for luxury brands to prepare themselves for the future by identifying the gaps, turning their weaknesses into strengths and strengths into distinctive competences. This endemic may bring major change in the consumers’ mindset and the value system that underpin their luxury buying decisions. The brands that would work to understand this and adapt accordingly will surely turn out to be the new champions.

(This article has also been published in Business Today.in on 23 March, 2020)

Covid-19: Opportunities in crisis for Indian Luxury Market

Since the last few years, various incidents like demonetization, cash related purchase restrictions followed by GST have acted as a great deterrent for the growth of Indian luxury market. However, people had gradually digested these effects and Indian luxury market continues to experience a high growth rate. The development of new markets beyond metros in tier 2/3 cities and growth of new affluent class of consumers have been the key reasons for the expansion of this market in India. But, with the outbreak of Covid-19, the future of Indian luxury market has once again become questionable.

According to the recent report by Bain & Company, global luxury sales could drop up to 35% by the end of 2020. With the key luxury markets across the globe now affected, the pandemic poses serious threat to the sector. Some nations like China are predicted to see the rapid rebound, while others nations like Europe and the US could experience an extended impact. Already, there are signs of recovery in China. For brands ranging from Hermes to Louis Vuitton, store traffic is inching back and is projected to accelerate in the subsequent months. Similarly, with the prompt action taken by Modi government to combat the coronavirus epidemic, it is most likely that India will see strong recovery and emerge as a more powerful nation in the coming months.

Presently, with all luxury stores shut down, fashion shows postponed, art and watch events cancelled, supply chain disrupted and low consumer sentiments, it will certainly take a while for Indian luxury industry to bounce back. However, post Covid-19, success of luxury brands in India is mainly dependent on the following 5 factors:

Go Phygital: Luxury brands must break down the internal silos and seamlessly merge offline and online channels. They should increase the use of digital platform not just for transactional purposes but also to engage, interact and provide bespoke experience to the consumers. To fight this crisis, luxury retailers must invest more in online sales and marketing and leverage the full potential of omnichannel marketing strategy. They may consider to moving their promotional budget from outdoor to online.

Be Purposeful: Today, brands need to be purposeful to remain relevant. From Louis Vuitton to Loreal, all luxury retailers have altered their production units from making perfumes to sanitizers and designer wear to medical gowns and masks. Consumers will embrace the brands which show sense of responsibility and empathy in the hour of crisis. Therefore, it is very important for the luxury retailers to step forward and contribute for the well-being of the society.

Remain in contact: It is important for the luxury retailers to remain at the top of the mind of their high-end consumers. They may use tactics like virtual shopping session, online make-up classes, trunk shows or fitness sessions to engage and interact with the consumers. Luxury brand managers can provide personalized attention to the top clients by one to one engagement and conversation with them. They should develop meaningful content that foster a sense of community building during this epidemic.

Introduce entry level brands: At this point of time, when employment and financial markets are under pressure resulting in low consumer confidence and willingness to spend.  Therefore, brands must use the tactic of introducing ‘bridge to luxury’ brands to make luxury available at accessible prices for young Indian buyers. Luxury retailers should see opportunity in this challenging scenario to entice new consumers by coming up with products with lower price points.

Go Green: Luxury brands must re-think about the planet and people while making the products. The outbreak of the virus has resulted in drastic changes in the behavior of consumers. They have become more concerned about the social and environmental issues. Therefore, fashion and luxury brands must relook at their value chain, from sourcing to manufacturing and from packaging to product disposal. Serious attempts should be made move from traditional linear economic model (take-make-dispose) to circular economy by embedding the 3R principle (Reduce, Reuse and Recycle) into production and consumption process.

Although the future is unforeseen and difficult to predict. Luxury brands must remain proactive and reinvent themselves to survive in this tough situation.

(This article has also been published in ET Retail on 31st March, 2020)

4 Luxury Marketing Strategies to win New Age Consumers in 2020

Luxury consumer behavior is transforming significantly due to changing consumer’s demographics, lifestyle, values and interests. Over the years, the meaning and definition of luxury has evolved. Today, luxury is no longer restricted to ‘elite few’ rather more and more consumers are trading up to purchase these products. New-age buyers save every month to buy new Mercedes Benz or new Gucci bag. This market segment spend lavishly when they have money, without much consideration about their debt levels. Marketers cannot ignore them as they provide better lifetime value and loyalties.

Luxury market which has traditionally relied on a sense of ostentatiousness and splendor, need to align itself with the values of new generational cohort. There has been shift in luxury consumption from conspicuousness to personal fulfilment. For millennials luxury is more about experience and authenticity rather than just flashy brand logos. Brands should create marketing strategies by keeping in mind, buying patterns, media habits and psychological motivators of today’s luxury consumers. To remain relevant, luxury companies should reinvent themselves. They need to clearly define what they stand for and what their core values are? They should ask themselves, are the 4 Ps of marketing still relevant? Or it’s about the 4 Es: Environment, Experience, Emotion and Ecommerce.

Environment: Luxury warrants a psychological cost categorized as “guilty pleasures” which might lead to negative emotions after the purchase. Therefore, growing number of people are buying sustainable luxury products to experience “guilt-free” enjoyment.  As per a Neilson survey performed with 30,000 consumers in 60 countries across the globe, 60% of global consumers were willing to pay extra for sustainable products. This new perspective and consciousness toward others will shape the future values of luxury industry. Luxury brands along with consumers can no longer overlook sustainability. Brands are expected to regard environmental sustainability as a core pillar of their strategies. Brands like Chanel, Louis Vuitton and Stella McCartney, among many others, have taken pledge to go cruelty free in all future collections. They are continuously reviewing their value chain to make it transparent and are shifting to plant based alternatives.

Remember: Young consumers look for luxury brands that don’t just elevate status but really touch their souls and help them to create connection with the wider world.

Experience: Luxury has always been about the best quality, the finest materials and greatest savoir-faire. However, there has been paradigm shift in the expectations of the new consumers. They want to feel special, wish to get personalized treatment and desire to obtain immersive experience during their complete shopping journey. The entire experience of purchasing luxury goods is as important as the product itself. Luxury brands need to continuously create new experiences and wow moments for their customers. This is an amazing way to build a story in consumer’s mind- a story that you want customers to take home with them and cherish forever. For instance, Tiffany is opening its first café ‘Tiffany Blue Box’ in London to provide a way to its customers to immerse themselves in the world of Tiffany.

Remember: You must focus on delivering customer experience and not just products. Make your consumers part of your story, clearly communicate the value proposition to them and they will become yours forever.

Emotion: Neuroscience reveals that decision to buy a luxury item is overwhelmingly emotional. For today’s consumers it is not enough that a luxury product is well-crafted with great history and heritage. They cherish products which are authentic with unique and intangible quality of truth. Each promotional campaign must express truth which breathes life into the brand, conjuring perceptions of genuineness and endurance.  New generation value the opportunity to interact with the brand and become part of the brand. Through evoking emotions of pride and awe, luxury brands can build deeper connect with their consumers. Brands must think genuinely about what their clients actually care for and go an extra mile to make them live it. The ability to engage, empower and innovate is a crucial factor for becoming successful luxury brand. Gucci has launched a call center in Florence to give consumers a direct seamless connection to the Gucci community throughout the world anywhere and anytime. It enables consumers to interact with call-center assistants over phone, email or live chat and build personal relationships with assistants, similar to brick and mortar world.

Remember: You must build emotional relationship with your clients both offline and online to win them.

Ecommerce: Being a high involvement product, in-store shopping has been the way to shop for luxury brands. These high-end brands have been really slow to embrace ecommerce as a distribution channel. However, nearly 80 percent of luxury sales today are ‘digitally influenced’. Consumers hit one or more digital touch points in their luxury shopping journeys. Online luxury sales is projected to reach $70 billion globally by 2025. As per recent Euromonitor International Report, luxury goods sales are growing nearly three times faster online than in physical retail. Therefore, traditional luxury brands cannot ignore digital platform today. These brand are now trying to catch up with the changing buying patterns of the affluent consumers. Brands from Burberry to Louis Vuitton, all are making efforts to provide a consistent brand experience both in-store and online. The major challenge for all these brands is to maintain the perceived cache of luxury in the digital world.

Remember: You cannot afford to work in silos today. The combination of offline and online is the way forward. Today, the rule book for what it means to be a luxury brand that is loved by its customers has profoundly changed. It’s no more just about making the finest product. It’s also not just about the brand repute that has been built over years. In my opinion it is about really aligning with a sense of deeply held values to create an authentic brand that connect with consumers.

(This article has been published in indianretailer.com on February 4 2020)

6 Major Trends Reshaping the Luxury Retail in 2020

Luxury retail is experiencing a paradigm shift. The traditional ways of doing retail are no more effective and requires a radical makeover. Mobile commerce is blooming worldwide as growing number of consumers are using their smartphones to research, compare, purchase and return products. Does this mean brick and mortar stores are becoming passé? Absolutely true, many iconic retailers like Nordstorm, Lord & Taylor, Victoria secret, Barneys, to name a few, are closing their retail stores. To remain relevant, these stores are trying to reinvent themselves by going digital.  But, simply moving sales online will not be enough for their survival. Retailers need to device innovative ways to make their stores meaningful for the new-age luxury buyers. In tandem, digital players such as Amazon, Rent the Runway and Warby Parker are opening physical stores, as a way to augment the online experience. What’s leading to these changes? Customers urge for seamless, bespoke shopping experience through 360 degree access to retail across all touch points is resulting in luxury retail disruption.

Let’s look at 6 major trends reshaping the luxury retail environment.

Phygital Retail: In future, there is need to blur the line between physical and digital retail. As per Juniper Research, fashion brands’ retail spend on AI is predicted to rise from $2billion in 2018 to $7.3 billion by 2022. Software developer SAP is working with Harrods to develop technology that provides customers with personalized recommendations from the in-store screens based on what they are wearing. Omnichannel brands are using digital behavior to inform in-store assortment. Nike store in Los Angeles furnished the store with Nike Cortez sneakers after knowing through digital commerce data that its local customers enjoy running.

Note: Data-driven technology with help luxury retailers to design appropriate in-store strategies.

Experiential Stores: In coming times, luxury retailing will be driven by experience. Recently opened flagship store of Nordstorm in New York is trying to captivate time-starved buyers by providing dedicated service stations for easy returns/ exchanges, etc. The store is providing a perfect blend of technology, innovation and a truly luxury experience. Store associates are well-trained and empowered to augment customers’ experience. Similarly, Sephora is providing free beauty workshops to not only attract customers but also to provide them with something more than just a product to walk away with.

Note: Luxury retailers need to have celebration every now and then in the store so that people will have a reason to talk and step into the store to discover something different every time they visit.

Care is the new Commerce: Organizations have to adopt ‘care is the new commerce’ mindset. They need to understand each step that customer goes through in their journey while making buying decision.  This will help in knowing customers’ problems better and providing them personalized solutions (services) by leveraging analytics and artificial intelligence. Recently, Cartier has initiated a digital customer care system, ‘Cartier Care’ which is designed to build relationship with clients. It provides clients access to comprehensive suite of watch workshop services like complementary battery changes, brightening and engraving, full technical check, etc. It aims to permit customers to sell their timepieces back to the company and acquire creations from latest collections.

Note: Today, luxury retailers need to go an extra mile to serve their clients.

Zero-inventory Stores: There are many luxury retail brands that focus on ecommerce business model. They can benefit from having physical presence. Various researchers have proposed a novel idea, known as zero-inventory stores (ZIS) which will make physical stores as a platform where shoppers can touch, see and experience the items while orders can be placed online. Less inventory would require smaller store format which would mean huge savings on rental costs. Such stores will enable to gain the best of both physical and digital world. Research suggests this strategy is not only cost effective for retailers but has supercharging impact on digitally native customers.  As ZIS provides millennials with an opportunity to experience the product, it would generate more demand and less returns. JLL, the commercial real estate company, predicts more than 800 new stores will open in next five 5 years by top 100 digital players. Will it have any implications on traditional luxury retailers? In my view, this will have lethal impact on age-old retailers, who may have to find alternatives to survive in this complex and challenging environment.

Note: Experience-driven ZIS will help luxury retailers to engage, inform and provide better service to millennials while leveraging online fulfillment.

Luxury brands partnering with resale/ rental sites: Few years back, high-end brands could never have thought to make collaborations with closet-sharing/ pre-owned apps. However, as luxury consumption patterns of consumers are undergoing drastic changes, brands are exploring new ways such as these to generate traffic into their dying stores, attract millennial clientele and boost sales. Also, because of circular nature of the partnership, it is a way to boost the corporate social image of luxury brands. Lately, Burberry has announced an official partnership with pre-owned luxury site The RealReal. Customers who purchased consigned Burberry items through The RealReal are provided with a unique shopping experience at Burberry stores. Similarly, Rent the Runway and Neiman Marcus teamed up to redefine the way consumers shop.

Note: Luxury retailers have to explore new business partnership opportunities to draw millennials into their stores.

POP-IN / POP-UP shop: Physical retailers like Nordstorm created a POP-IN shop with EverLane, a brand known for its transparency approach, to tap today’s discerning, eco-conscious shoppers. Similarly, many luxury brands like Chanel, Louis Vuitton, etc. are opening pop-up stores to test small before opening a full-fledged store. It helps brands to display their new collections and engage directly with customers. Recently, the Hermes Silk Mix pop-up was held in Munich. The pop-up prioritized on enticing young consumers who feel estranged by flagship stores; for whom sense of community holds great significance.

Note: Luxury retailers have to come up with innovative store formats to excite discerning, new consumers.

Today, luxury retail environment is more challenging than ever. Emergence of collaborative economy, growth of social media, advent of AI and VR and changing consumer behavior has made it hard for traditional luxury retailers to survive. The only solution left with them is to adapt and accept innovative new business models to remain relevant in the future.

(This article has also been published in indiaretailing.com on 13 February 2020)

Unraveling the Indian luxury market in 2030

India is one of the fastest growing luxury markets in the world. The size of Indian luxury market is expected to grow from the current $30 billion to more than $200 billion in 2030. Over the next decade, Indian luxury market is well poised to see positive growth through the economic development, well- being of its people, greater connectedness and policy reforms. It will offer plethora of opportunities for luxury companies to serve the young, affluent, connected and confident Indian consumers.
Here are the 6 major trends for Indian luxury market over the next decade that can help luxury companies to envision the future Indian market.
1. Millennials will be key luxury driver: India is one of the youngest populations in the world and it will continue to remain till 2030 with average age of 31 as opposed to its Western (40 in the USA) and Eastern (42 in China) counterparts. India will add more breadwinners to the world than any other nation. This population will be reared in more confident and open India and thus, will aspire to live a better life and splurge money on discretionary items, unlike their previous generational cohorts. Looking ahead, this favorable demographics will drive strong luxury consumption growth.
Note: This generation will want luxury to be more meaningful and reflect their individuality and values rather than just being a symbol of status.

2. Rise of Gen Z: By 2030, India is estimated to have around 370 million Gen Z consumers between the ages 10-25. For them, digital will be the ‘new norm’. They will embrace tech-driven consumption models. They will have a distinct set of values and beliefs as compared to Gen Y. This segment will redefine the rules of the luxury market. Luxury companies need to pay close attention to this cohort as they will be the influencers for future. Gen Z will choose brands that are ethical, socially responsible and transparent. They will look for more brand interaction and will have greater influence of social media than traditional marketing channels while making purchase decisions.
Note: Luxury companies should work towards development of technologies such as IOT, AI and VR to be able to provide more opportunities to new-age buyers for brand engagement.

3. Growing middle class: It is predicted that middle-income households will grow from 158 million in 2018 to 300 million by 2030 (World Economic Forum, 2018). Upper middle-income households will drive 47% of total consumption as opposed to the current 30%. Over the next decade, 80% of incremental spend will be driven by middle-income consumers. These consumers will particularly climb up the ladder and demand for better products and services. Therefore, luxury companies should offer huge variety of ‘masstige’ brands in categories such as apparel, accessories, watches, handbags and personal care products. Also, spending on entertainment, health and fitness, travel and dining out will substantially increase which will provide immense opportunities for global high-end players to penetrate in these segments in India. For instance, a recent research by Bain PRICE estimated that dining out could well be a $400 billion opportunity in 2030.
Note: Luxury marketers cannot ignore middle-class consumers as they will be the growth engine of Indian luxury market

4. A more connected India: In India, internet users are expected to increase from the current 627 million to around 1.1 billion by 2030, as per the recent report by World Economic Forum. It will produce more informed consumers who will appreciate brands to be more transparent. Democratization of internet access will provide huge opportunity for luxury brands to reach consumers in interiors of India which otherwise would have been a great challenge for luxury brands to tap such a dispersed and fragmented Indian market.
Note: In future, e-commerce will play a major role in bringing luxury in the forefront.

5. Luxury going to smaller towns: As per recent report by World Economic Forum, India’s top 40 cities will constitute of $1.5 trillion market by 2030. With the increase in purchasing power, urbanization, brand awareness, brand consciousness, social media, easy access and aspirations, Indian consumers residing in large as well as small towns will be willing to spend more on luxury items. There will be tremendous change in consumers’ outlook and purchasing patterns. From high-end luxury automobiles, upscale restaurants to affluent lifestyle brands, there will be ample demand coming from different segments across India.
Note: Luxury companies looking for growth will require to reach a highly spread continuum of large and small towns.

6. Tech-led Business Models: New business models driven by technology such as rental services, subscription models, etc. will be future business models in India. As per a report by PricewaterhouseCoopers, the rental market will reach $335 billion by 2025 globally and Indian share is estimated to be around $35billion. Young consumers believe in ‘usership’ than ‘ownership’. They seek for experience, convenience and variety. Therefore, more and more such users will favor sharing economy. Startups like The Clothing Rental, Flyrobe, The Stylease, Rent it Bae, etc. see huge growth potential across India for such models in future.
Note: With evolving consumer attitudes and high internet penetration, luxury consumption on sharing basis will be next big thing in the Indian market across categories including watches, apparel, bags and automobiles, to name a few.

As per Euromonitor Report, 77% of India’s populace will include millennials and Gen Z in 2030. These young, affluent, tech-savvy and buoyant consumers will pave the way for further innovation in products, services and business models in luxury realm.

(This article has also been published in indiaretailing.com on 25 October 2019)

5 Keys to provide great Luxury Customer Experience

In today’s competitive world, undoubtedly, consumer is the king and companies need to exceed consumer expectations to create loyal customer base. Technology driven global leaders such as Apple and Amazon have raised the bar of consumer purchase experience by providing excellent customer service, convenience, vast variety, on-time deliveries, free returns and what not. Luxury industry is no exception to this phenomenon and increasing consumer expectations from luxury brands makes it imperative for them to understand consumer psychology to thrive in the dynamic luxury retail environment.

For luxury brands and retailers, understanding the luxury consumer journey is most important to be able to deliver best to these well-versed, discerning consumers. It is about knowing what exactly your consumer wants and being able to provide that and much more. Luxury retailers must work to make consumers’ shopping experience a seamless journey. Every time when consumers interact with luxury brands, it is important for retailers to make them feel delighted. This will create customers for life and maximize customer lifetime value for luxury brands. Just think about the last time you stayed in a luxury hotel or shopped at a luxury store or took a ride in luxury sedan or visited a gourmet restaurant or ordered something on a luxury portal. You will certainly have some memory about how you felt about the entire experience. Did you loved the experience or hated it? Was it worth your time and money?

Happiness research reveals that retailers need to trigger emotions of shoppers not just during the time of actual purchase but also during pre-purchase and post-purchase phase. It requires putting the customer at the center of the entire consumer purchase journey and providing flawless experience across all touch points. Personal relationship built on trust should be at the heart of every customer transaction.

Here are 5 keys to provide great luxury customer experience:

  • Hyper-personalization: Luxury companies should use technologies like artificial intelligence enabled consumer data analysis to improve hyper-personalization in terms of product, promotion and shopping experience both in-store as well as online. For example, luxury Brands like Gucci and Valentino are using AI which help sales associates to recognize customers, greet them by their name and provide personalized recommendations based on consumers’ preferences and past purchase history. Sephora also uses AI technology to allow users to upload their picture and virtually apply makeup and visualize how products would look on them. The chosen products can simply be purchased via mobile, thereby making the whole purchase experience seamless, convenient and highly satisfying.

Similarly, live chat can provide real time assistance to the online luxury buyers making them feel important. Such engagement will boost consumers’ confidence in brand and refrain them to move to competitors’ brand. A recent study has found that shoppers who are engaged through live chat are 4.73 times more probable to convert and they can spend nearly 60% more than those who are not engaged.

Note: Technologies like AI and live chat are providing a new opportunity for luxury brands to offer better and seamless customer experience both online and offline. But, at the same time, technologies such as blockchain should be used to ensure data integrity and privacy.

  • Unified customer insights: Luxury companies should draw unified insights related to consumer profile from all channels such as social media platforms, brick and mortar stores, online stores, website, etc. This will help them in providing unmatched customer experience. For example, omnichannel brands are using online consumer behavior to make decisions regarding their in-store assortment. A Nike concept store in Los Angeles has furnished bright-colored products in their store based upon the data acquired from consumers’ digital footprint.  A 360 degree view of customer insights across touch points will permit luxury retailers to develop more captivating, discerned offers and deliver more meaningful customers experiences.

Note: Luxury retailers need to consciously invest in data driven analysis of in-store purchase behavior which will be the key in providing better customer experience in the future.

  • Customer feedback: For luxury companies, it is very important to get honest customer feedback regarding service, product assortment, physical environment, salespersons’ attitude and overall consumer experience. For instance, once a consumer is through with the purchase and making the payment or is checking out of the hotel, he/she should be requested for feedback preferably on a platform which is easy to measure. (Since most of the times either luxury brands don’t have consumer data or even if they have, it is in the form which cannot be measured and so it is useless). This will help brands to gain valuable customer insights and accordingly design strategies to provide frictionless consumer experience in the future.

Note: Luxury brands must quickly act based upon customer feedback as if they will not care about their customers, they will lose their customers forever.

  • Invest in customer service training: Regardless of the growing ecommerce business, physical stores and sales associates remain central to the success of luxury companies. Luxury sales associates have the power to transform transaction-led business into emotion-based relationships. As per a recent research by US based Luxury Institute, more than one-third of affluent consumers globally reported helpful sales associate as a prime reason for buying a particular luxury brand. More than 50% of opulent consumers mention product-related expertise as a key characteristic required by luxury sales associate followed by trustworthiness, courteousness and helpfulness.

Note: No matter how significant technology becomes in providing superior customer experience, role of sales associate will always remain most important.

  • Building micro-moments: Luxury brands claim that they are in the business of creating dreams and making them true. Therefore, brands must surprise and wow their customers again and again. Marketers must amaze their consumers by doing something which they least expected. For instance, sending a small gift with a hand written note wishing them on their birthday or giving a little freebie with their order just to make them feel special or simply inviting loyal customer to an exclusive VIP sale to make the customer feel part of the elite community.

Note: Small things like a handwritten ‘thank you’ note after the purchase can create a ‘wow moment’ for consumers. So take the extra step to thank them, put them in the limelight and make your brand more memorable and special for your consumers.

In today’s disruptive environment where everything can be copied by your competitors, unarguably the best way to win is- offering a ‘wow customer experience’. This is a most powerful moat to drive sales and develop eternal brand.

How to develop a Sustainable Fashion Business

The world is steadily moving towards sustainability. In fact, sustainability is well-poised to be the new normal. Now-a-days, veganism is a growing trend, battery driven vehicles are talk of the town and ethical fashion is a buzz word. High-end fashion labels are all of a sudden trying to reestablish themselves as ‘organic’, ‘green’, ‘cruelty-free’, ‘eco-conscious’ and ‘honest’. They have realized strong need to change their business models to succeed in the new paradigm. However, the path towards sustainability is not easy. The key question that haunts everyone is: What fashion brands need to do in order to evolve them as a sustainable brand?

Today’s discerning young consumers are much more aware and concerned about the environment as compared to their previous generations. They have refined tastes and preferences and are willing to spend more on quality products. They are not just fashion conscious but are also intrigued in knowing more about what goes behind creating a particular product. They want to know: Who makes their clothes? What are the materials used? How the materials have been sourced? Are fair trade practices implemented to create the product? What dyes are used and what is the social and environmental impact of the clothes produced? According to Sustainable Fashion Blueprint Report, 2018, sustainability is considered as one of the key factors while purchasing fashion products by the consumers. This clearly reflects the increasing awareness among consumers about sustainability as well as growing concern for sustainability in consumer decision making process. This poses great challenge for the companies to redefine their long-term strategies to fulfill consumers’ call for ultra-transparency and sustainability in the way they operate.

Here are the three most important things that are necessary to develop a sustainable fashion business:

Entrepreneur mindset

Even though creation of sustainable brand has lot to do with resources, but it is more important to have a mindset or willingness that goes a long way in creating such brands. Entrepreneurs’ beliefs are vital while framing an organization’s strategy and are manifested in their priorities, resulting in organizational process and outcomes. The perfect example of this fact is Stella McCartney, who is a role model for sustainable fashion. In one of her interviews, she stated “We really don’t have long now, to change things. But I honestly believe it’s doable – I couldn’t do what I do if I didn’t believe that”. Her eco-friendly ethos has led to disruption in the fashion industry. She has partnered with suppliers to introduce innovative textiles, from leather alternatives to recycled marine plastic and yeast-based silk. Recently, she has made the world’s first fully recyclable hoodie for her Adidas collection through collaborating with textile innovative company Evrnu. They used 60% NuCyclfibre, a material made using the threads from old garments and 40% organic cotton that has been diverted from landfills.

Remember: In order to implement sustainable fashion principles, the most important point is the strong urge to create an ethical product. Unquestionably, entrepreneur need to make long-term commitment and allocate dedicated budget. Use of technology like block chain; networking and partnerships with other actors; certification like Fairtrade, GOTS, etc. and learning by example from early adopters will act as key enablers in the process.

Organizational values

By having intensive knowledge about the value chain and the key influences at each phase, an organization can begin to start its sourcing, design, production and distribution in a more ethical way by considering its impact on people and planet. An environment of transparency can be developed across the value chain. For instance, global luxury group Kering, which owns brands including Gucci, BottegaVeneta, Saint Laurent, Alexander McQueen, to name a few, aims to develop 100% transparent and responsible supply chain by 2025. In 2013, the group developed Material Innovation Lab (MIL) dedicated to ethical material.Through collaboration with start-ups and academia, the group has developed new sourcing solutions and innovative raw materials. 

Remember: Sustainable initiatives should be fostered both internally and externally. Internally, fair trade practices (e.g. fair wages, proper working environment, etc.) should be followed and employees should be incentivized to encourage the adoption of sustainable practices throughout the supply chain. Externally, partnerships and collaborations with innovative start-ups should be promoted that will help an organization in reaching their sustainable goals.

Education

Sustainability efforts are not gaining strong traction among end-users owing to several factors such as lack of awareness and knowledge as well as lack of visibility and availability of sustainable products. Premium prices and limited styles also deter consumers who make an effort to try sustainable products. Brands need to patiently and diligently educate consumers about why their products are priced more, why they should care about the materials used and its environmental and ethical impact. Consumers should be motivated to buy less and learn to choose quality over quantity. Social media and other tools can be used to promote awareness about sustainability among vendors, consumers, etc. Also, there is a strong need to educate fashion entrepreneurs about strategies to implement sustainable supply chain practices.For example, Kering provides training to new-age designers. The group has partnered with universities across the globe to design sustainability curriculums. 

Remember:Education can play a key role in bringing change in the attitude of future designers, employees and customers. It can help enlighten the issues of social and environmental sustainability and encourage them to adopt green practices.

Businesses that can address these challenges can surely leap ahead in the sustainable fashion goods industry. They need to redesign their traditional business models to create a sustainable fashion business.There is great opportunity for businesses to move towards a more conscious
approach to fashion and help drive a shift to a more circular, sustainable industry.

Sustainability: New norm for Luxury Fashion Industry

 Recently, a paradigm shift has been witnessed in luxury domain.  There has been increased pressure on luxury companies to adhere to sustainability from not only government, media, NGO’s but also from the growing number of ethical luxury buyers. As the number of well-educated, socially responsible, affluent, global elite is rapidly rising, the concept of sustainability is becoming top priority for luxury brands. Today, global luxury consumers, especially millennials, expect companies to act responsibly. According to a 2018 study performed by McKinsey & Company in association with Business of Fashion found that 66% of millennials are willing to spend more on brands that focus on sustainability initiatives.

In the past few years, sustainability value has derived importance in buyers’ purchase decision.  Luxury buyers want the brands they use to reflect their concerns and aspirations for a better world. There has been a transformation from ‘conspicuous’ to ‘considered’ consumption, from ‘what you wear’ to ‘who you are’, within conscious luxury consumers, leading to rising consumer demands for product traceability, supply chain standards, product authenticity and quality. They want luxury brands to focus on moral issues related to luxury products and have convincing answers to questions of environmental and social responsibility. Therefore, many luxury fashion brands are working towards redefining their business models with the focus on reducing social and environmental problems through the use of progressive production methods and innovative textile inventions. They are using environment-friendly raw materials, like organic cotton and natural dyes, for instance, the leather of a Dior handbag is attained from Italian bio farms. Many organizations are also using recyclable packaging to ensure circular luxury processes.

Few luxury fashion retailers including Prada and Armani are retaliating to the rising consumer demand for making the value chain transparent and sustainable.  Eileen Fisher, an American clothing designer is disrupting the linear production model of take-make-use and dispose. She uses recycled fabrics and give new life to old textiles and discarded garments. Fisher has collaborated with numerous environmental conservation organizations and local artisans with a motive to support planet and people.

A recent study by the Ellen MacArthur Foundation reported that 73% of 53 million tons of garments produced every year ends up in landfill or incinerated. Sustainable consumption act as stimuli among luxury buyerswhowant to feel good and not guilty, when they are purchasing a certain luxury brand. Luxury warrants a psychological cost categorized as ‘guilty pleasures’ which might lead to negative emotions after the purchase. Therefore, growing number of consumers are buying sustainable luxury products to experience ‘guilt-free’ enjoyment. Millennial aspire to rationalize their luxury buying by contributing to social ‘well-being’.

It is a known fact that luxury industry is lagging behind other industries in creating and fostering sustainability. The Danish Fashion Institute (DFI) has pointed out fashion as the second most polluting economic sector after oil business.  Considering the gravity of the situation, luxury industry is progressing towards sustainability as luxury consumers seek for superior quality products which provide no harm to environment. Few luxury fashion brands like Burberry, Gucci and Stella McCartney have set examples for others.

The British heritage label, Burberry, last year took a pledge to stop destroying unsold clothes, which it previously did as a way to preserve its exclusivity. Burberry has partnered with sustainable luxury company Elvis & Kresse to convert 120 tons of leather offcuts into new items. It is also working to drive industry wide change to move towards zero discharge of hazardous chemicals (ZDHC) in the textile supply chain.

Similarly, Gucci, in its effort towards sustainable development, has recently launched Gucci Equilibrium, an online platform designed to connect people, planet and purpose. In October 2017, it made announcement that no fur will be used in any of its collections. It is also working towards creation of new natural materials.

Another example is Stella McCartney who is known for eschewing leather, fur and feathers in her collection. She has created an alternative to leather, made from mycelium- the root structure of mushroom. McCartney is continuously working on redefining fashion through the use of cutting edge technologies and sustainable materials like reengineered cashmere, ethically sourced wool, organic cotton and recycled textiles. She has aligned with various NGO’s such as Parley for the Oceansand Fashion Positive, to bring awareness among the people about how our clothing choices impact the world in which we live.

As we look forward, it is evident that there is a considerable risk to luxury brands that are resistant to invest in people and planet. Therefore, luxury companies should work on reshaping their business models to make it more ethical. Embracing sustainability will provide them with opportunity to enhance their brand image and reputation and possibly create additional value and gain competitive advantage over the other brands.

Though luxury and sustainability appear to be antithetical to each other, but luxury fashion brands must put efforts to reposition themselves as ‘the care taker of mother earth’ to establish a positive brand image among the new luxury buyers.  By 2050, the global economy is predicted to use three planets worth of resources annually. To change that trajectory luxury brands must commit to use less water, leave less fabric waste and emit less carbon. They must invest in renewable energy, innovative technologies, alternative ethical materials and empowering communities.

(This article has also been published in Textile Times in the month of May, 2019).