MONTE CARLO — Discerning, demanding and younger: These are consumers the luxury goods sector will have to address once the global economy recovers from the downturn.
That is the view emerging from industry titans, including Bernard Arnault, chairman and chief executive of LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury goods company, and Angela Ahrendts, chief executive officer of Burberry.
Arnault said these post-recovery customers will place a particular emphasis on values like quality and craftsmanship, but also exclusivity and commitment to social and environmental responsibility.
“Nothing will be the same again. It would be illusory to think it will be the same again,” he said, speaking at the Financial Times’ Business of Luxury Summit here.
Unlike during the boom years, the luxury consumers of the future will be less inclined toward the ephemeral, and will want to own exclusive items of outstanding quality. What’s more, he said, this trend will spread across continents, narrowing the difference between consumption in the developed and developing countries.
“In the most developed countries, customers will want exceptional brands,” he said, noting that “in developing countries, customers will increasingly adopt the consumption models of developed countries.” Arnault’s forecasts seem to vindicate the strategy pursued by LVMH over the years.
Unlike some luxury retailers — which last year slashed prices in the run-up to Christmas in fear of a negative season — LVMH’s flagship brand Louis Vuitton has a policy of no markdowns to preserve its prestige and value status.
And while the industry has shown an uneasy approach toward e-commerce, Arnault has pointed at its increasing importance as a marketing channel to reach out to new, younger customers, even though it’s a tool that poses some risks for the industry, as witnessed by the booming trade of counterfeit items on Internet sites. LVMH has been slow to roll out e-commerce to its brand’s Web sites for that reason, and has been vigorous in taking legal action against sites such as eBay that sell LVMH products, many of which it claims are counterfeit.
“I don’t want to stop the Internet. I want to use it efficiently to develop the growth of brands, but in a safe way,” Arnault said.
Targeting younger, technologically savvy customers is also a priority for Burberry’s Ahrendts. Today’s twentysomethings — or Millennials — who are active users of the Internet through social networking sites and aren’t as easily influenced by the traditional media as previous generations, are fast becoming the core customers of luxury brands, edging away aging Baby Boomers, Ahrendts said.
As a result, she has sought to make them part of the company on purpose.
“Millennials are a significant part of Burberry today,” she said. “They are designers, the public face in advertising campaigns and store staff. They are resonating with core consumers.”
The company recently named 19-year-old British actress Emma Watson, who stars in the “Harry Potter” movie series, as its newest face, joining models Kate Moss and Agyness Deyn.
The new focus on younger generations isn’t just a branding exercise as the industry tries to shrug off the severe economic downturn, but a necessity, as highlighted by economists at the conference.
“We are an aging society, we should care about consumption in 2020,” said Norbert Walter, chief economist at Deutsche Bank Group.
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