NAPLES, Fla. — The good news for the luxury market is the world is in the greatest asset boom in history with Gatsby-flush consumers owning $241 trillion in personal assets, a 5 percent increase from last year, and unprecedented savings to boot. The bad news is they still think there’s a recession even if their bank statements prove the opposite, since job growth remains sluggish and the middle class has little to no discretionary income.
Brands must completely rethink their strategy to recapture savvy, cautious postrecession buyers who have further become invulnerable through online information. Consumers also care more about their feelings, experiences and egocentric selves as personal brands than commercial brands of any sort. They’re also discovering luxury brands through print media, whether editorial or ads, while social media and online marketing are relatively ineffective despite their cool factor.
These points were some of the shockers delivered by Dr. Jim Taylor, vice chairman of YouGov, a London-based market research firm that partners with Time Inc. for the Survey of Affluence and Wealth, on the final day of the 12th annual Luxury Summit hosted by Time Inc., the new parent company of Departures magazine, at the Ritz-Carlton here last week. In Taylor’s view, brands are going the way of the horse and buggy.
“We’ve entered a self-enlightenment phase where the product is no longer the star. There’s a sense of entitlement and wanting a fulfilled life above all else among these top-tier families who’ve amassed incredible wealth, whose children will be wealthy their entire lives,” he said.
The event’s theme, “Luxury Without Borders,” came replete with a live camel and truly took effect as, for the first time, some sections of the survey factored in 11 countries beyond the U.S., which continues to lead with 30 percent of the world’s wealth. Taylor, who referenced the Credit Suisse Global Wealth Report 2013 with China and Japan neck and neck at 9 percent, believes China has already inched ahead as the second-wealthiest country, though it struggles with escalating manufacturing costs in a competitive global economy, and profits from its manufactured goods flowing back to U.S. companies. Chinese tourists are among the 50 percent of surveyed foreigners who plan to visit the U.S., their top destination, in 2014.
Other BRIC countries weren’t studied, with Taylor citing reasons from Russia’s political unrest that has resulted in a wealth exodus, to Brazil’s poverty and self-sustainability. Influential luxury spenders hail from Europe, South Korea, Canada, Mexico, Singapore and the United Arab Emirates. Depressed by the nuclear disaster and China’s production rise, affluent Japanese are least confident.
Fashion is in the dumps, too, as consumers’ closets are crammed and they move to a global garage sale online through Web sites like eBay.
“Another reason it hasn’t fared as well as homes and cars is the well-to-do feel guilty buying nonnecessities when relatives and neighbors are suffering layoffs and foreclosures,” said Taylor.
Estimated robust categories in the U.S. for 2014 are travel, homes, cars and watches, a male-dominated item that will increase 23 percent, compared with a 6.7 percent increase in spending by affluent and wealthy U.S. consumers in key discretionary categories. Preferences for a favorite luxury brand across the board have plummeted since the recession. As the only consumers willing to pay full price based on quality and aesthetics, tastemakers are a luxury brand’s best friend and possibly last.
Many speakers focused on how to win over the new, more-informed consumer. Marriott International Inc. is expanding its luxury portfolio, shifting from global blending to geographic context, and courting Millennials through communal spaces and mobile technology conveniences. Stating wholesale is dead, Emmanuel Perrin, president and chief executive officer of Cartier North America, is strengthening retail and educational outreach such as craftsmanship videos for an enhanced experience. Perrin added fine jewelry must adapt eventually to mobile transactions and emulate handbags and other luxury categories through more aggressive branding.
“There’s a huge, missed opportunity to put our signature like an artist, since 85 percent of U.S. jewelry purchases are unbranded,” he said.
Made in Italy still matters, according to Umberto Angeloni, president and ceo of Caruso SpA, who emphasized the country’s manufacturing renaissance. He presented Boston Consulting Group’s 2013 True-Luxury Global Consumer Insight survey of 10 countries, which found an overwhelming preference for Italian clothing, accessories and jewelry. As the quality of goods decreases worldwide, Angeloni predicted the Made in Italy stamp only will grow stronger to icon status, like German automobiles.
“It’s why I reinvested profits from my Brioni sale into training and caring for 600 skilled people,” he said, of Italy’s age-old stronghold on design and innovation that’s too powerful to dismiss in a few decades of outsourcing. “Italian brands who tried to stand on their own abroad without the authenticity are returning.”
Luxury brands also should prepare for more sophisticated consumers in developing Asian countries who are entering a postmodern phase. They’re establishing more complex identities through the Internet and foreign education and travel. At the same time, globalism must be balanced with each country’s and even city’s deep luxury heritage. Brands need to know these nuances, according to one executive.
Hanna Struever, founder of Retail Portfolio Solutions, defined new retail opportunities as regional markets that aren’t saturated, and outdoor developments designed as charming neighborhoods with best-in-class tenants, from grocery to designer stores and amenities like rooftop gardens, versus homogenous, enclosed malls with higher safety concerns. Mixed-use destinations as curated experiences are not only causing established luxury stores to relocate in their markets but also drawing new retail stores in droves.
“My takeaways are: Create destination experiences with a DNA vision; be fabulous not good, and one size does not fit all,” she concluded.
Dennis Freedman, creative director for Barneys New York, concurred that individual stores, too, can’t appeal to all consumers but should focus on their niche. Regarding his store’s signature, sometimes controversial, windows and advertising campaigns, he said the line between provocative versus sensationalism should favor the former.
“It’s also important to balance a celebrity’s fame so they don’t overshadow the brand,” he said, of Lady Gaga and Disney themes interpreted by Barneys. “And details must be perfect or you’ll show the customer you really don’t know luxury.”
The push for authentic, diverse environments fit right in with the “Psychology of Buying and Spending,” Dr. Peter Noel Murray’s session about how the actual product is a far second to the highly personal, emotional connection consumers have with it. Consumers want to see themselves in a brand — luxury is a massive mirror.
“They’re moving away from conspicuous consumption like logos,” he said, comparing new purchasing habits to the transparency and political correctness movements. “There’s an emotional awareness today that brands have to be sensitive to and tap into deep. People want truth in their brands.”
Speakers also touched on spinning altruism into long-term profit. By providing a free, comprehensive digital database for fine art works that can be browsed by everyone, including school classes, Artsy is building future generations of art collectors to use its sales services and tools, according to founder and ceo Carter Cleveland. Brands also would be better served in allotting more of their ad budget to charity.
“Philanthropy generates a lot of free publicity and positive response from consumers, so companies get the same if not far better results for the greater good. It’s win-win,” said Trevor Neilson, partner and president of Global Philanthropy Group, which advises high-net-worth individuals, foundations and corporations in effective charity strategies.