The biggest threat to the luxury industry comes not from technology (although this is disrupting the industry too) but rather it is from the millennial consumer.
Here are the key take-aways from the luxury conference:
- Be different and unique to succeed: Paul Smith said his success came not from thinking about money but rather he was curious and did things differently from everyone else. That explained his success. CEO of Loro Piano and CEO of Moncler also stressed the unique factor in their brands reason for success. If your brand is unique, you can keep the attention of your clients better.
- A good brand is managed for the long term: CEO of LVMH fashion said that all his brands are managed with a 7-10 year outlook. He doesn’t care about short term trends. Good brands have strong building blocks and building those building blocks takes time.
- To win in fashion you have speak to different generations: CEO of Moncler said he does well because his brands speaks to 18-80 year olds. If your brand can speak to a broad audience and be equally appealing – you have a winning formula. The numbers back it up – Moncler has among the best margins in the industry (33% EBIT margins).
- Experience is everything when buying luxury: This might have been the most important point made by many executives and CEOs. Design is of course essential in luxury but part of buying luxury is the experience around the purchase. Luxury is about making people dream. For example, by building a new culture and thus experience for Chinese millennials Adrien Chen of C Ventures hopes to attract the best brands on his platform. If the experience is new and good then brands will follow. Experience was already a key driver at last years FT conference.
- Retail is not dead: Despite online growth – if you do retail right and get the experience right – it is a growing business (Sephora is a good example).
- Brands will not win with logistics only: While Amazon has mastered logistics and distribution in the end brands have a large advantage as they can win on emotions. Managing peoples dreams and experience and emotions is where brands will win in luxury in the future.
- Data and analytics are more important: New companies like Aeyde and Narrativ as well as Moda Operandi are using data as their comparative advantage. Aeyda in terms of profile of customer (basket spend, shopping habits) Narrativ in building a better search engine (optimised for product search and recommendation) and Moda in terms of knowing trends faster (as their technology allows buyers to order directly off fashion show runways and bypasses the buyers for department stores).
The main takeaway from the conference was a point Italian billionaire Andrea Bonomi made: The biggest threat the luxury industry faces comes from the millennial who is smarter and better educated about brands. He wants to know the origin of products, if it is environmentally sustainable and so forth. It is not about the product itself anymore and the quality but rather the how part (how is made, where, etc).
This new way of thinking of young consumers is the biggest risk to established brands according to Bonomi (owner of brands like B&B Italia, Aston Martin, Sergio Rossi). This consumer wants a new type of brand that has this ‘new way of thinking’.
The new millennial consumer, rather than any new technology (online threat by Amazon or Alibaba) is the biggest threat to luxury brands going forward, who demand a new type of product, one that is sustainable and ethical in the way that it is made.
This will mean that every single luxury brand from Harley Davidson, to Louis Vuitton and Gucci will have to rethink their entire supply chain to adapt to a new type of consumer in the future.
(NB: The companies that impressed me most were new generation companies called Narrativ and Moda Operandi. Narrativ has a chance to become the google for product searches and Moda Operandi the Amazon of fashion. Both will become important players in luxury in the future).
For last years luxury conference summary 2018 see my report here.
