Consumer activism, behavioural changes and technology are all forcing luxury players across the board to re-think almost every business model. It is becoming increasingly difficult to keep up with competitors and understand how and why the industry is evolving the way it is and how they can balance digital demands whilst also maintaining the human factor.
Technology plays a pivotal role in consumer decision-making. Amongst others it has created massive upheavals in consumer expectations, lowered the barriers of entry for fast-moving companies and helped to create new and disruptive retail channels such as the rental and re-sell market. While technology has inarguably led to major growth and opportunity in the world of luxury, the boundaries between digital and human are beginning to blur.
A Majority of the World’s Population are Connected
By the end of 2018, global sales of luxury goods exceeded the US$1 trillion mark. Total online sales of luxury goods from all devices clearly continued to gain ground with 14 percent growth in the last five years. However, as the boundaries between digital and store-based channels become even more ambiguous, the industry experienced a massive 271 percent growth in transactions taking place through mobile.
According to Euromonitor International’s latest data, for the first time in history a majority (51 percent) of the global population are connected, with over 5 billion mobile phone users today. This continues to play a huge role in the evolution of society. It has given luxury consumers greater convenience, simplicity and knowledge. In fact, data itself is now a commodity – as such, the world’s most valuable companies are no longer the likes of Coca-Cola or McDonalds, but companies such as Apple, Google, Microsoft, Facebook and Amazon.
Many of the consumers going online for the first time are in emerging markets, a trend enabled over the last decade by affordable mobile handsets and an improved mobile network infrastructure.
Profiling the Affluent Consumer
Thanks to the ever-growing rate of wealth expansion, it is become increasingly challenging for luxury players to profile today’s wealthy consumer. Whilst the High-Net-Worth Individual (HNWI) makes up less than 1 percent of the world’s population, they now command over half of global wealth. One common trait that they do all share is that they all enjoy extensive and regular travel and are all digitally connected in some shape or form. That being said, they all define luxury and, above all, luxury travel in very different ways– based on who they’re traveling with and why. To make matters more complicated they are all looking for very different experiences and self-discovery that is completely relevant and unique to them. To this end, knowing what they want or need is even more of a challenge.
Social media of course plays an essential role here but when considering the global High Net Worth Individuals (HNWIs), what sets the wealthy consumer apart from the rest of the world is the fact that they have the resources to actually live out their social media dreams. This has created an ever more demanding consumer that looks beyond experience alone. Yet, with so much available at the click of a button, the need for guidance to take the journey from conceptualisation to conversion is growing. But with so much technology now being used in the conversion process, do we see a risk to the human element here?
There is also no denying that technology plays an increasingly important role in understanding the needs of the affluent consumer, but what we are seeing in terms of using data and technology to profile the luxury consumer is a shift from targeting demographic groups based on traditional ideas about luxury (such as wealth, age, nationality) to psychographic profiles based on personal lifestyle.
Staying relevant in today’s digital luxury landscape has never been harder; come tomorrow, what it takes to win today will already have changed. Based on a survey carried out by Euromonitor International evaluating technologies set to have the biggest impact on the way we do business in the next five years, Artificial Intelligence (AI) and The Internet of Things (IoT) came out on top. Other areas that are venturing further into the luxury space are robotics, augmented and virtual reality, blockchain and biometrics. But what is interesting is that the very expansion of digital has created a craving for authentic, genuine, and above all– trustworthy human connections.
From #FOMO to #JOMO
While connected consumers are generally seen running towards technology, there is also a shift where consumers are resisting this mentality.
Indeed, we have gone from #FOMO (Fear of Missing Out) to #JOMO (Joy of Missing Out). In a recent consumer survey carried out by Euromonitor International, although 70 percent of consumers admit checking work email on holiday, 51 percent say that relaxation is key on holidays and 34 percent want nature and outdoor activities. It is therefore unsurprising that many consumers want to take back control and completely switch of. Naturally, luxury travel companies are buying into this.
Luxury travellers are becoming increasingly interested in off-the-beaten path destinations where they can reconnect with the natural world and switch off from the stress of modern life.
Digital Remains Gateway to World Economy
In a tech-driven climate, digital will remain the gateway to the world economy and is where most consumers will make their decisions. With 85 percent of all global households being connected to a smart device in less than four years, the need for seamless experiences through technology will rise. However, luxury companies will continue to feel the conflicting push-pull from their traditional, wealthy and maybe slightly older consumers who want one type of luxury, and their younger, maybe less wealthy consumers who want a completely different kind of luxury.
The key to future success is to keep evolving as digital is never really a done deal. The future consumer will be more fluid and comfortable moving between a wide range of digital and non-digital experiences, depending on the context. But whilst these new technologies may be disruptive, they all help to improve personalisation which ultimately helps to improve the customer journey. To reach and influence luxury consumers, brands must take an omni-channel approach to experience and provide relevant digital content throughout the customer journey.
Moving forward, establishing and maintaining empathy will increase in importance. As luxury becomes more engaging, authentic and personal, the human element has never been more important.
Source: Luxury Society