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Luxury’s perception evolves as the business grows more inclusive and attainable

Shauna Moran Shauna Moran

 

By Shauna Moran

In the luxury market, nothing is cut and dry.

The term “luxury” has always been difficult to define, especially as its essence is always changing. But premium ice cream brand Häagen-Dazs recently had a go.

By prompting influencers to explain what luxury means to them, the brand showed that, for some, it is simply having the freedom to express their creativity.

In its traditional sense, luxury suggests exclusivity and extravagance, but this concept continues to blur as the industry grows more inclusive and attainable.

Our June Zeitgeist research helps us clarify some of the transformations taking place by highlighting where the attitudes of today’s buyers differ from and conform to past standards.

Luxury spending is emotional, not rational

Shared attitudes offer a stronger characterization of luxury buyers than financial qualities such as purchasing power.

Given that luxury is more accessible than in the past, today’s buyers are actually likely to have a low amount in savings (44 percent do), and one in four earns a low income – a sign demand often is not a reflection of what is in the bank.

What is more, Gen Z now represents a greater share of the luxury market than Gen X and baby boomers across the five countries included in our research, which also implies a change in convention.

The pandemic may have caused a lot of economic uncertainty among younger consumers, but for some, it is an incentive to make the most of life, and brands need to recognize this sentiment.

Buyers are more likely than average to describe themselves as adventurous (46 percent versus 39 percent) and to like exploring the world (64 percent versus 51 percent).

Justifying Bentley Motors’ leap in sales, its CEO sums up its customers’ rationale: “Life’s too short and I would rather come out of this crisis with this in my collection.”

Unsurprisingly, various luxury car brands speak to those who want to live life on the edge.

Infiniti’s ad for its latest SUV puts forward some of the challenges faced during the pandemic and tells consumers to embrace the chaos rather than stall.

This perspective resonates with luxury consumers for a number of reasons.

Buyers stand out for being ambitious, fashion-conscious and risk-takers – a sign that aspirational triggers will continue to drive impulsive purchases.

On top of this, they are optimistic about their future finances, which means many likely view money spent as money that can be made again.

Segmenting by purchase habits also offers greater insight into how expectations among the industry’s main participants are changing.

When it comes to brand qualities, regular shoppers are most distinct for wanting providers to be funny and young, with big names such as Valentino and Gucci setting a new tone by introducing humor to their marketing campaigns.

This chimes with what Häagen-Dazs is suggesting: that luxury is a state of mind that has evolved over time.

Once serious and elitist, the sector is being touched by the more light-hearted, laid-back and value-based views of its younger buyers.

Different categories of shoppers tend toward quiet or loud luxury

The luxury market is definitely changing, but we do have to acknowledge where buyers align with traditional markers.

Buyers are more likely than average to pay for a product to access its community (+23 percent) and to want brands to be exclusive (+19 percent). So, when they purchase these items, they continue to buy into the lifestyle of a select group.

Within this group, the experience of buying a product and its social capital are key purchase influencers.

Indeed, 63 percent prefer to buy high-end items in-store, compared to 54 percent of occasional customers. They are also far more likely to want the branding on luxury goods to be clearly visible (80 percent versus 62 percent).

The COVID-19 crisis put existing social inequities in the spotlight, making some less eager to show off their wealth. But research indicating that luxury has become more subtle and discreet rarely breaks this trend down by different audience segments.

To be more specific: among regular shoppers, the age of signaling status is far from over.

The convention of buying in-person is more complicated.

Even though the majority of regular shoppers continue to favor the in-store experience, many have been forced to buy virtually during the pandemic and over a third are now more inclined to purchase luxury goods online. This is big news for a sector deeply rooted in heritage and tradition.

And prestige alone is not enough these days, as this group will not splash out on just any high-quality item. The online or omnichannel experience that they are seeking demands the perceptions of rarity that give luxury its luster.

Compared to the average shopper, regular buyers have higher expectations about brands having a strong online presence, a clear narrative and overt values.

In short, this group pays for a luxury brand as much as, if not more than, its product.

Conspicuous labels may be a priority, but a company’s image is ultimately what attracts them. This reality has allowed high-end brands to sell casual streetwear without any harm to their reputation.

While immersive technology such as AR to try on products and live video chats with experts help recreate the luxury experience, many competitors are leaning on other forms of content to amplify their storytelling.

Whether enhanced interaction comes in the form of Gucci’s gaming service or Berluti’s live streamed art exhibition, players need to diversify their marketing efforts to attract regular buyers, who skew young.

As even though in-store buying is still the go-to preference within this group, most typically find out about new luxury brands or items online.

Non-fungible tokens are another disruptive trend fronted by regular buyers, who are more than twice likely than occasional treaters to own cryptocurrency and to know what NFTs are (55 percent do).

NFTs are essentially digital rights to rare goods. Brands such as Dolce & Gabbana are among the first to launch collections in this asset class.

It may be uncharted territory for many, but these tokens are an exciting addition to the sector and definitely worth exploring. More than two in five NFT-aware buyers see them as an opportunity to own exclusive content that they could not find anywhere else.

Experiences are an increasingly important facet of the luxury market

The word “luxury” is usually framed by tangible products such as jewelry or purses, but its parameters have expanded over time.

While more than half of regular luxury buyers say they would rather own a product or service than pay to access it, they are 27 percent more likely than average to prefer the latter, which hints at where the market’s future is headed.

The rise of experiential luxury pushed the likes of LVMH to acquire hospitality company Belmond back in 2019. Now that restrictions are easing, brands such as LVMH’s Dior are investing in pop-up boutiques at choice beaches.

More than six in 10 regular buyers would rather purchase a high-end experience than a product.

These shoppers are distinguished by their desire to stand out in a crowd, their interest in influencers, and an above-average tendency to use social media to post about their lives.

Regular buyers’ fondness for experiences therefore makes sense, as they are a prime way to showcase their lifestyle and build a personal brand – whether that is demonstrated through glamorous locations or services.

Also, luxury does not presuppose over-indulgence. The extended period of time that buyers spent at home during lockdowns influenced their perspectives.

Among those who engage with one of the 30-plus designer fashion brands we track, susceptibility to anxiety has risen since second-quarter 2020, as have sentiments of being overworked.

It is not surprising that luxury shoppers, and occasional treaters, in particular, are significantly more likely to be interested in outdoor activities, which gives brands the opportunity to add “glamping” equipment and experiences to their list of offerings.

In fact, Grand View Research predicts the global glamping market will grow at a rate of 14.1% from 2021-2028.

ON THE WHOLE, new outlooks on mortality have had different effects on customers. It has pushed some toward living healthier lives, and others to adopt a YOLO – you only live once – point of view where spending is concerned.

Industry players will need to recognize these newer perspectives if they are to attain a greater share of the luxury market in 2021 and beyond.

Shauna Moran is insights analyst at GWI, London. Reach her at smoran@gwi.com.