Luxury market report points to new challenges for brands, Part II
In the second part of this article, we look at the findings of the latest UnityMarketing State of Luxury report, which surveyed over 600 professionals working in the luxury sector, which covers the beauty and fragrance categories, to find out about how they thought the area would perform in 2019 and what challenges lay ahead.
In the first part of this report, we looked at how the majority of those surveyed thought that the luxury segment was largely good for the next two years, but that clouds were forming on the horizon, especially with consumer spend on luxury in China already on a downward curve.
Thanks to the survey responses, insiders also shared fears about other big future challenges, including the fact that the wealthy are becoming harder to access and indications that they no longer want to flaunt their wealth.
The wealthy retreat into the cocoons
On top of this, there are also other macro-trends that are likely to impact the luxury business in 2019, including the fact that, although rich people are getting richer, anxiousness is making them retreat into secure cocoons, making harder for luxury marketers to access them.
This is part of the reason why, even though the number of wealthy is growing, the share of consumer spend on luxury goods is likely to continue to shrink.
The report highlights that Capgemini, in its World Wealth Report 2018, states that global high-net-worth individual wealth rose 10.6 percent in 2017 to surpass $70 trillion, the first time it has reached this level and following six consecutive years of wealth gains.
So although evidence of growing wealth is there, this retreat is also making luxury consumers more difficult to access for marketers, and particularly in the digital realm.
Luxury got in late to digital, plays catch up
The luxury consumer business was largely late to carve out a slice of the digital pie, and with the wealthy attempting to slip out of sight and be as inconspicuous as ever, this is making things even more challenging.
This will leave luxury brands aggressively trying to court younger millennial consumers, in an effort to bridge the gap and increase digital engagement, the report reveals.
Reports indicate that digital spend by luxury brands will grow by approximately 8% in 2019, with 80% of those companies surveyed reporting that their spend will be focused on website enhancement.
But for luxury consumers, brands will have to program in the human dimension to both luxury brand’s digital and in-store systems to give the enhanced and personalized service that this type of consumer demands.
In the same instance, print advertising is less and less likely to resonate, and brands are responding to the signs of its demise, with Calvin Klein announcing that it is about to pull all print advertising in favor of digital advertising.
The growing danger of irrelevance
The report also highlights the importance of HENRYs (High Earners Not Rich Yet) who are born between 1981 and 1996 as being highly crucial to the continued growth of luxury brands.
This is a category of consumer that is highly educated, more informed, social aware and also likely to grow in affluence in the future.
And they are also the tyrp of consumer that is likely to redefine because they are approaching luxury with a different attitude, specifically as they are increasingly putting an emphasis on high end experiences, rather than goods.
While HENRYs are the most empowered generation ever, with the most access to products at their fingertips, they are also able to suss out the relative value of purchases, which might threaten the survival of certain types of brands because they may become irrelevant to many, the report finds..
“The biggest danger that the luxury business faces is irrelevance,” said Mickey Alam Khan, editor in chief of Luxury Daily, New York.