James Thompson
May 12, 2014

Luxury: An industry redefined by cultural tensions

With logo-driven conspicuous consumption no longer fashionable, luxury brands must show a gentler, more discreet face.

Chime for change: Gucci’s charity movement yields meaningful returns
Chime for change: Gucci’s charity movement yields meaningful returns

From the story of forbidden fruit in the Garden of Eden to the decadence of the Roman Empire, people have yearned for comfort, for nonessential and rare pleasures, for self-indulgent gifts and treats. However, in recent years, the perception of luxury has shifted to a more holistic mindset.

The impact of the global recession went beyond economics. It prompted a cultural rejection of ‘old luxury’ in many parts of the world, as demonstrated by the Chinese government’s anti-extravagance campaign and the American public’s revulsion at the antics of The Wolf of Wall Street.

This does not mean luxury is dead. Consumers still want more. What has changed is that conspicuous consumption is out of fashion and the logo-driven excess of the past decade is now disdained. Luxury must show a gentler, more discreet face. Quality is once again a watchword, authenticity is in demand, and the rarity of an experience is key. The brands that understand this can continue to succeed. 

But to deliver, they must adapt to cultural changes and emerging tensions, and seize related opportunities. 

Luxury’s turning point 

There are three key drivers affecting the industry’s future. The first is the emergence of a new Silk Road that circles the world. We are witnessing unprecedented geographic and demographic change. Consumer behaviour is dynamic, with an estimated 130 million luxury consumers in emerging markets, and more than 10 million joining each year. 

The second is the democratisation of luxury. While the category remains, by definition, a market targeting a moneyed elite, most revenue is in fact generated by occasional purchases made by the rest of us. BMW, for example, has focused on these aspirational customers for years, with advertising designed to create desire in people a few years before they can afford it. At Diageo, we talk about our ‘1:9:90 rule’. This approach first targets the 1 per cent (connoisseurs and global influencers) with exclusive offers and experiences. This can be amplified by the 9 per cent (media, bloggers and regional influencers). And this is all overheard by the 90 per cent:  aspirers, who purchase when they can. 

The third key driver is cultural context. This keeps changing and brands must evolve with it, not just by surfing the cultural wave, but also adding new meaning and possibilities. Brands must help people think about themselves and their worlds

Using cultural tensions 

Together, these changes create a challenge for brands to create an aura of rarity and privilege for ‘old luxury’, while embracing new markets and aspirational consumers. They also give rise to attitudinal and behavioural tensions, such as humanity versus technology. The rise of fast-paced, easy transactions is welcomed by most, but these cannot fulfil the continued desire for craftsmanship, authenticity and experience. For luxury brands, the tension between human touch and technological ease creates two opportunities. One is experiential luxury. This typically occurs on an epic scale, and is exclusively held for the 1 per cent and noticed by the 90 per cent, producing memories, emotions and brand admiration. 

Similarly, there is opportunity in personalisation, or the reintroduction of difference. Hermès has done this by promoting customisable saddle options. Its offering helps build awareness for its wide range of equestrian items, reaffirms its heritage, and gives consumers an authentic and personal experience. 

Another tension is materialistic versus post-materialistic values. Intangibles like well-being and contribution are now as laudable as material achievement. This is most apparent in developed markets, but the developing world is changing fast. This is all compounded as millennials drive a shift in inter-generational values. 

Consumers want their products to create experiences, facilitating quest and discovery. A study by Diageo and Oxford University’s Professor Charles Spence and Sensory Architects for example found that the presence of the colour red dialed up the sweetness of whisky while a room that smelled of cedar and had the sounds of a crackling fire made drinking whisky 15 per cent more enjoyable.

Brands are also rethinking the way they talk with consumers. With technology allowing us to be just one click away from a sale, investing in content creation is a necessity. Fashion brands such as Net-A-Porter and Louis Vuitton, have blurred the boundaries of selling fashion and publishing content by creating their own magazines like Porter and Nowness.com respectively.

As the shift continues away from materialistic values, another opportunity that has arisen is ‘soulful luxury’. Consumers are no longer happy with instant gratification, but are in search of more meaningful returns on their investment — luxury as a force for social good. Gucci’s ‘Chime for change’ is an example of a brand’s gravity in promoting education, health and justice for women. Another tension is creation versus consumption. Active participation in creation reinforces the resurgence of craft People want to participate, develop and share their adventures. We are returning to a time when luxury was an art form, when products were admired, not just acquired, and helped advance culture as a whole. An example is Vacheron Constantin’s video, A Journey through Architecture & Openworked Creations, which explores the history of watchmaking, while stressing the importance of architecture.

Luxury’s existentialism 

Luxury used to be a static icon: it travelled from West to East; celebrated the world of a proprietor; separated the ‘mass’ from the ‘class’; and was a fantasy with a price tag. 

Today, luxury can come from anywhere, go anywhere, and celebrate all of our heritage. It is a sign that consumers are on their way, progressing, and curating their personal brands. It can bring hopes and dreams to life. 

Luxury brands can establish salience and unlock growth in this environment, not only through products they sell, but also the experiences they provide and the stories they tell. In doing so, they can redefine the face of luxury to capture the desires and dreams of their evolving consumers. 

James Thompson is global MD of Diageo Reserve

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