The world of luxury retail is flooded with news about declining sales with brands like Gucci, Burberry, LVMH as a group, Ermenegildo Zegna and Hugo Boss. The most common reasons for this slowdown are Chinese customers choosing to shop in Japan to take advantage of the weakening yen, as well as the flattening of post pandemic revenge buying. While these socio-economic factors may hold true, I think it’s time for all luxury professionals to reflect upon the bleak reality of why luxury brands are losing their luster. In this article I wanted to raise some key drivers of decline:
Dwindling customer delight: Luxury shopping for many is a dopamine rush. The entire experience makes a customer feel special and valued. But like most highs, the same experience becomes predictable and joy starts to flatten. Most of the luxury brand stores I have visited in the last year offer nothing different when it comes to the experience, in fact many of these interactions have been mundane and downright disappointing. Product innovation, a sexy social media campaign around a new launch is only part of keeping your customer engaged. The goal is to design an iterative customer experience that is unique with unexpected elements and genuine human connection!
Lack of exclusivity: The feeling of being able to access something special and belonging to a privileged community is a key driver of luxury consumption. Perhaps that why Hermès with their “waitlist to buy Birkin” strategy has been one of the few brands to grow in these times. With a rise in global wealth and e-commerce, luxury goods have become accessible to an aspirational lot. This trend can have an adverse effect on top spenders who then expect VIP treatment and access to bespoke and limited edition products. Many luxury brands are yet to get their VIP segmentation and VIP clienteling strategies in place.
Lack of authenticity: Luxury has always been synonyms with quality and craftsmanship so when a leather master like @tanner.leatherstein starts to deconstruct and evaluate leather goods, there is no surprise he has over 688K followers. I ended up watching him deconstruct a Polène before making the purchase, so I can vouch for his ability to appear credible. One can say the seed that luxury goods are overpriced has been planted, and now it’s further fueled by the Dior and Armani scandal. The brands were accused of violating labour laws and producing goods that cost a mere fraction of the selling price. An overall feeling of being duped is leading to a subtle but growing movement of luxury boycott.
Missing the Gen Z mark: A rise in affluence means luxury customers are getting younger, making Gen Z a significant clientele for luxury brands. As independent thinkers, this client persona doesn’t consume luxury to conform but to express their unique personalities. They value sustainability and purpose driven brands and look for meaningful experiences. They also expect a very engaging digital experience that aligns with their “vibe”. The Chanel ‘Over the moon’ film is a great example of a brand catering to Gen Z aesthetics and emotional values. If you’re a millennial like me, you probably have to watch the video a few times to capture its essence!
Rise of boutique luxury: One cannot deny the post covid e-commerce boom that has flooded the market with luxury alternatives. The fact that customers were willing to purchase luxury goods online opened the doorway for so many niche and founder lead brands across the globe. From custom sizing, responsive customer service to narrating an authentic brand story, these new age brands manage to offer a more intimate customer experience then legacy brands. Whether it’s my recent shopping experience with DeMellier via e-commerce or my hunt for the perfect resort wear with the indie brand Verandah, I found the brand story is on point and the service far more responsive.
Lack of emotional connection: When Chinese customers run to Japan to save 20% on luxury good purchases and Indian customers still prefer to shop when they travel because the luxury shopping experience isn’t as satisfying at home, one can say luxury brands have failed to create relationship driven bonds with customers. My regular visits to Dubai Mall is a clear testament to how transactional interactions have become, it’s a pure sales consultation, no brand speak or rapport, unless of course you fall into the VIP bracket and have proven your loyalty. The question in today’s competitive market is can luxury brands afford to make their customers work hard to get attention?
What can brands do about this? The short answer is to develop deeper customer empathy for their different customer personas through out the organisation. All stakeholders could recognize the needs of the VIP Customers, aspiring customers, disloyal customers as well as Gen Z customers. Listening and caring for their customers’ expectations would be a great starting point to start designing better customer experiences that elevate personalization, exclusivity and authenticity consistently.
Bring your team together across functions to evaluate the needs of different customer personas and refresh their understanding of the luxury customer. Get in touch with me at sonaligogia@gmail.com if you need help facilitating a workshop.
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