UNDERSTANDING THE EVOLUTION & FUTURE ROLE OF LUXURY CONSUMPTION IN SOCIETY LAURA HARADA PLANAS MAJOR PROJECT CWK1 JOSE GUERRERO
BA Fashion Marketing and Communication Level 6, 2017-2018 6FAMKOO1C
ABSTRACT
The purpose of this dissertation was to understand the evolution of luxury and its possible future state, while also establishing the importance that luxury holds in the development of personal growth and society. Luxury brands directly influence the mass market and generate social media content that young consumers are constantly exposed to. Although it is an omni-present fact, many individuals do not know why the purchase luxury goods or cannot identify the way in which brands have behaved in order to generate such admiration from people. This topic was selected because of the curiosity by the author in understanding consumer motivations when purchasing luxury goods and how luxury brands construct the dream value associated to these motivations of self indulgence. The Literature Review was divided into three main sections: The Nature of Luxury, The Luxury Consumer and Luxury in the Digital Era. In order to extract findings from the desired sections published investigations and books where used. Central to the comprehension of the topic, a clear comprehension of past and present consumer values and notions of desire had to be identified in order to draw conclusions about the future of luxury. Furthermore, critical analysis of brand cases studies of success where evaluated in terms of data in order to determine how brands are reacting to disruptors such as streetwear, democratisation and digitalisation. The key findings from the literature review and coherent data to the final aim where discussed in order to reach conclusions on the evolution of luxury and future predictions.
ACKNOWLEDGEMENTS
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I would like to express my gratitude to JosĂŠ Guerrero for guiding me through the process of this dissertation and constantly pushing me to find a deeper meaning in the development of each topic covered. Furthermore, I would like to thank Cristina Lastra for being my specialised tutor and helping me focus on my final objective. Finally, I would like to thank my friends and family for accompanying me every step of the way and for constantly inspiring me to follow my dreams and improve in any way I can.
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TABLE OF CONTENTS I.INTRODUCTION TO THE TOPIC
MOTIVATION AIMS & OBJECTIVES RESEARCH QUESTIONS SPIDER DIAGRAM
II.RESEARCH METHODOLOGY III.LITERATURE REVIEW THE NATURE OF LUXURY i. ii. iii.
Origins and theological connotations The 20th century and the democratization of luxury Luxury- the individual- society
i. ii.
UNDERSTANDING THE LUXURY CONSUMER Luxury customer value Cross cultural and generational behavior
LUXURY IN THE DIGITAL ERA
KEY FINDINGS
IV.DATA ANALYSIS V.DISCUSSION VI.CONCLUSION VII.REFERENCES
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I. INTRODUCTION TO THE TOPIC
If the antonym of luxury is necessity, then why is purchasing a luxury product or experience a priority for most consumers? It is not about needing, but about desiring that which will bring pleasure and abundance. The rise of capitalism and the digital revolution have brought immense access to luxury goods, but the value of the purchase is no longer in the product or the physical sensation at core. Post purchase satisfaction is a product of the new luxury experience, the digital social experience. in the following paper the new method of experiencing the luxury lifestyle will be explained and highlighted by juxta positioning traditional models and present one in order to foresee a future panorama of the luxury experience.
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MOTIVATION The selection of the chosen topic was driven by the author’s fascination on the abstract yet powerful appeal of the luxury industry. Furthermore, the intrinsic relation between technology and capitalism continues to introduce and discard factors influencing the perception of the luxury market in the minds of modern consumers. Psychological, economic, sociological, political and cultural agents are present in the evolution of the luxury experience which serves as an inspiring challenge to try to illustrate the future of the experiential spending alongside the emerging luxury consumers. Discussions regarding social values, brand models, consumer progression and market offer are discoursed towards a digital reality where pre- and post-purchase satisfaction are the driving force behind each transaction.
AIMS
The main aims of this research paper are to explain the close relationship between luxury and the development of society and the self. Secondly, to explore the current and future role of luxury consumption.
OBJECTIVES -Define and explain the nature of luxury and its origins -Explore the concept of luxury in a modern free economy and democratic society. -Determine the impact of globalization and digitalization in consumer culture and its direct effect in the luxury sector -Study current needs and profiles of luxury consumers -Forecast the future panorama of the luxury industry.
RESEARCH QUESTIONS 1. What is luxury and how has its presence influenced society and vice versa? 2. How has democratisation impacted modern luxury consumption? 3. What do luxury consumers value in a the purchase of a product or experience? 4. How to attitudes and purchasing behavior vary from consumers of different generations and cutlures? 5. How has digitalisation affected the way in which consumers and brands communicate values and status? 6. How have brands reacted to the shifts in consumer values? 7. How are current attitudes and mindsets going to affect the future outcome of the luxury experience?
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SPIDER DIAGRAM
UNDERSTANDING THE EVOLUTION & FUTURE ROLE OF LUXURY CONSUMPTION IN SOCIETY
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DIFFERENT PERSPECTIVES ON THE DEFINITION OF LUXURY
UNDERSTANDING THE CONCEPT OF LUXURY
EVOLUTION OF LUXURY CONSUMPTION DEMOCRATISATION OF LUXURY FROM THE 20TH CENTURY IMPORTANCE OF DESIRE IN A DEMOCRATIC SOCIETY RELATIONSHIP WITH SOCIETY AND THE INDIVIDUAL
VALUES AND EFFECTS OF LUXURY PURCHASES
THE LUXURY CONSUMER
IMPACT OF GLOBALISATION IN SHOPPING DYNAMICS CURRENT NEEDS AND TRENDS OF CONSUMERS FROM THE DIFFERENT REGIONS AND GENERATIONS.
IMPACT OF DIGITALISATION ON LUXURY BUSINESS EFFECT OF SOCIAL MEDIA’S INSTANT GRATIFICATION ON CONSUMERS
LUXURY IN THE DIGITAL ERA
KEY PLAYERS: CHINESE CONSUMERS, GEN Z & MILLENIALS HOW ARE CURRENT ATTITUDES AND MINDSETS GOING TO AFFECT THE FUTURE OUTCOME OF THE LUXURY EXPERIENCE?
THE CASE OF STREETWEAR
DISCUSSION & CONCEPTUALISATION ABOUT THE FUTURE STATE OF LUXURY
II. RESEARCH METHODOLOGY
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The main sources used for the collection of data and theoretical information consisted of secondary sources such books, The development of this dissertation was based on information collected from secondary sources such as books, research papers and industry reports of luxury consumption. The dissertation consists of a theoretical section, where most of the topics covered lead to the understanding of theories on luxury consumption from sociological, marketing, economical and philosophical perspectives. In order to understand the concept of luxury and its origins, theories and published works from Alessandro Brun & Cecilia Castelli (Department of Economics and Management in Milan) on consumer’s perspective on luxury, Christopher J Berry (author of the “Idea of Luxury), and John Armitage & Joanne Roberts (authors of the “Spirit of Luxury”) where analysed for the first of the explanation of the luxury concept and the democratisation of luxury. In order to introduce and establish the relationship between “Luxury, the individual and society” the author has retrieved findings Jean-Noël Kapferer (Marketer in the areas of brand management and luxury strategies, author of “The Luxury Strategy”). When explaining the value for luxury consumers in its social and tangible/ intangible dimensions the findings of Alessandro Brun, Karaosman Hakan, Hakan Karaosman (Customer influence on supply chain management strategies) will be discussed with which of those dimensions are best adopted by current consumers the opinions of Neil Fiske and Michael Silverstian (authors of “Luxury for the Masses”, 2003). Concerning the impact of digitalisation on luxury and current responses from brands to consumer shifts extensive research in Industry Reports and Forecasting Companies such as Bain & Company ( LUXURY GOODS WORLDWIDE MARKET STUDY, FALL–WINTER 2018), McKinsey & Company (Enhance the customer experience and transform your business to survive and prosper in the luxury digital era : The age of digital Darwinism) and the Deloitte (Global Powers of Luxury Goods).
These sources include insights about the rising generation of luxury consumers and the power of Chinese consumers which compliments the section of Customer Profiling in the Literature Review. To address and give an in depth study of how brands are adapting to young consumers, the construction of case studies from top luxury brands ‘Gucci” and Louis Vuitton” and the key to their success with data published in LuxeDigital, 2018. Stating the importance of luxury streetwear, data from Lyst.com resulted helpful in order to show that top brands are luxury brands embracing streetwear. No primary data collection was conducted for this dissertation. The main limitation was the limited access to company information and sources, as well as scarce information on Chinese interviews on consumption patterns in English.
III. LITERATURE REVIEW
THE NATURE OF LUXURY
In order to understand the current and future state of luxury and its role in society it is fundamental to introduce a global comprehensive understanding of the term itself. Ranging from its earliest etymological origins and its respective evolution alongside humanity. Many authors agree that luxury “indicates a conceptual and symbolic dimension, identified with the cultural values of a particular society and period” (Brun and Castelli, 2013). Other researchers such as Dubois and Paternault (1995), state a focus in luxury as a property of brands and attribute a dream value to their proposition. However, Dubois and Czellar (2002) focus on the concept of luxury in means to consumers while other such as Vigneron and Johnson (1999) categorize luxury from a marketing perspective. The abstractness of the concept has disabled the selection of an official definition for it is multi-faceted and is applicable depending on the focus of the particular study. However, previous definitions are all valid and relevant to the evaluation of the perception of luxury in the present paper. Luxury derives from the old French root: luxury as luxurie, which furthermost comes from the Latin word luxuria, luxus, or “abundance” (Armitage and Roberts, 2016). In the other hand, Kapferer (2014) argues that the origins are closer to ‘luxatio’ meaning a “disruption, an excess of…” which is the notion active in the universal application of the word. In relation to society, luxury offers a productive basis for a mindset oriented towards extravagance and indulging the pleasures of sumptuous living. In this introductory section, the author will present the origins and emergence of the term throughout the development of civilization, the driving forces propelling the growth of luxury and an exploratory study examining the phenomena known as the “democratization of luxury”.
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ORIGINS AND THEOLOGICAL CONNOTATIONS
Historically, luxury products where symbiotic to wealth, exclusivity and power (Brun & Castelli, 2013). According to Kapferer (2012), since the dawn of humanity, there have been specific objects, symbols and lifestyles proper to a specific leading social group which transcended well beyond the notion of possessions and status during life, but also the “extreme comfort” after death. In the case of Ancient Egypt, who buried their dead with the treasures enjoyed during mortality, two key aspects of luxury are present: opulence and splendor during life and superb ritualistic approach to the afterlife for it was the survival of the body that guaranteed the survival of the soul. Thus, reassuring that the religious roots of luxury are latent today in the sense that it is born and intended for the elevation of the soul during and after life. Philosophers such as David Hume (1752) and Nicholas Barbon viewed luxury as an aspirational and improving force in society towards refinement; while moralist thinking schools such as Plato (380 BC) and Cicero (44 BC) considered it to be a vice and enemy of human virtue, Hume’s perspective on the term is the most applicable in today’s society as it links luxury with upwards verticality in human progression. The philosophical and economic impact of the Age of Enlightenment in the 18th century restructured Western society’s fundamental values and gave birth to free trade and wealth for all. According to Christopher J. Berry (1994), as consumption expanded and marketing structures such as credit networks became more complex a reevaluation of the morality in luxury turned to sophistication rather than morbidity.
Following the Industrial Revolution, a considerable increase in the level of living standards and financial power of the working class enabled the affordance of luxuries and thus began what is identified as a general democratization of luxury, ambition and pleasure. Berry (1994) justifies these shifts in conceptions of consumerism with the changing in notions of desire, which from both contemporary and premodern standpoints represent the engine of human motivation and morality. Taking into consideration the viewpoints of modernists such as Barbon and Hume, Berry (2016) offered a new perspective in the notions of desire. “Once desires are seen as the bearers of values for any individual, then the construction of a positive role for luxury goods served as aspirational incentives, leading to the increase of employment and diffusion of desirable goods to a universal level which entitled the vast majority to the free enjoyment of these goods” Berry (1994).
THE 20TH CENTURY AND THE DEMOCRATIZATION OF LUXURY Up until the turn of the 19th century, luxury corresponded to items which were rare and available to a small elite only. This idiosyncratic manner ceased to have an economy of its own after the Industrial Revolution where wealth was distributed equally and increased the middle-class population which in time had access to the luxuries and commodities of the time. In the beginning of the 20th century, the redefinition of the luxury panorama was transformed drastically at a dynamic rate by four main drivers: democratization, increase in spending power, globalization and technology (communication). Democratization is the major driver of luxury and the explanation to the modern notion of “accessible” luxury consumption in present day. The primary implication of democratization, is that everyone has access to luxury, therefore the client base has grown exponentially. This mindset has constructed and often lead to vulgarization or loss of value/exclusiveness. “Luxury, the offspring of social stratification in in egalitarian societies, has become the father in democratic societies” (Kapferer 2016:11). Paradoxically, luxury does not cease to exist but rather interchanges roles with social stratification by granting it in a democratic modern society. In addition to leading to social stratification, luxury also encourages humanity as so is the role of luxury brands/products and their emotional relationship with the clients. Armitage and Roberts (2016) relate democratization to desire and how it is a “decisive component” of human motivation, further sustaining that the survival of the luxury is synergized with the desire of ambition and pleasure. Closer to contemporary fashion culture, the expansion of luxury customer base is including more modest high social classes which have a high disposable income paired with the emergence of new brands that combine perceived prestige with reasonable prices, making “luxury” products more affordable and accessible to a larger scope of consumers (Truong et al., 2009).
Its success is due to the strong motivation to emulate an affluent lifestyle belonging to that of a higher social class, which with the help of drivers such as technology and globalisation, the masstige luxury culture can appear equally attractive across different social and cultural segments (Silverstein and Fiske, 2003).
LUXURY-THE INDIVIDUALSOCIETY A central theme to this dissertation is the clear comprehension of the connection between luxury, the individual and society. The paradigm of luxury exists in its relation to social stratification, which in present day has become obtainable through the ownership of luxury goods rather than from traditionally hereditary social order established by metaphysical principles. However, the human need of knowing its place in the world has not disappeared. According to the Rene Girard’s (1961) theory of mimetic desire, people seek to establish distinction in order to escape social chaos and imitation. The functional contribution of luxury has been the answer to rebuilding social stratification through conspicuousness and gratifying self-identity. Furthermore, in relation to democracy, luxury encourages its recreation available to everyone to the extent and expense of their own financial means. This newly found freedom has also created a demand for the creation of unestablished hierarchical codes therefore luxury brands have become of sociologic instructional
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character because of the intangible yet influential assets that brands transmit to society. As a social marker, luxury brands function as signifiers with ascribed high prestige value symbolic to that of a higher social class. For this reason, customers buy all of the potential social benefits of self-expression by engaging in luxury brand consumption (Escalas and Bettman, 2005). Countless times has the connection between luxury and conspicuous consumption have been repeatedly established. Introduced by Veblen (1899), conspicuous consumption relates to the public display of wealth and status indication of economic power, with a comparative intention towards others. The permissive character of indulgence through conspicuous consumption has given shape to the modern consumer culture which promotes self-actualization through purchases and possessions (Vignenon & Johnson, 1999). Luxury’s personal component consists on several key points that differ from its other function as a social marker (Kapferer, 2016). Luxury for oneself must be qualitative over quantitative, hedonistic over functional, multisensorial, aesthetically pleasant, and of high human content (Kapferer, 2014). Although the two aspects of luxury, personal and social, present unique characteristics and motivations (Kapferer,2016), they are very interrelated and depend on the success of the other to obtain an effective outcome.
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UNDERSTANDING THE LUXURY CONSUMER Upon providing a groundwork and context of the different interpretations and transformative nature of luxury, this second chapter of the literature review is introducing a framework of luxury consumer profiles. Furthermore, the perceived values among luxury consumers in different generations and cultures will be discussed in order to come closer to inferring the future value propositions of luxury.
LUXURY CUSTOMER VALUE As mentioned in the introductory section of the literature review, luxury was once a rare taste reserved for an elite which thanks to democratisation is now enjoyed by a larger segment. According to Kapferer (2016), luxury consumption consists of two axis which measure the sources or approaches of these purchases. Mainly consumption for oneself (self-pampering, self-healing, self-elevation, escape from day-to-day life) and for others, signaling a superior positioning in a social structure in a conspicuous matter. However, both approaches eventually become one. Whether high income spending is discretionary or ostentatious, the prevailing media culture of self-indulgence will continue to feed the “ego” society and maintain the aspiration to impress others and oneself (Dubois and Duquesne, 1993). The primal force behind the personal pleasure of owning luxury goods and experiences is the hedonistic component built from the dream value that luxury brands offer. The influence of individual value perception of personal luxury goods relies on the excellence, aura and desirability of brands indicative of superior quality, prestige and aesthetic appeal, and therefore worthy of exclusivity and high prices (Antoni et al., 2004).
Luxury consumers have been categorized by Vigneron and Johnson (1999) according to the effect luxury purchases cause on them. Most relevant to this study, are the considerations that the Veblen effect (conspicuous), where price is the main indicator of prestige and the purchase is based in conspicious intentions; and Bandwagon effect (social gratification) where post purchase gratification and recognition motivate the need to splurge. In the other hand, the important component of “desirability” has further led to categorize and identify consumers based on the three basic motivations implied in the perceived value of luxury purchases. The main two dimensions of the scheme are the tangible and intangible aspects of the product or experience itself, and the third axis considers the social dimensions of the item or experience. Therefore, given this framework, it is agreed upon that consumers have a social impact with their purchase decisions (Brun et al., 2006).
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More affluent and sophisticated consumers who demand to have the material excellence, exhibit a general motivation towards the tangible or physical value of a product. Whereas, consumers uninterested in material excellence but only aspire to the emotions and accessories associated with a luxury lifestyle. Silverstein and Fiske (2003) identify that emerging young luxury consumers are less interested in the product itself and more interested in the image, services or emotions associated with the brand. Addressing the third axis of the luxury consumption, its sotangible aspects intangible aspects cial dimension, in the previous section of “Luxury, the individual and society” it was discussed how the paradigm of luxury is in relation to social stratification and the values of time. The relevance of the social value has been confirmed social dimension multiple times confirmed by Kapferer (2009) in this paper with what is known as “luxury for others”. Current consumer behavior signals that intangible and social dimensions are the lead values behind luxury purchases due to the Veblen Figure1. Graphic framework of the dimenand Bandwagon effects caused on others. sions in a luxury purchase.
CONSUMERS FROM DIFFERENT REGIONS AND AGE GROUPS Upon analyzing the various motivations and perceived values that drive luxury consumers, this section will take into account macro-environmental factors that have influenced the consumption of luxury brands. Disrupters such as globalisation, cultural convergence, new emerging market segments, e-shopping, increased international travel, and rise of new wealthy consumers have redefined the segmentation of the luxury market. The two most contrasting profile categories are those of the West and East consumers, and that of young consumers (belonging to Generations Y and Z) and older consumers (belonging to the Baby Boomers and Generation X). Globalisation, the second most powerful driver of change for luxury after democratisation, can be defined as the continuous process by which regional economies, societies and cultures become more integrated through economic, social, political and technological exchanges (Robertson, 1992). Its major effect has been the universal awareness and desire of absolute and aspirational luxury brands such as Chanel and Louis Vuitton from consumers in Asia, BRIC, and CIVETS countries (Kapferer, 2012). Although consumers across the world exhibit “universal” tastes for luxury, their consumer attitudes and behavior vary from each region and generation. The most drastic case to influence the luxury market has been that of China, a market that embodies new technology and an obsessive interest for luxury with strict political conventions. Economic freedom in China after 50 years of equalitarianism, Chinese consumers seek to signal their positon (genuine or fake) through branded luxury products as their channel of distinction (Kapferer, 2014).
There is a sentiment of entitlement to the ownership of luxury installed by former President Deng Xiao Ping with his motto: “To get rich is glorious”, which is why obsessive conspicuous behavior is rewarded. This inclusiveness explains why counterfeits thrive, even with the ownership of counterfeits the celebration of Western icons measure the glorious collective of Chinese growth in the 21st century. The single-child policy and social networks with young hyper-connected customers have further pushed the boundaries of accessibility and promote conspicuous consumption. They choose their brands on the basis of fame and global wealth status symbols, not personal preference or pleasure (Kapferer, 2014). Statistics and insights will be further discussed in the literature review as these are key players to the future growth of the luxury industry. Today’s mature luxury consumer is most likely from old generations (i.e. Baby Boomers) or Generation Y (Millenials) (Stein and Sanburn, 2013). However, the penetration of Millennial and Gen Z targets is key for luxury brands as these are groups with high public-self-consciousness who make their purchases based on influence and admiration from their peers (Veblen and Bandwagon effects) (Fernandez, 2009). For the Baby Boomer generation, luxury was about aristocracy and high price points but for Generation Y and Z consumers, luxury is seen as a right more than a privilege, a main direct social effect of democratisation (Silverstein and Fiske, 2008; Stein and Sanburn, 2013).
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The high level of brand consciousness and digital power, make these age groups highly sensible to brand messages and conglomerate of influences at the time of purchase. However, crossing both axis of emerging luxury consumers, the result are Chinese millennials and Gen Z consumers with high disposable income and obsessive conspicuous shopping behavior, which along digital power and international travel demonstrate to dominate the industry in the next decade (McKinsey, 2019).
LUXURY IN THE DIGITAL ERA The Digital Revolution has disrupted all segments of the business landscape, particularly the way in which brands consumers effectively (Morisset, 2016). Digitalization is a critical source of growth and an effective way to increase brand equity through storytelling and advocacy (McKinsey&Company, 2018). Emerging digital language and disruptions have facilitated the creation of new elements such as sharing economy, social media branding and commerce, user-generated and curated digital content, retail technology, and the Internet of Things which have further redefined the meaning of luxury. Digital is the ability to diffuse ‘brand content’, everything that gives depth, perspective, empathy and conveys the uniqueness of brand intangibles (Kapferer, 2014). Furthermore, the omni-channel capabilities of producing a seamless experience reiterates that the consumer is central to the shopping journey not just as paying observers but as marketing channels of co-creation.
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However, being a highly symbolic and emotional business, luxury experiences and products will always need a real-life journey in order to synergies with digital tactics that converse effectively with shoppers. Digital allows emerging luxury brands to increase their awareness and offer a “dream value” created through their digital image, similar to well-established luxury brands who dispose of immense budgets for marketing and retail stores (Kapferer, 2014). The modern social dimensions of luxury consumption are integrated by desired effects of recognition and distinction, while personal dimensions include pleasure and reward all of which are highly connected through digitalization. Young luxury consumers are timepoor, diverse, individualistic, knowledgeable, and digitally empowered. Considering the hyper-connectivity of consumers, new releases and desirable luxury product are known and accessible to whomever can afford it. However, the post-purchase satisfaction of real life product or experience is digitalized and therefore materializing the emotional and symbolic recognition of living the “luxury experience”. All though luxury experiences and travel have proven be of greater desirability among young consumers (Buckle, 2019), the satisfaction and hedonistic effect are shared in social media digital channels in attempt to feel admired and gratified by their peers and the public eye. The self-perception of oneself to others, is a significant motivator behind sharing luxury experiences in present days. Intangible feelings and attitudes towards the particular customer and brands synergies in digital content to create an idea of pleasure or dislike in a potential consumer’s mind and diffusing brand awareness. Too often, people treat the digital world as a more tangible and real space than the physical world. For this reason, sectors such as fashion and luxury which are emotional and rare, have found in digitalization and consumer behavior of social gratification an entrance to increase brand desirability and access a wider range of individuals to become of aspirational value to them.
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1. The concept of luxury has always been an essential aspect to hierarchal societies, for it is how higher leading classes differentiate through the possession of objects and lifestyles symbolic to wealth and exclusivity. 2. Luxury is driven by individual and collective notions of desire that shift through cultures and periods but still represent the engine of human motivation. 3. Democratization eventually led to the emergence of “accessible luxury� and the increase of global luxury consumers, which in present day has translated into the use of digital channels to reach global brand exposure. 4. From an individual perspective, luxury consumption has generated hedonistic effects such as pleasure and self-validation. While on a social level, luxury consumption gratifies status and admiration from others. 5. The perceived exclusivity (intangible) and social dimensions involved in the luxury experience are the aspects most valued in present day. 6. Conspicious consumption and post-purchase gratification are being manifested in a digital social medium. 7. Gen Zers, Millennials and young Chinese consumers are the key players in luxury. They differ from previous generations because they are time-poor, diverse, individualistic, knowledgeable, and digitally empowered. 8. New power is digital and consumers seek brands with meaning to which they can identify their own individualistic character when expressing themselves digitally.
KEY FINDINGS
IV. DATA ANALYSIS
THE CURRENT PANORMA The luxury market grew 5% to an estimated 1.2 trillion euros globally. In a study report by Bain and Company in 2018 data showed that fastest growing sector within the luxury industry is the experience sector with sales growoth of 5% is hospirtality annually. Sales of high-end food grew 6% from last year, the “ethical nutrition” trend, reflected consumers’ desire for authenticity, quality, and transparency regarding product’s origins. However, personal luxury goods outperformed the overall market in 2018, reaching a 6% increase ( 260 billion euros). New Consumer attitudes 1. Getting woke and involved. Gen Z proved to be the most community and personal truth searching generation. Avocation and social causes are strategies that companies are using to connect with these consumers 2. End of Ownership – the concern for social and environmental causes has made young generations more conscious and elastic about purchasing pre-owned and second hand. Therefore the second hand markets places and rentals extending production lifespan are blooming voting 44% that this business model is most because of preference to purchase experiences. The secondhand market for luxury goods rose to €22 billion in 2018, Europe was half o this market, as well as by growth among highly specialised online platforms. 3. Now or never- rising demands with delivery expectancy is an aspect companies must effort to shorten. In 2018, customers expected 24 home delivery from Amazon as opposed to traditional 9-day shipping back in 1995.
All retreived from the MCKINSEY State of Fashion 2019 Report.
RISING CONSUMERS -Generations Y and Z accounted for 47% of luxury consumers and 33% of luxury purchases in 2018. Companies are evolving in terms of product offerings, engagement strategies, and distribution channels (Bain&Company, 2019) -Generation Z is already demonstrating highly differentiated preferences from previous generations. They are more “individualist” (seek personalisation and authenticity), willing to shop in physical shops with the digital experience, and very logo driven. -Millennial spending in the US amounts to $1.3 trillion—$430 billion of which is discretionary spending.“Nearly half of all consumers—and a majority of Millennials—say they’re buying fewer products and purchasing more experiences. By 2022, the experiential segment is forecast to account for nearly two-thirds of the total luxury market—representing a fundamental shift in consumer behavior, from owning to being.” - BCG, 2019 -Chinese consumers dominate the luxury market as accounting for 33% of the total spending Chinese consumers still dominate luxury consumption, accounting for 33% of the global luxury spending. Local consumption in China grew 20% (23 billion euros) driven by high demand. From 2015 to 2018, local spending in China doubled in growth in comparison to abroad spending (McKinsey , 2019).
Surveys from Business of Fashion conducted a survey to Business executives in 2018 targeting consumer shifts in the past year by most important. The top four being mobile obsession, start-up thinking and personal connection, all of which where obtainable through technology.
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GENERATION ATTITUDES
Figure 2. Consumption and behaviour according to generations via McKinsey&Company,2018.
GEN Z ATTITUDES
Figure 3. Generation Z life habits and mindsets via McKinsey&Company,2018)
GEN Z ATTITUDES IN INDIA AND CHINA ARE MORE OPTIMISTIC THAN WESTERN YOUTH
Figure 4. Indian and Chinese Gen Z are more optimistic and proactive via Bloomberg, 2019.
GEN Y & Z ARE 47% OF THE GLOBAL LUXURY GOODS IN COMPARISON TO PREVIOUS GENERATIONS
Figure 5. Millennial and Gen Z market share of luxury goods via Bain & Company, 2018
SECOND HAND LUXURY GOODS MARKET 2015-2018
Figure6. Second hand market emerigng and Europe is the leading market 55% via Bain & Company , 2018
LUXURY SPENDING BY REGION AND NATIONALITY
Figure7. Chinese customers top luxury spenders 46% by 2025 but Europe is the top market place via Bain & Company,2018.
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EXPERIENTIAL LUXURY IS ON THE RISE BY YOUNG CONSUMERS.
Figure8. Experiential luxury raising 9.5% via BCG, 2018
ONLINE SHOPPING BY REGIONAL AND GENERATIONAL MARKETS
Figure 9. Online shopping by regions and generations via Deloitte, 2017.
ONLINE SALES OF LUXURY GOODS IN 2025 (BILLION EUROS)
Figure10. Online sales in 2025 74 billlion euros via Euromonitor, 2018.
SUSTAINABILITY New affluent generations are more socially involved and environmentally conscious. Gen Z are known to seek for individual truth, expressing their social views, demanding personalized product all in an attempt to achieve differentiation. This demanding expectation has forced brands to take initiative and incorporate sustainable and ethical practices into their production processes. A study from Nielsen said that 73% of Millennials are willing to spend more on a product coming from a sustainable or socially conscious brand and 81% expected for brands to be transparent in their marketing and report their environmental impact (Nielson, 2015).
FASHION COMPANIES ACTIONS IN RESPONSE TO THESE DEMANDS
BURBERRY
In September 2018, Burberry announced terminanted the destroyance of unsold products and practice recycling, repairing and donating unsealed products.
KERING GROUP
Owner of Gucci and Stella McCartney, is increasing the share of its raw materials that are renewable and implemented a Code of Ethics and a Sustainability team.
PRADA
Promoter of “Manifesto of sustainability for Italian Fashion” and applies the “Code of Ethics” in the company.
ROLEX
The philanthropic and socially conscious host of “Rolex Award for Enterprise” rewarding young entrepreneurs (aged 18 to 30) for projects driving a positive environmental or cultural change.
TIFFANY ‘s
Has a zero-tolerance policy for purchasing diamonds from countries with human rights infringements.
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OUTLOOK FOR THE FUTURE In a Luxury Industry Report conducted by Bain & Company several trends and key players where identified that would affect the near future (2025) panorama.
IV. Young Generation Z and Y will contribute 130 percent of market growth by 2025 and brands will focalise strategies centered in them.
I. Chinese luxury consumers will be more powerful than ever (45% of luxury purchases in 2025) from which half of them will be purchased in mainland China.
V. . Cultural and subculture groups will lead consumer trends and brands will use their cultural meaning to create engagement.
II. Online will repreesent 1/4 of the total market value and 100% of luxury purchases will be influenced by online. III. Deminishing of foot traffic in physical stores induced by digital.
VI. Brands will diversify into other categories such as wellness in order to attain lifestyle positioning and “serve for all� (ei. Amazon). VII. Decreased conspiciousness and experiential spending will further push retailers to invest in technology, partnerships and events to enrich brand experiences.
HOW BRANDS ARE RESPONDING TO NEEDS OF RISING YOUNG LUXURY CONSUMERS? Luxury fashion brand are targeting the rising luxury consumers Millennials and Gen Zs, which will make 45% of the global luxury market by 2025 (LuxeDigital, 2018). Luxury fashion brands have been actively courting millennials in recent seasons attempting to digitalise their brand experience. However for the captivation of Generation Z born after 1995, has required the inclusion of streetwear into the luxury segment. Gucci and Louis Vuitton are among the fastest-growing luxury brands in the world because they have embraced the contemporary cachet without losing their DNA but rather enriching it. From a Millennial perspective, Gucci is considered the top brand given that it has adapted and integrated the digitally powered mind set that millennials seek for in a brand. In the other hand Louis Vuitton, a traditional heritage luxury brand is the exemplification that the luxury streetwear is the gateway to raising sales and gaining relevance among GenZers while still remaining exclusive and desirable.
Figure11.
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In 2017 under the appointment of Kim Jones for Louis Vuitton men, Louis Vuitton and Supreme launched a limited-edition collaboration sold in exclusive pop-up stores and in selected Louis Vuitton stores. Released in the same matter as Supreme drops plus the strict conditions of Louis Vuitton Figure12. Louis Vuitton logo distribution, generated artificial scarcity and greater desire for the collection’s products resulting in immediate sell out (Financial Times, 2017).
The expectancy of co-branding between two very different set of char-
acteristics was strategically smart because of the long-listed benefits for both parties. Through this, Louis Vuitton employed a step-down strategy to appeal to an affluent millennial target group that was otherwise Figure13. Supreme logo inaccessible through their own marketing approach, overcoming each brand’s potential limits. The strong brand influence of Supreme manages to attract their loyal customers into buying the products in the collection and granted awareness of Louis Vuitton among millennials as a “cool” luxury brand for doing so. Their post-purchase satisfaction given the extreme scarcity of the products, was manifested through social media and magnified in the eyes of the media which is the second aspect of the value of this co-branding where consumers experienced most gratification and satisfaction. The pricing strategy was closer, and in cases, higher than regular Louis Vuitton products meaning that their step-down strategy did not compromise their profit and also adding “young” products such as skateboards, tech accessories, sneakers and fanny packs further emphasizes the need to appeal to emerging consumers tastes and necessities by luxury brands. Louis Vuitton had a closing year of 8 billion euros in 2017 (CNBC, 2018). The booming industry of luxury streetwear with exponential price points and rapid inventory turnaround, high fashion and streetwear are leading fashion trends with contemporary top desginers such as Rick Owens, Raf Simons, Ricardo Tisci, Public School, and OFF WHITE presenting at New York and Paris fashion week and engaging in lucrative partnerships with sports brands such as NIKE and Adidas. The long-term aim of this collaboration was to generate brand awareness beyond Louis Vuitton’s target group and access a future buying relationship with the high streetwear segment, while for Supreme a significant step up and boundary breakage to enter high-end fashion luxury as a streetwear brand proved that both can be intertwined and present a successful luxury business model (Highsnobiety, 2017).
“More than a collaboration between two labels, this represents the excellence a New York street style and the Louis Vuitton’s French savoirfaire.” (Louis Vuitton, 2017)
Figure14. Average resale markup from Supreme and Louis Vuitton collaboration via StockX and Highsnobiety, 2018
Figure15. Malle Courrier 90 classic is $34,396 via Louis Vuitton
Figure16. Supreme x LV Malle Courrier selling for $68,500 via StockX
The success of the collaboration exists within the exchange of cultures (brands) that choose to combine their meanings to create a third meaning with greater power than both parties alone. This authenticity and exclusivity is how the limited edition capsule collections and drops generate their value and hype. Money is no longer the main power agent, but knowledge and time. For this reason these drop models great an overflow of demand and gateway to secondary marketplaces where resale markups double the original retail but scarcity increases its value. This resale culture of limited edition product goods has led to the emergence of the Hypebeast subculture (High Snobiety, 2017).
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Figure17. Top brands from 2019 are all luxury brands mixed with streetwear via lyst, 2019
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Figure18. Top selling men items in fashion where all sneakers via lyst,2019.
Figure19. Global search volume streetwear vs. luxury via Gartner L2 Digital Index, 2018 .
VIRGIL ABLOH AS THET NEW CREATIVE DIRECTOR FOR LOUIS VUITTON MEN
Figure20. Fashion’s recent appointments to high luxury brands have a background in streetwear and avant-garde design. Demna Gvasalia from Vetements is the new creative director for Balenciaga and Alessandro Michele has lifted Gucci and made it a cool Millennial brand. Heidi Slimaine from YSL is now in Celine and Kim Jones from Louis Vuitton is now at Dior. New appointments are ways in which brands attempt to stay fresh and relevant.
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Figure21. Previous history from Off-White shows that collaborations are part of Virgil Abloh’s preferred creative actions.
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Figure22. Moncler Genius collection from early 2019 caused sensation .
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Figure23. Balenciaga and Crocs collaboration prove that high end and mass market generate content because of the set of cultural values, fascination factor.
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Since Gucci’s 2015 revival with the appointment of Alessandro Michele’s as creative director market share has increased significantly and the brand is considered cool again. This is an exemplification that embracing the digital luxury experience is necessary in order to avoid irrelevance among the rising Millenial and Genz consumers. Digital is Gucci’s key strategic focus to being a top performing brand and offering the best Omni channel retail experience in comparison to its competitors, earning top Digital IQ brand by GartnerL2 (Forbes, 2017). In 2017, Gucci had an increase of 45% in comparison to 2016 reaching 6.2 billion euros. Gucci’s outperformance in mobile and Instagram, along with other digital efforts have resulted in over 40 million interactions in social media. Gucci uses open source creative collaborations in social media which crafts content specific for each platform. Eccentric visuals and unconventional luxury feeds the love of visual culture among Millenials, proving that luxury brands can adapt and generate influence in a consumer driven social Figure24. media culture (LuxeDigital, 2017).
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Figure25. Gucci’s digital IQ in comparison to Burberry and Louis Vuitton showed that mobile and instagram are the key digital mediums that Gucci excels via L2 Fashion 2017.
Among top digital and searched brands in 2016-2018 Gucci has outperformed because of their excelling focus in Instagram the main influencial and visual network for young consumers. Also efforts in mobile have proven to appeal to this generation since in 2018, time spent by consumers on mobile was 4 times higher than on desktop and 98% of millenials are smartphone equipped.
Figure26. Gucci was the #1 search brand from 2016-2018 via Luxe Digital, 2018
Figure27. Gucci runway show, became Instagram sensation and generated 113,000 posts
Figure28. Top items from Gucci where also the most seen in Instagram.
In convergence to the previous section, as streetwear is upscaling into the luxury industry in the last quarter of 2018, among the most desired and searched for items for women were Gucci accessories and leather goods as top first and second in the list. The popularity of these items is not unrelated to the fact that throughout social media, fashion content by influencers and users showcase and mention these products. In Instagram alone, Gucci has a follower base of 23 million. The hashtag #gucci accounts for 59 million posts of products, stores, events all user generated, and #guccibag 2 million posts. In Gucci’s product revenue breakdown, data showed that in 2017 the top selling category were leather bags and goods accounting for 55% of the total revenue.
Figure29. Top women’s items are Gucci accesories.
Figure 30. Gucci’s fur bann campaign in 2017.
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Figure 31. Gucci Snapchat
Gucci has embraced social media in order to create shareable experiences and content inclusive for all. Real time social communications provide followers, both customers and aspirational followers of the brand, to live the brand experience through digital. For this reason democratization paired with digitalization because this medium provides an global access to a traditionally exclusive and elite event such as a runway show. In fashion week 2017, Gucci alone generated over 40 million social media interactions and generated a total of 29% of the share value (Launchmetrics,2018). Millennial conscious behavior has driven luxury brands to incorporate sustainability and ethical practices into their production and company. For this reason, Gucci’s sustainability plan “Culture of Purpose” vocalizes environmental and social pillars which has further. As consumers are purchasing with purpose and spending more on experiences, they have become more selective about investing in retail. Therefore, sustainability is a way to add meaning and value to these purchases and add a self-validating emotional component to luxury retail.
“To stay relevant, luxury brands will have to deliver and look for ways to tailor their marketing efforts to each consumer’s need for individuality. Personalisation plays on consumer sentiment and is an essential part of the experiential services associated with luxury brands.” – Florine Eppe Beauloye
V. DISCUSSION
The aim of this dissertation is to establish a clear understanding of the evolution of luxury consumption and its importance in society, to further predict its future state. Central to studying an abstract concept such as luxury and determining it relevance in contemporary culture, is the ability to provide a clear relationship between itself and society. As previously discussed in the section “Luxury, the Individual & Society” the paradigm of luxury exists in relation to social stratification. There is a deep existential component to the desirability of luxury goods which establishes one’s position and identity in the world. Although Kapferer, argues that there exists a luxury for one’s self, the personal hedonistic value is valid only if it is also considered valuable to others. It was found that gratification of the self results from the admiration from others in cyclic causal motion. Taking into account the Veblen (conspicuous consumption) and Bandwagon (post-purchase gratification) effects of luxury, it was determined that although physical and emotional attributes influence the decision-making of a purchase, it is the anticipation for the final effect or result imprinted in society that holds the true pleasure. In modern consumer culture, consumption has become a central aspect to the establishment of a social hierarchy in a democratic “equalitarian” society. The way in which these self-identity statements are being communicated and instantly gratified back is through social media by young rising luxury consumers belonging to Generation Y and Z.
This newly found pleasure in the anticipation of the post purchase recognition among young consumers is what has enabled streetwear and luxury brands to generate “hype” and excel. In previous generations, the prestige of a brand was more focused in the physical attributes and rarity of the materials involved, whereas now, the perceived values relating authenticity and exclusivity do not discriminate quality and heritage, but are much more focused on the brand’s purpose and cultural association. As social markers brands are expected to hold meaning and unique characteristics, which due to globalisation and digitalisation, have resulted in a unified universal culture where exchange of meanings are understood and interpreted under the same “language”. As shown in the data, the power of collaborations lies in the convergence of two set of meaning which have been unified to provide a unique product and shopping experience. Data showed that young consumers from Gen Z and Millennials hold the power to the future of luxury and global economy. The have redefined consumer mindset drastically and driven luxury brands to evolve with them in order to stay relevant. They are much more self-oriented, ethical, crave uniqueness and are experience driven which is why brands have had to provide continuous efforts in developing a seamless omni-channel brand experience that adds value to expensive purchases. As 50% of millennials prefer spending in experiences that generate happiness and wellbeing, luxury goods as status symbols are being replaced or in need of complementation from status experiences and shareable digital content.
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For this reason brands have had to expand into categories which are of value and preference by this young consumers such as the case of Streetwear. The consumption of a luxury streetwear item offers the status of an experience and it is equally shareable through social media, causing high brain stimulus. Brands have been reacting to these consumer shifts through various digital marketing efforts that feed individualism and personalisation, essential to experiential services and also redirecting their strategy from a product or business oriented, to a customer centric design. Addressing the evident fact of the Chinese consumer power in future years, their retrieval towards purchasing in their local mainland will push brands to develop custom strategies for China alone. These millennial and Gen Z consumers, are not expected to decrease conspicuousness nor engage with ethical practices as much as Westernise consumers but demand a much more efficient digital omni-channel experience. Although consumer power is predicted to increase, the growing conscious mindset among consumers is expected to decrease conspicuousness in terms of products. As mentioned in the earliest section of the discussion, the never-ending quest of personal self-improvement and actualisation will shift towards spending in experiences that lead to personal and social wellbeing. The growing consciousness and experiential preference will feed the development of second hand and rental marketplaces because of the generation’s purchasing elasticity. This ethical mindset is contrasting with traditional ideals of waste regarding luxury consumption, however this reuse business models will help close the gap between the fashion industry and its impact in the environment.
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Furthermore in terms of luxury brands, buying form an ethical and sustainable company is an entry to a conscious elite who enjoys values of self-actualisation and contribution to a general wellbeing. The future of luxury is headed towards further digital transformation especially in terms of distribution and retail. Leading brands, such as e-tailer Amazon, succeed because of their diverse and extensive product category market place. This is a “one market serves all” that succeeds among consumers because of its one stop shopping journey, meaning that shoppers don’t need to leave the website in order to shop for different products. Luxury brands will need to adopt a similar model were they extend into other sectors, in that of becoming a lifestyle brand who is able to satisfy target consumers in as many needs as they can without losing its DNA. Through the evaluation of all the data and theoretical literature, author concluded that fashion brands will need to redesign their heritage and values in order to have an appealing brand story that establish status and provoke admiration in future society.
CONCLUSION
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The initial aims and objectives of this dissertation have been met. All the topics have been covered and discussed through the data analysis and the reviewed literature; luxury’s relation to society, the effects of the driver’s of change in luxury consumption, consumer shifts and values, brand’s reaction to these shifts; and possible future implications on the luxury industry. The future predictions of luxury consumption stated are based on speculative official data and current consumer attitudes. However, abrupt external macro disruptors such as politics, economics, and technology may change the course of the predictive panorama. One thing that the author has verified throughout the investigation is that luxury is an aspirational state symbiotic to wealth, exclusivity and superiority that has been present ever since the creation of societies with hierarchal order. Driven by individual and collective notions of desire, the representation of luxury will continue to be evolutive throughout cultures and periods. Therefore, the author has concluded that the abstract concept of luxury will continue to exist and evolve for as long as societies and individuals ascribe meanings to establish differentiation among social groups.
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