The International New York Times Luxury Conference 2015, which is hosted and moderated by New York Times fashion director Vanessa Friedman and award-winning New York Times journalists, will addresses some of the most critical challenges and opportunities facing today’s luxury goods industry.
Aptly named Luxury Beyond Product, the event will bring together a selected group of brand thought-leaders and innovators from luxury fashion to art, technology, entertainment, beauty and retail to share ideas on the most pertinent issues luxury businesses face in this ever-evolving landscape – joining the International Luxury Conference 2015 event are C.E.O.s Maureen Chiquet of Chanel and Marco Bizzarri of Gucci, icons and celebrates like will.i.am and Victoria Beckham, and unexpected experts such as Doctors Without Borders founder Bernard Kouchner, choreographer Benjamin Millipied, artist Grayson Perry and myriad others.
Below are just some of the thought provoking and highly informative discussions that will take place at The Trianon Palace in Versailles on 17 – 18 November 2015.
The Global Context
Moderated by Roger Cohen, op-ed columnist at The New York Times, one of the key discussions which will take place in the morning of the first day of the International Luxury Conference 2015 event will look at the geopolitical, economic and cultural forces shaping the luxury industry and changing the way consumers interact with brands. Joining Cohen to talk about these testing times will be Nader Mousavizadeh, Co-founder and partner at Macro Advisory Partners, Bernard Kouchner, former French Minister of Foreign and European Affairs and founder of Médecins Sans Frontières. Together they will look at the troubles in today’s Russia, the new conservative attitude to luxury in China, as well as the impact of the floating Swiss Franc and what these mean for the industry going forward.
Indeed, Euromonitor International’s latest luxury goods data reveal that 2015 was yet another challenging year for the industry. In particular, the economic instability, social unrest and armed conflict buffeting formerly fast-growing emerging markets have driven up the strategic importance of the developed markets, not to mention the turmoil on the global foreign-exchange markets since late 2014 creating a global currency war for the industry.
In 2014 and 2015, mainland China posted its lowest growth in sales of luxury goods since our records began (a real decline of -3% and +1% respectively). The slowdown in growth also means that China will not overtake Japan to become the world’s second largest luxury goods market in the world in the next five years and is expected to maintain its third position ahead of France and the UK in the short to medium term.
Similarly, Russia’s luxury goods sales delivered a disappointing real decline of 5% (real RUB terms) in 2015, making it the world’s second worst-performing market after Ukraine. With the backdrop of sanctions and the deterioration of relations with the West, business and consumer confidence in the economy has collapsed, to some extent. On the consumer side, this (alongside falls in real wages) has contributed to a decline in luxury expenditure; and on the business side, a lack of investment and capital outflows. With the risk of an escalation of geopolitical tensions weighing on the economy, however, confidence is likely to remain fragile.
At the same time, external currency pressures continue to create even more headwinds for the industry and are forcing some of the world’s leading luxury brands to revisit their global pricing strategies. The strength of the US dollar and, to a lesser extent, the UK pound, teamed with a surging Swiss franc and debilitated euro in 2014 and 2015, has led to marked consequences for some of the key luxury goods categories. China’s latest currency devaluation could further amplify the situation by creating greater disparities in prices between Asia, North America and Europe. In some markets, prices are going up, while in others, they are going down. It is arguably one of the biggest challenges facing the industry today, particularity on the back of the floating Swiss franc.
One such category which has fallen prey to this currency war is luxury time pieces. What was once heralded as one of the world’s fastest-growing categories is now dwindling in sales. Euromonitor’s new research indicates that global sales of luxury watches declined (-0.5%) in 2014 and will just reach over 1% for 2015 (US$ real terms).
All of this and more on these pressing topics will be discussed at the International Luxury Conference 2015 event.
The rise of consumer awareness about labour working conditions, sustainable sourcing processes or environmental policies is shaping the apparel and footwear industry globally. The luxury industry as a whole is under increasing pressure to source, manufacture, distribute and sell in a more ethical manner as consumers start to assess more carefully how garments are produced and in what type of labour conditions.
In a case study with Cyrill Gutsch, founder of Parley for the Oceans, and Eric Liedtke, executive board member global brands at adidas Group, along with a panel discussion moderated by Vanessa Friedman, fashion director at The New York Times, who will be joined by Brunello Cucinell president and C.E.O., at Brunello Cucinelli SpA and Michael Kowalski, chairman of the board at Tiffany & Co, all these issues and questions over being “green” will be discussed.
Being green has become very much a fashion trend, but so too has suspicions of greenwashing. During this discussion at International Luxury Conference 2015 the panel will answer questions over:
- How a luxury brand decides what level of sustainability is right
- How much budget can a luxury brand commit to environmental protectionism and how should they decide
- How can a luxury brand measure what that means to consumers
As a result of the need to be “green”, luxury goods players are quickly trying to adapt to this scenario with a myriad of policies and partnerships, trying to build an ethical profile while investing heavily in promoting these. However, many consumers remain dubious about what is perceived sometimes as a simple marketing ploy.
The list of designer clothing brands and apparel companies developing ethical practices and eco-friendly schemes is growing as much as consumer concerns regarding the real impact of these or the authenticity of these attempts. In this scenario, it is critical for luxury apparel and footwear operators to adopt a transparent approach when looking at lessons learnt from other industries in terms of what works and what does not when it comes to sustainability or ethical practices.
At the moment, designer clothing and footwear operators have several platforms to build a more eco-friendly and ethical brand image across the whole value chain: from the manufacturing phase, with the usage of organic materials and fair labour conditions, to the post-sale treatment of unwanted clothes, where recycling is playing an increasingly important role.
Green fashion is even infiltrating sportswear, an area not historically associated with environmental or ethical values. Eric Liedtke (executive board member global brands at adidas Group) will no doubt discuss how adidas, for example, has increased its commitment to green issues through its four pronged Fair Play strategy, which covers the sourcing and development of green materials, enforcing basic employee and human rights, and reducing water use and pollution.
At the designer end, celebrity-endorsed events, such as the Green Carpet Challenge, put eco issues into the spotlight. Designer fashion online retailer Net-a-Porter introduced its Runway to Green collection, founded by Green Carpet Challenge (GCC) director Livia Firth, with designers such as Christopher Bailey, Christopher Kane, Erdem, Roland Mouret and Victoria Beckham all contributing two pieces in accordance with GCC ethical benchmarking. A percentage of each sale is donated to RED, a charity working to eradicate the transition of HIV from mother to child.
Nevertheless, the eco tag is still often at odds with a fashion image, being instead associated with a worthy attitude. This issue is tackled by Positive Luxury, which awards the Interactive Trust Mark that indicates that a company has commitment to sustainability and also to quality, design, craftsmanship and service. One of the aims of the company is to remove the language barrier that links “eco” with “frumpy”, and to instead link sustainability with aspirational qualities, such as craftsmanship and superior materials. The long list of brands signed up to the Positive Luxury mark include designers such as Alexander McQueen, Marc Jacobs, J Crew and Dior, as well as high end companies working in a wide range of industries, including beauty care, tourism, wine and chocolates.
Stella McCartney, a designer brand with a strong ethical stance, confirms the need to change perceptions. The company found that using the word “organic” on its organic line made consumers perceive its value as lower, even though the line was more expensive to produce. McCartney commented, “Obviously I don’t use any animals, which has a huge impact on the planet. But my first job is to make desirable, luxurious, beautiful clothing that woman want to buy.”
Going forward, sustainable solutions are a must for luxury brands, manufacturers and retailers alike and, although borne out of necessity and still relatively low down on the list of consumer concerns, current innovation paths stand the luxury goods industry in good stead to tap into an increasingly important selling point.
Is the Logo Really Over?
Another key discussion at International Luxury Conference 2015 will focus on the truth of logomania and whether it really is over. Moderator Charles Duhigg, senior editor for conferences and live journalism at The New York Times, will be joined by Marco Bizzarri, president and C.E.O at Gucci, Andrew Keith, president at Lane Crawford and Joyce and Maurice Lévy, chairman and C.E.O. at Publicis Groupe to look at this pressing issue. They will question whether the industry is looking at a case of the fashion pendulum swinging and whether they should simply wait it out. At the same time they will look at where the line between proper use of a heritage symbol and its over-use lies.
For the vast majority of luxury apparel manufacturers, “made in” began simply as an aspect of regulation and labelling, but, more recently, it has shifted to be an important part of corporate social responsibility and transparency. For luxury consumers, regardless of the brand or price point, the country of manufacture carries instant connotations. Made in Italy, Britain and the US, for example, are regularly used to denote heritage, quality and craftsmanship and can be used to leverage a shift away from logomania.
While luxury apparel brands have long publicised their origins in the interests of reinforcing brand positioning and emphasising craftsmanship, as yet surprisingly few exploit their geographic heritage to its full potential. While the likes of Valentino and Gucci publicise their Italian heritage, Burberry is one of the few luxury brands using its geographical heritage as a key driving factor throughout both marketing and product design. Given that higher-income consumers in emerging markets such as China would much rather a foreign brand than anything locally-produced, country of origin holds a lot of marketing value that could be exploited.
For existing apparel brands looking to capitalise on country of origin, the prospect presents more of a marketing challenge simply because the “made in” concept hasn’t been part of the brand story from the off.
When it comes to finding success in today’s hard-fought apparel market, striking a chord with the target consumer while differentiating from competitors is vital, and country of origin can be leveraged to play a key part in the brand story without using the logo. US, British or Italian-made means far more to the luxury consumers than it might have done 10 years ago, when American Apparel began to garner attention for local production in the US. If heritage and the manufacturing process allows, then there is certainly room for “made in” as a key part of the luxury goods marketing mix.
The Future of Digital Culture
Last but far from least, one of the closing sessions at International Luxury Conference 2015, which will be Moderated by Vanessa Friedman, fashion director at The New York Times, will look at how luxury heritage institutions can balance tradition with technology. Friedman will be joined by Matt Jacobson, Head of Market Development at Facebook and Instagram, and Benjamin Millepied, Director of Dance at The Paris Opera; together they will look at the crucial components that will optimise the digital relationship for the future and how the timeless most effectively meets the time-sensitive.
Indeed innovation is a buzzword across all fmcg industries at the moment, and luxury goods is by no means a stranger to this. 2015 started with a bang in terms of wearables, as the Apple Watch was unveiled. According to Euromonitor International’s latest data, global sales of wearables are expected to grow at a phenomenal speed. By the end of 2015 global sales of wearables are expected to reach 85 million units having grown by a massive 1,000% in the last 3 years alone. Asia-pacific has seen the most impressive growth at 172,000% over the same time frame making it the world biggest region in terms of units sold. Today Asia-Pacific accounts for over 41% of sales having surpassed North America which now accounts for 37% of sales. Moving forward however sales of wearables are set to grow by an additional 260% to reach 305 million units by 2020. Much in-line with our predictions for overall regional growth, forecast sales will be led by Latin America at 2,480%. This is mainly on the back of Mexico’s huge growth in the middle class which today is both the fastest-growing and the largest single segment in Mexico and pushing economic growth and social and political cohesion forward.
In terms of luxury, however, there are still very few on the market. To date, the industry has witnessed the launch of the new “smart” Ricky Bag from Ralph Lauren, the unveiling of the Tag Heuer smartwatch, which will be available to buy from November 2015, as well as the latest Hermès-branded Apple watch, which went on sale in October 2015.
At the same time, thanks to the merger of Net-a-Porter and Yoox in August 2015, the stakes have never been higher in luxury goods e-commerce. Indeed, global online sales of luxury goods are booming and are widely seen as one of the industry’s key battlegrounds of the next five years. According to data from Euromonitor International, global sales of online luxury reached almost US$25 billion for 2015, accounting for just over 7% of all sales. While, at first glance, this may seem comparatively small, this figure is up from 3% just 10 years ago, representing a massive increase of 134% on 2005 numbers. From virtual stores to live streaming of fashion shows, luxury brands have driven up investment in digital technology, with social media platforms becoming much higher profile.
With such impressive growth rates, it could only be a matter of time before digital sales catch up with those of physical stores. According Euromonitor International’s data, sales of online luxury are set to increase by an additional 50% in actual terms over the next five years, to account for almost 10% of all luxury sales. Indeed, the number of luxury consumers shopping online is soaring by the month, and affordable luxury goods will be increasingly on their radar. The over-60s are the fastest-growing demographic for internet connectivity, and will be a key target of online marketing. This is a major uptick for luxury e-commerce: According to Euromonitor International’s latest income data, while people in their 40s overall will continue to dominate wealth, the 65+ age group will be the wealthiest overall by 2030.