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This year, The New York Times celebrated its 15th annual New York Times International Luxury Conference, which was a 2-day event (5-6 April) held at the opulent Trianon Palace in Versailles, Paris, as well as the extraordinary surrounding areas of the Chateau and Palace Versailles and its gardens.
Euromonitor International attended the event earlier this month. Some of the major themes of the conference (digitalisation and technology, philanthropy, art, film, food, sport and politics, to name but a few) provided interesting discussion points. This article provides an insight into some of the key themes of discussion at the event and what we learnt.
Source: The New York Times
This conference was opened by Vanessa Friedman, fashion director at The New York Times, with a somewhat sombre note but also one of hope and new growth: the 15th annual New York Times International Luxury Conference was actually scheduled to take place on 17-18 November 2015. This was postponed in the wake of the terrorist attacks that took place in Paris in which 129 people lost their lives.
Against the backdrop of these tragic events Friedman emphasised the importance of the industry to France and its crucial role in the context of the global luxury goods landscape. She quickly and very poignantly added, however, that instead of us gathering in Versailles at a time when the leaves would be turning brown and falling from the trees in the garden and surrounding woodland and the sheep and cows grazing in the adjacent fields would be preparing themselves for the cold winter months ahead, thick with their heavy wool coats and oily fleeces, we were in fact meeting at a time of new growth, new beginning, new life and, above all, new hope.
Source: The New York Times
Indeed, according to Euromonitor International’s latest research, luxury sales in France reached just under €19 billion in 2015, making it the fourth biggest market in the world, behind the US, Japan and China, but, with a regional value share of 21%, France comes out top across the whole of Europe and ahead of neighbouring Italy and the UK.
Home to two of the world’s biggest and most prominent luxury goods companies, namely LVMH and Kering, some of the world’s most glamorous shopping streets and one of the most prestigious fashion events in the global calendar, the mere mention ofthe word “Paris”, or of something being “d’une fabrication française”, conjures up immediate ideas of luxury, style, sophistication, heritage and savoir-faire. However, despite its venerable position on the luxury and fashion scene, the French luxury goods market has not escaped the country’s political environment.
France’s rich fashion heritage has enabled it to maintain its position as a prime tourist magnet for many years. The influx of tourists has become a boon for the French luxury market. It is no surprise that Paris, as one of the leading tourist destinations in the world, is where tourists are drawn to (Paris is currently the world’s fifth largest city in terms of international arrivals), but, similarly, it is no surprise that in the aftermath of the attacks there were strong concerns over the impact and damage that this would have on tourist spending in the short term.
While France may be the world’s leading destination in terms of overall tourist arrivals, Paris accounts for just 18% of France’s total arrivals – 15 million vs 84 million in 2014 – so although there may be a slight slowdown in France as a whole in the short term, Euromonitor International does not predict that the luxury industry will witness a major decline in 2016, as tourism and luxury spending is very much integrated into every region of the country and so will act as a shock absorber to the impact in the capital .
Following the Paris attacks, security at ports, airports, borders and key cultural and historical attractions was stepped up across Europe. The outlook for European tourism, and, with it, international luxury spending, hinges on whether the authorities are able to contain the threat on the European mainland along with tackling ISIS at source in the weeks and months ahead as the French government engages in military action in Syria.
A very clear message that ran through the 2-day event was the issues of sustainability, social responsibility and environmental integrity as key components of the operational landscape in global luxury goods, it was also very clear that these components are here to stay.
In the keynote session entitled Beauty Within: Leadership in Luxury, Maureen Chiquet (Former global CEO Chanel) spoke of the importance of listening to the customer and on being real and authentic. Chiquet added that “Heritage, exclusivity and craftsmanship should be a given in today’s luxury world but brands need to stretch themselves further than the realms of standard luxury and should challenge themselves outside of their comfort zone.” She advised today’s luxury goods marketers to be more “self-reflective” and to pay more attention to today’s millennials (defined here as consumers aged 25-34 years), who, as both a customer or indeed an employee of a luxury brand, place a lot of emphasis on ethical values and will increasingly be looking for more connection in their purchases and workplace.
Source: The New York Times
What the millennial wants, of course, varies from person to person, particularly by culture and income. However, a number of common wishes have been identified by Euromonitor International that many in this demographic prioritise. They want experiences rather than “things”, they want good value for money, they want products that speak to them specifically, and, above all, they want to be heard and interacted with. While many millennials may be thought to be self-obsessed, this is also a generation that is seen to care about social justice and about the environment. They also care passionately about authenticity, and it is important to them that luxury brands and companies are transparent about their ethical stances. They typically reject traditional advertising and promotions, and are instead much more influenced by their peers, or by celebrities and vloggers. Indeed, according to Chiquet, “luxury brands are the least trusted source of information”.
Does this mean that more luxury brands will be following in the footsteps of companies such as luxury car manufacturer Tesla or indeed Apple, which, famously, does not do any of its own advertising, instead opting to devote this time and revenue towards research and development, leaving all advertising to an unofficial army of representatives and through the use of social media platforms?
According to Euromonitor International, the largest millennial populations by far are located in India and China, and provide a key to entering these critical and fast-growing markets. Other important emerging markets also feature at the top of the rankings, notably Indonesia, Brazil, Russia and Mexico.
However, it is not only emerging markets where millennials represent a large and important demographic for the luxury goods industry. The US has the third largest millennial population in the world, and other key developed markets also feature in the top 20 rankings, including Japan, Germany, the UK, France and South Korea. All major luxury goods markets and key contributors to global spend.
Despite their green credentials and concerns over sustainability millennials remain relentlessly optimistic about their financial future and are very willing to spend on some areas, including gadgets, clothes, health and fitness and life experiences (such as travelling), making them a prime target for personal as well as experiential luxury.
Whilst sustainability is not generally regarded as being “sexy” in the context of the global luxury goods landscape it is something that Cyrill Gutsch, founder of Parley for the Ocean, and Eric Liedtke, executive board member global brands, adidas Group, spoke passionately about in the session Strategic Sustainability.
Together Parley for the Ocean and adidas have been working on an innovative footwear concept, the 3D-printed Ocean Plastic shoe midsole, to demonstrate how the industry can rethink design and contribute to stopping ocean plastic pollution. Gutsch stressed that “unless we all make a change now 2048 is the final deadline when life in the sea will cease to exist”.
Source: The New York Times
With the recent Sustainable Development Goals and the 2015 Paris Climate Conference (COP21), sustainability is top of the agenda for luxury goods companies. Household luxury names across the world, including LVMH, Group Galeries Lafayette and L’Oréal, partnered or sponsored the Paris event. The anticipated outcome of the Paris conference back in 2015 is a new international agreement to keep global warming below 2°C.
But while we often hear of ocean life sustainability, green credentials and animal welfare, when Vanessa Friedman, Fashion Director The New York Times, asked Brunello Cucinelli, Chairman and CEO of Brunello Cucinelli Spa, during the same session what sustainability meant for him he spoke of his passion and projects for human sustainability. The son and grandson of Umbrian farmers, Cucinelli was brought up in an idyllic setting steeped in beauty, love and life. It was this that later reinstalled his belief in human dignity. Under the Brunello Cucinelli umbrella, in which he employs 15,000 people in the Umbrian hamlet of Solomeo, moral and economic dignity are attached to labour and productivity, stating that “human beings need dignity before they need bread”.
Source: The New York Times
In today’s modern age of advanced science and technology, according to Eric Liedtke of adidas Group, through DNA mapping it won’t be long before we are able to grow leather in a test tube. Indeed, sustainability needs be wrapped into everything a luxury business does. With consumers demanding more transparency, and trust being an increasingly fragile yet valuable commodity, luxury goods companies cannot afford to transgress. Added to which, the cost-saving and profit-enhancing results of running a sustainable business should speak for themselves. It was this “trust” that Michael Kowalski, Chairman of the board at Tiffany & Co, touched on during the same panel, stating that “as part of the Tiffany brand promise, as a customer when you step into a Tiffany store they expect trust”.
Corporate philanthropy has been practised by private businesses since the early days of the Industrial Revolution, taking place at a time when the idea of a welfare state did not yet exist. The first motive was to improve the living standards of the working classes so that they would be more inclined to work more efficiently. The world has moved on a long way since then, but the issue remains key and is more relevant in the luxury goods world now than ever.
In an increasingly competitive global market, luxury companies must prioritise not only the quality of their products, but also their contribution to society as a whole. In the session “Can You Quantify Goodness?” on 5 April Claudia D’Arpizio, partner at Bain & Company, examined the intersection between corporate social responsibility, philanthropy and luxury brands.
Source: The New York Times
Since the global downturn in 2008 an increasing number of luxury companies are beginning to see the sense in associating themselves with charities and giving. “Consumers were really questioning the value of luxury products in 2008-2009,” Ms D’Arpizio said. “And were really rethinking the ethical aspects of spending money, especially on products that are not necessity and are meant, really, to address desires, and not needs.”
While this in itself does not enhance a company’s financial figures, emphasising the philanthropic side of a company could turn out to be good business in the long run. However, despite embracing causes across the board, the luxury industry has done so sporadically without putting much thought into what a charity says for the greater meaning of the brand and its narrative.
According to a recent study carried out by Bain & Co luxury brands contributed €750 million in 2014 (US$853 million) to charities. These included efforts towards environmental causes, supporting the arts, culture and museums as well as the works of group-owned foundations such as Fondation Louis Vuitton and the Fondazione Zegna.
Consumers are not the only benefactors of a brand’s charity efforts. Bain found that 83% of brand employees care about their workplace’s philanthropy involvement, especially in terms of social responsibility and sustainability.
Ms D’Arpizio added that brands themselves also benefit from involvements with charities. Countless luxury companies are now emphasising their commitment to helping on their websites and through social media to appeal to consumers. Of the US$853 million spent on philanthropy in 2014, luxury brands saw a return of more than €1 billion (US$1.13 billion) in free media, which resulted in big returns for the brand.
As for consumers themselves, according to the survey carried out by Bain & Co 94% of respondents felt that luxury brands should be involved in philanthropy and 63% of those expect this as standard. This is proving to be more vital now than ever in terms of the millennial generation as they are more likely to support environmental causes. Millennials are typically described as being champions of social justice, who will not support brands and companies engaged in practices that conflict with these beliefs.
Indeed, globally, research has shown that millennials are keen to support brands that are committed to a positive social and environmental impact. According to a 2014 study by Nielsen, millennials are more responsive to sustainability actions than any other age groups, with 51% of consumers prepared to pay more for sustainable products and 51% of those actively looking for these traits when making a purchasing decision.
Overall, philanthropic issues are deemed more relevant when the consumer feels involved and engaged. Brand philanthropy should set out to be excellent in execution, strive for realness and authenticity, pick the right fight for the brand and communicate the cause via social media to spur consumer interaction.
Innovation and digital are buzzwords across all fmcg industries at the moment, and no luxury goods conference would be worth its salt without a session dedicated to these fast-growing areas.
During the session Digital IQ Index: Fashion Maureen Mullen, Co-founder and head of research at L2 Inc, gave a great presentation to illustrate its findings on a benchmarking project looking at 83 luxury brands in the US to measure their digital performance.
According to Mullen and her research at L2 Inc, beauty is by far the best performing category and has flourished in terms of digital interactions as well as digital spending overall, whilst, in terms of company rankings, British luxury brand Burberry is by far best in class in terms of overall digital innovation, followed by Kate Spade.
During this presentation Mullen stressed that whilst the luxury fashion industry in general has come on leaps and bounds in the last 10 years from a lagging category in digital to one of the frontrunners today, it still has its work cut out and needs to make strides in the omnichannel, warning that Amazon and Apple both pose a threat to the luxury industry.
And rightly so, Amazon has made no secret of its ambition to become the largest apparel and footwear retailer in North America; however, up until now, the company’s progress has been limited by its fruitless efforts to build partnerships with leading fashion brands. While some brands scoff at the idea of Amazon becoming a credible contender in the industry, many are becoming increasingly concerned about losing share within the all-important e-commerce sphere. So, how much of a threat is Amazon Fashion?
Apparel and footwear is considered an integral part of Amazon’s mission to reach annual sales of US$200 billion, and rightly so, given the industry is expected to account for global absolute value growth of US$142 billion over 2015-2020. Although not considered in any way your standard luxury e-tailer and better known for books and electronics, Amazon isn’t unfamiliar with the business of apparel: in 2015 it accounted for a 6% value share of apparel and footwear internet retailing, predominantly driven by its sales of third party brands.
In addition to the recruitment of industry veterans such as Caroline Palmer from Vogue and Cathy Beaudoin from Gap, the company has strategically aligned itself with the fashion industry by sponsoring events such as the Met Gala and Men’s Fashion in order to generate fashion credentials.
Similarly, Apple’s entry into the wearables market also sparked interest in the budding category among consumers and competitors alike. Non-tech companies such as luxury fashion houses and watchmakers are also entering the market.
Indeed, 2015 started with a bang in terms of wearables, as the Apple Watch was unveiled. According to our latest data, global sales of wearables are expected to grow at a phenomenal speed. In terms of luxury, however, there are still very few products on the market. To date, along with the Apple Watch, the industry has witnessed the launch of the new “smart” Ricky Bag from Ralph Lauren, the unveiling of the Tag Heuer smartwatch, which was available to buy from November 2015, as well as the latest Hermès-branded Apple watch, which went on sale in October 2015.
As smartphones have become a necessity for many, consumers are looking to wearables as an extension of the smartphone experience. The decline in the average unit price of wearables will prompt many consumers to take the leap. By 2020, there will be one autonomous wearable sold for every eight smartphones sold.
The diverse range of companies working on wearables will offer consumers a wider selection of products with different usage scenarios. Critically, the diversity meant that wearables will no longer be just a tech product and will open up the market to a wide segment of users, from fashion to health.
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 Euromonitor International, world sales of online luxury goods reached almost US$25 billion in 2015, accounting for just over 8% 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 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 rates of growth, it could only be a matter of time before digital sales start to catch up with those of physical stores. According to our latest 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. Whilst millennials are the obvious target audience now and in the future, 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 our 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.
Source: The New York Times
To close this 2-day event fashion director at The New York Times Vanessa Friedman concluded that there were four key elements that stood out, having listened to all the sessions and topics discussed, which were, authenticity, risk, moral responsibility and honesty, but that, above all, in order for all of those to exist a brand needs bravery.
Source: The New York Times