by Leonard Steinberg
I know I’m going to sound like Pollyanna again……but here goes: I’m SO EXCITED about the next luxury market we are heading into. Why? I have fashion in my genes (I was in the fashion industry for a decade prior to real estate) so newness and change are wired into my DNA. Here are some thoughts on the next luxury markets based on reading and thoughts I’ve gathered over the past few weeks from Bain, McKinsey reports, and the writings of the Wall Street Journal, Jing, Forbes, CNBC, etc:
* Future luxury will adapt after the Corona-virus pandemic. Luxury is not dead and will NEVER die. The desire for luxury in tough times is often greater.
* Research has proved that luxury isn’t overly income-sensitive, nor is it reactive to recessions. Even when people have less money or income, the desire for luxury remains.
* Analyzing past crises confirms that the luxury sector suffered less than others, and it rebounded faster and larger than non-luxuries sectors. Practically all luxury categories have outperformed non-luxury segments since the 2008 recession.
* Luxury brands will have to continue and expand their focus on experiences and storytelling around purpose and values, heritage and authenticity to remain relevant to their newly discerning customers.
* In a world where conspicuous consumption might be less acceptable for a while, prominent logos will recede. A flashy, glitzy brand attached to a home may not matter as much as the home’s specific attributes.
* The more creative style of a brand will come back to the fore with a new focus on discretion.
* Consumers in China that have already begun a path towards a more normal life have cut back spending on frivolous things. Real estate is not considered a frivolous purchase. A home is a substantial and meaningful purchase, more so than a sports car. It is also usable and valuable to your daily existence.
* Digital shopping will expand notably for safety and convenience. Digital experiences MUST be elegant, informative, SMOOTH, and less focused on gimmicks and flashy effects.
* LOCALLY made and sourced anything will be of greater value and should be highlighted. Think LOCAL PRIDE.
* Affordable price-points in anything will have a growing demand as those who could afford more now can or want to spend less…..or may want to lower budgets to accommodate owning a second home.
* Luxury marketers and service providers will need to have to provide more robust intelligence, fast decision making and clearer, to-the-point communication.
* Be relevant to your clientele. Be customer obsessed, agile, digital and sustainable.
* Luxury marketing language should adapt to be softer, less grand. More human. Calming. Substantive content that is informative and aspirational will matter. People are a bit fragile right now and many won’t admit it.
* Luxury brands that can create extreme value become important to consumers, which often see items as investments, helping them to rationalize the purchase and increase their willingness to pay.
* The luxury sector is often based not on a rational decision-making process and reasoning but on emotions and feelings. How does what it is you are selling leave your audience FEELING? Think tone, sounds, smells, sensory qualities as well as facts and data.
* While this unexpected crisis will undoubtedly have a strong impact on societies, it is unlikely to affect the very roots of human nature.
* After potentially months of austerity and isolation, customers may be willing to go back to their lives from before the pandemic and enjoy luxury services including luxury travel, entertainment, food and beverage and spa services. But this will require extreme confidence around safety….and it will take time. Confidence is built and earned.
* Spending in times of crisis tends to be about identity and security. Combining this with the essence of luxury which is often based on conspicuous consumption or at least signaling status, both luxury products and services are bound to be popular again.
* Home as sanctuary of safety and comfort…..and functionality….and now it has an additional necessity: work from home environment.
These are just some initial thoughts on this subject. We will learn much more over the next weeks and months about the shifting tastes of the luxury consumer.