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What trends are likely to disrupt the premium luxury sector?

The Arab Luxury World conference held on June 12-13, at JW Marriott Marquis Dubai, will highlight major trends in premium luxury ... but here's a sneak peek!

New generations of digitally-inclined “millennials” and “Gen Z” are transforming the industry Luxury goods sales are growing at 15 percent online, compared to a 5 percent growth in stores Luxury brands are switching from universal experiences to focus on local and personalized touchpoints

The luxury retail industry has witnessed a number of changes over the past five years. The luxury landscape has evolved in tandem with its consumer base. The increased number of malls in the GCC and MENA regions coupled with the e-commerce boom has caused brands to reassess their omnichannel strategies. With technology and digital disruption stealing the spotlight, keeping up with changing consumer behaviors and their new habits has become more important now than ever before.

Although geopolitical uncertainty in the Middle East, economic and trade challenges facing major players such as China, as well as financial concerns in the UK and the Eurozone have caused apprehension among investors and consumers alike, the luxury industry seems to be weathering the storm. The Savigny Luxury Index (SLI), which compiles the stock values of the top 18 luxury companies, announced a mixed bag of results in the first quarter of 2019.

“Richemont announced a 27 percent increase in full-year sales, but much of that was driven by acquisitions and investors were not so impressed by the group’s profitability level. Ferragamo and Safilo both announced better-than-expected first quarter-results — nevertheless, this was against a backdrop of deteriorating performance in recent years for both companies. Ralph Lauren beat market expectations in its quarterly results but investors were spooked by weak North America sales. Burberry’s annual results were overshadowed by weak sales in Asia along with softness in the U.S. Finally, Tod’s first quarter-revenues fell further than expected but its own retail channel returned to growth,” the SLI report summarizes.

The sixth edition of the Arab Luxury World conference, the Middle East’s leading luxury business conference, which will be held on Wednesday, June 12 and Thursday, June 13, at the JW Marriott Marquis Dubai, will highlight the major trends likely to disrupt the premium retail industry during an in-depth session on “The Future of Premium Retail”. Moderated by Nick Vinckier, Managing Director – MENA of Duval Union Consulting, the panel discussion will include insights from Regis Dupertuis, CEO of Le Monde des 5 Fleurs; Charles Haddad, General Manager L’Oreal Luxe, L’Oreal Middle East; and John Peeters, co-owner of Holition, among others.

Some of the trends likely to watch out for in 2019 are:

1. A new generation of consumers:

New generations of digitally-inclined “millennials” and “Gen Z” are transforming the industry. Their behaviors, motivations, and influencers are reshaping the luxury industry – from brand positioning and product development to operations and marketing. According to the recent Deloitte Global Powers of Luxury Goods report, millennials and Generation Z will represent more than 40 percent of the overall luxury goods market by 2025. These generations interact with legacy and novel brands primarily through digital platforms and require highly customized in-store experiences. This is an experience-driven set of consumers with a high purchasing power and an increased interest in lifestyle values such as sustainability.

2. Drive toward digital:

Luxury brands have begun to latch on to the growing digital disruption. According to a Euromonitor International report, luxury goods sales are growing exponentially at 15 percent online, compared to the 5 percent growth in brick-and-mortar stores. Major investments into LVMH’s multi-brand website 24 Sevres, Richemont’s YNAP multi-brand online platform, and the incredible growth of Amazon all bear testimony to the importance of having an online presence. In addition to this, in-store consumer experiences are also being digitalized with the dawn of the connective Internet of Things (IoT) solutions, mixed reality experiences (AR and VR), and trusted AI-driven recommendations – all of which deepen product experiences and build stronger customer relationships. Gucci’s 2018 spring collection, for instance, turned flagship stores into interactive art galleries, and its digital campaigns incorporated augmented and virtual reality experiences. Estee Lauder has also launched an AI- and AR-driven lipstick advisor that advises potential customers on the ideal shade for their lips.

3. Personalization and social media:

Luxury brands are slowly switching from creating a unified, universal experience to focus on local and personal touchpoints. Expectations have been raised to a level where consumers anticipate their physical, offline interactions to be as seamless and customized as their digital and online experiences. While artificial intelligence (AI) and AR will soon begin to dominate this sphere, luxury brands are already engaging personally with their audience through social media interactions. The day and age of maintaining a dignified distance between a prestigious brand and its faithful customers have passed. Gucci’s Instagram following increased more than twofold between 2016 and 2018 with industry leading initiatives such as #GucciGram and #24HourAce. Gucci’s “Do It Yourself” campaign also showcases how customers can personalize a selection of products to develop an intimate connection with a brand. Burberry dedicates close to 60 percent of its marketing budget to engaging with customers on its various social media platforms and its customized perfume collection was the talk of the town in 2017. Chanel’s social media creative videos pulled close to 300 million views on Facebook and YouTube, more than any other luxury brand. Louis Vuitton’s “Now Yours” personalized program for menswear is another great example of this trend.