The familiar profile of luxury shoppers has been undergoing a steady shift in recent years, getting younger and more tech-savvy every year.
For decades, it seemed, the most avid patrons of exclusive boutiques around the world sprang from a predictable, almost monolithic, caste of global elites: Prominent men and women of the baby-boom generation, who travelled extensively – and at a high standard – for both business and leisure, and whose appreciation of the quality and heritage of top luxury brands had been cultivated across generations.
But this reliable core of luxury consumers has been changing over the past years, becoming a shrinking force in the global marketplace as the newly wealthy economies of China, India, Brazil and Southeast Asia churn out young buyers with a hunger for markers of status and sophistication.
Last year, more than 330 million people consumed luxury products worldwide, representing EUR217 billion, or about $270bn, according to Bain & Company, a Boston-based consulting firm. Of these, approximately 150 million are considered to be “true luxury” buyers, who consistently spend an average of roughly $1,560 a year on products, such as perfume, fashion and fine jewellery.
“We are in the midst of a generational shift… Today’s luxury consumers are a very diverse crowd, representing many different segments of people,” says Claudia d’Arpizio, who specialises in luxury goods as a partner with Bain in Milan.
According to analysts, that crowd is only going to get larger and more heterogeneous – both geographically and demographically. By the end of this decade, the global luxury consumer base will probably reach 400m people, according to Bain, and climb to 500m by 2030. Most of that growth will be fuelled by steady economic growth in emerging markets, particularly in Asia, as well as the proliferation of digital and mobile technologies enabling consumers and brands to connect with one another in new and different ways. A development that adds enormous complexity to the customer relationship but create opportunities for brands well-prepared to adapt to the new landscape, analysts say.
“The population of high-net-worth individuals is going to expand globally,” notes Doug Gollan, editor of Elite Traveler magazine. “The big question is, how deep into the pockets of these super-rich people are the luxury brands going to be able to get?”
The key, Gollan and others say may be in better harnessing the Smartphones and other digital devices already nestled in these consumers’ silk-lined pockets and crocodile handbags.
“It’s clear that access to Big Data from the internet is reducing any gap in terms of education of consumers and information about luxury goods,” d’Arpizio says.
In addition to creating new virtual “touch points” for these affluent, hyper-connected consumers, analyzing the way people interact with apps and online stores can help educate brands about what she calls the “deep why” – the emotional, rather than the rational, drivers of luxury purchases.
“Technology and the Internet are enlarging the range of opportunities for creating a dialogue with customers,” d’Arpizio said.
Luxury consumers around the globe are increasingly emerging into a class accumulating wealth at a younger age than their parents and grandparents. Now in their 30s and 40s, these consumers grew up with the internet and mobile technology, and are accustomed to using digital tools and social networks to educate themselves about brands, allowing these brands to establish emotional connections with them.
Analysts pointed to companies like Burberry, which have harnessed social media with hugely popular campaigns, including “The Art of the Trench,” a long-running blog that invites people to upload photos of themselves wearing the brand’s signature coat.
d’Arpizio said such experiments showed that the fashion world had already learned a lot about the transition from technology and lifestyle brands.
For example, “Apple has taught a big lesson to the luxury industry,” she says, “making it understand that people want a different kind of relationship with brands.”
E-commerce still represents a small fraction of luxury transactions – approximately 4.5 per cent last year, according to a survey published by the Italian trade association Altagamma – but it is growing fast. By the end of this year, that figure is expected to climb to seven per cent, and d’Arpizio says that by 2025, she expects that more than one fifth of all luxury purchases would be take place online. By then, even most transactions that are concluded in a physical store will be influenced by what people have experienced on a website, mobile app or through their social network.
“That changes completely the rules of the game,” she says.
Not only will the proliferation of digital and mobile sales and marketing channels continue to transform customer behaviour, it will also have a drastic effect on the life cycle of luxury brands.
“You no longer need a long heritage to be credible,” d’Arpizio said. “The ability to become relevant now is not a question of years, but of months.”
© The New York Times 2014