It has been a busy two decades for the UK’s fashion industry. Over the past 20 years, it has become one of the world’s most internationalised and fiercely competitive retail sectors, while structural changes have changed the way fashion retailers do business.
The number of luxury consumers worldwide has more than tripled over the past 20 years, from roughly 90 million consumers in 1995 to 330 million at the end of 2013, according to an extensive study of 10,000 luxury consumers, conducted by Bain & Company in collaboration with Redburn Partners, Europe’s largest independent equities broker, and Millward Brown, a leading consumer research agency. Their report, “Lens on the Worldwide Luxury Consumer,” was released at a press conference in Milan.
According to the report, a net total of 10 million additional consumers yearly enter the luxury market to reach an estimated 400 million luxury consumers worldwide by 2020, and an estimated 500 million luxury consumers by 2030. In its analysis of approximately 10,000 luxury consumers, the report finds significant differences within the global luxury market and its consumer base, which is shifting from its historically homogenous base of affluent consumers worldwide to a broader and highly heterogeneous class of luxury shoppers. “The race is on to capture an explosion in worldwide luxury consumer growth,” said Claudia D’Arpizio, Bain partner in Milan and lead author of the report. “But the luxury consumer of the future will become increasingly heterogeneous and luxury brands and operators need an immediate upgrade to their consumer strategies to recognize and react to this growing diversity, else risk falling behind.”
Within luxury’s current 330 million consumer base, 55% (180 million) shift between luxury and merely “premium” purchases, including products such as designer second lines, beauty products and small accessories. This group comprises approximately 10% of global spending, purchasing an average of €150 per capita annually. The remaining 45% (150 million) represent “true luxury consumers” who consistently dedicate part of their discretionary spending to personal luxury products of various natures, usage occasions and price points, and make up roughly 90% of global spending, purchasing an average of €1,250 per capita annually. Additionally, the top 10% of spenders (15 million) within this group capture over half of its spending.
The luxury market is currently in slowdown and big brands such as Prada, Chanel, Louis Vuitton, Hermes, Mulberry and Burberry are feeling the pinch. Slow economic growth and political instability in China, Russia and the Middle East has led to a clampdown in spending which in turn has had a catastrophic effect on luxury goods firms. Consultants Bain and Company were recently quoted as saying that this slowdown will put the brakes on the global luxury goods sector for some time, with many brands reigning in any rapid expansion plans.
Retail is getting complicated. It is no longer a case of simply stocking shelves with desirable goods and waiting for shoppers to flock through the doors. Rapid developments in technology are changing the game.
Modern-day retailers have to make their goods available via websites and mobile apps, run efficient e-commerce operations alongside – or instead of – bricks and mortar stores, deliver goods to the consumer’s front door and be prepared to manage a backlash on social media if things go wrong.
Consumers are becoming more demanding and less willing to tolerate failure. They want a seamless shopping experience however they interact with a retailer. They may check out a store’s products on their mobile on the bus back from work, then wish to continue on the same page on their tablet or PC at home. That requires considerable technical prowess in managing the customer journey on different devices
Personalisation just got a whole lot smarter thanks to a new initiative from Burberry, which launching an innovation within technology as part of its London Fashion Week 2012. The British heritage brand has embedding digital chips that will unlock bespoke content in its new season’s coats and bags in a bid to entice consumers to pre-order them immediately after they hit the catwalk. RFID tags in clothing activate changing room mirrors when customers try a garment. The mirrors show a video about the making of the piece and its time on the catwalk.
As you can see from the video above, it’s designed to work with store tech only. To get the same experience on a customer’s phone requires NFC and a card that comes with the product when purchased.
I interviewed the CEO of Acumentive Limited a RFID specialist company, on the subject matter, Martin Kruse, gave his opinion; ‘RFID technologies have been around and capable for gathering ID/location much longer than people realise. For logistics/supply chain and store inventory, as it’s a technology to automate tasks and improve accuracy and productivity, its been quite readily understood and adopted as it’s a data feed into existing systems. For retailing, the limited use is more around creative new applications and ideas to use RFID – with mobile device capabilities really necessary to deliver a shopping enhancement. It’s been possible to automatically identify a specific garment in a booth using an RFID tag for a decade, but identifying a specific mobile phone/customer and their preferences and linking in real-time store stock to recommend alternatives and additions that are actually available there and then is a more recent systems capability. And as for through-life benefits to the customer, such as building in an serialised identify for life and providing value add through the life of the product is something still to come. RFID actually is part of a suite of Auto-ID technologies – including Bluetooth tags, NFC and Locationing which together can enable a massive improvement to the shopping experience and the retailers ability to influence customer choice and satisfaction. I think the big trend is going to be doing what Acumentive has been doing for a decade now – focusing on how you get an improved, creative solution using multiple technologies working seemless together, using Bluetooth, NFC and RFID and mobile technologies together, and as this volume of data increases making sure we can see the wood for the trees and pick out the points that add value’
So with all this smart personalisation in luxury retail, technology again demonstrates how luxury consumers connect with the brand, the full range of products, with the broader fan base using social media and increase revenues by multiple sales to each consumer. The brand narrative is that consumers want to be part of and believe it’s worth paying a premium for goods. Forward thinking, luxury brands still need to establish themselves as a premium and valued brand within the luxury industry.