Luxury brands must navigate a ‘decade of change’
Driven by technology and consumer forces to remain competitive
18 June 2015: Global luxury brands should take advantage of evolving technological and consumer demands to help boost profits and remain competitive, according to the 2nd annual Global Powers of Luxury Goods report issued by Deloitte.
The report provides an outlook on the global economy; an analysis of merger and acquisition activity in the luxury sector; and a forward look on the changing nature of the luxury consumer – notably through the impact of technology. The world’s 100 largest luxury goods companies generated sales of US$214.2 billion through the end of the last fiscal year (fiscal years ended through June 2014) despite currency headwinds and intense technological disruption.
David White, Deloitte partner and retail industry leader, commented: “Several key aspects of the luxury sector will be unrecognisable in the next few years. The traveling luxury consumer will change the concept of national boundaries; millennial consumers will represent a significant percentage of sales volume in luxury; and the competitive forces driven by technology will continue to disrupt at a faster pace. As such, global luxury brands must overcome significant challenges in order to maximise engagement with their digitally-savvy, time-sensitive and socially aware consumers or risk being left behind.
“The luxury sector in Australia has seen significant growth in recent years. This has been fuelled in part by increasingly wealthier Australian consumers with a growing hunger for high end branded products, coupled with strong demand from international tourists visiting Australia, particularly from Asia. The recent devaluation in the Australian dollar has further encouraged tourist spending on luxury goods in Australia. Whilst a relatively small market globally, Australia continues to be attractive for luxury brand retailers due to our consumer wealth, spending patterns, and proximity to Asia.”
Key findings from the report include:
- Adoption of technology as a competitive advantage – luxury brands must keep up with evolving technology and refine their products, but without detracting from their unique core product offering and expertise. Industry executives identified reputational risk from social media as one of the highest risks in online marketing and distribution, according to Deloitte’s 2014 Swiss Watch report.1 “The luxury sector needs to continue to forge a strong relationship with an ever-increasing array of technologies, as it continues to influence the value chain. The legitimate concern about diluting a brand’s exclusivity in the broadly accessible online world requires brands to move carefully to ensure sustainable, long-term value creation,” said White.
- Engaging the millennial shopper – 58% of millennials currently go online to search for information on luxury items and 31% use social media for gathering information around discounts and promotions, compared with 10% for older luxury consumers.2 In order to effectively target millennials, (who are already emerging as leaders in technology and other industries and are expected to comprise 75% of the global workforce by 20253) luxury brands can benefit by fully understanding their buying habits and influencers.
- The global make up of luxury demand is changing – “The channels on which luxury consumers shop is constantly evolving, making it critical for companies to understand the changing desires, buying behaviours and channels of luxury consumers,” said White. Results from Deloitte’s Luxury Consumption among European High Earners 2014 survey of over 1,000 high-income earners across Europe illustrate that while traditional marketing channels such as magazines and store browsing continue to be relevant for consumers gathering information on new luxury brands, 45% of participants indicated that they search online for information.
1 Deloitte, The Deloitte Swiss Watch Industry Study 2014 Changing Times
2 Deloitte’s Luxury Consumption among European High Earners 2014 survey
3 Deloitte Touche Tohmatsu Limited’s (DTTL) 2014 third annual Millenial Survey
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