Luxury Institute’s 2019 Luxury Trends From The Global Luxury Expert Network (GLEN)

To generate the trends likely to affect the luxury industry in 2019, the Luxury Institute recently initiated a crowdsourcing project with its global consulting unit, the Global Luxury Expert Network (GLEN). Collectively, Luxury Institute is comprised of the world’s largest network of elite, on-demand luxury consultants who provide real-time, effective solutions for luxury clients at a fraction of the cost of traditional consulting firms. Below are seven key trends that Luxury Institute’s elite luxury expert network predicts will help reshape the luxury industry in 2019.

1. Big luxury brands learn to crave the challenge of alpha growth

Alpha growth is a Wall Street metric that measures a large company’s ability to grow faster than its competitors, usually in high double digits, for a sustained period of time. Under Marco Bizzarri, Gucci has delivered meteoric alpha growth consistently throughout the past three years. Remarkably, Marco achieved similar results over three years while at Bottega Veneta, prior to joining Gucci, thus, demonstrating that alpha is a skill, not luck. Luxury alpha growth is achieved by executing three bold moves, according to Luxury Institute CEO Milton Pedraza. The first is to conduct an honest, rigorous, fear-free global exercise to confront the harsh reality of the self-inflicted wounds that are choking the brand’s performance. This exercise leads to radical reinvention that helps the brand to permeate an emotionally intelligent, highly adaptive, safe-to-fail culture that unleashes employee creativity. The second move is to tear down the stifling insular walls and extend the enterprise outward into uncharted territory to foster test-and-learn co-creation and collaboration with consumers, influencers, charities, artists and other members of the brand’s global ecosystem. The third move is to leverage technology, data, analytics, and A.I. to genuinely, boldly, and effectively communicate the brand’s story and engage in open dialogue with the entire ecosystem. This creates a virtuous cycle of positive feedback loops. In 2019, many more luxury management teams will be inspired to break the traditional rules of luxury and gear up for alpha growth. There are no guarantees, but it is far better to go for alpha than chase small incremental improvements in a world of high-risk, exponential and accelerating change.

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2. Legacy luxury brands re-examine the value of brand heritage and history

Brand heritage and history are not the key factors that they used to be. Luxury brands used to be able to boast that they had been established over a hundred years ago, and beyond. That legacy earned a brand premium status and premium pricing over less pedigreed offerings. Today, Millennials, Generation-X, and even Boomers, see brand heritage as a far less valuable luxury brand attribute. In the Luxury Institute’s annual 2019 State of the Luxury Industry survey, conducted across seven major markets (USA, UK, France, Italy, Germany, Japan and China) with affluent consumers, brand heritage and history rank sixth to superior quality, superior customer service, superior design, superior craftsmanship, and exclusive products. A brand’s historical credentials have been ratcheting down in relevancy over recent years. In today’s world, while 41% of early-stage Chinese affluent consumers see brand heritage as a defining element of luxury, only 28% of seasoned Americans agree. In fact, to add insult to injury, only a quarter of French and Italian connoisseur consumers agree. The harsh reality is that luxury consumers really only care about the brands that have created value for them in the last 24 hours. Luxury brands that continue to lean heavily on heritage without radically reinventing themselves for relevancy are destined to be discarded, especially by a rapidly growing global affluent Millennial population.

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3. The emergence of new luxury, far beyond luxury

While fashion luxury goods and accessories categories capture all the headlines today, new, radically innovative categories of the future are emerging far beyond the noise. Luxury Institute research and new client requests indicate that innovative start-ups are vying to capture the imaginations of totally bored billionaire and centi-millionaire men and women, especially those from Silicon Valley. Research that the Luxury Institute has conducted with billionaires through its Global Luxury Expert Network (GLEN) finds that the wealthiest consumers are intrigued by new categories of luxury such as life extension biotechnology, hyper-experiential home virtual reality devices, neuro-scientific performance enhancers, health care robotics, and a multitude of travel experiences that defy gravity. Wealthy individuals are no longer impressed by what they view as mundane luxury goods and services. They crave far out solutions and experiences that used to be the lore of science fiction. Look for a stream of new luxury categories to emerge in 2019 as accelerating exponential sciences and technologies converge into new entrepreneurial luxury offerings.

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4. Luxury begins to pivot from product innovation and technology innovation to people innovation

The luxury goods and services industry historically has invested heavily in product development. Major brands are now pouring billions into data, analytics, A.I. and other technology innovations in an effort to remain relevant. Unfortunately, most luxury and premium brands are borrowing from the playbook of mass companies and using these enhancements primarily to determine how fast they can automate, and how fast they can eliminate jobs. The critical human element that defines luxury is being ignored to the maximum. The human resources training and development budgets of luxury brands are either miniscule or are completely wasted on Industrial Age training methods led by human resources executives who have been duped by tech companies into transferring outdated, robotic, training methods online, or onto apps, and calling that process disruption. Simply stroll into the stores, dealerships, and branches of most luxury goods and services brands, reach out to their call centers, or contact them online, to experience the mediocrity and dehumanization of luxury front-line staff. All the investment in technology efficiency has had zero impact on the relationship building skills that drive effectiveness and lead to dramatic sales growth. A treasure trove of emotional intelligence research is being wasted. Yet, all is not lost. Brands such as Moda Operandi, Fusion Academy, and Hello Alfred are leading the way in re-humanizing luxury across several goods and services categories. In 2019, look for luxury brands with enlightened leaders to see technology for the commodity that it is, and begin investing in people innovation, realizing, at last, that it is, by far, the biggest ROI opportunity in luxury in the age of A.I.

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5. Affluent consumers continue to lose trust in Facebook and other social media brands

In the Luxury Institute’s 2018 Emotionally Intelligent Brand Index survey on technology brands, Facebook was rated lowest for emotional intelligence, according to affluent consumers. One in five affluent consumers report actively discouraging friends, family or other people they care about from using Facebook. If one reads any of the coverage on Facebook, which documents the endless stream of actions that put its users at risk, one can understand why adult affluent consumers, who have so much to lose from being hacked, or having their privacy violated, are abandoning Facebook. Further, according to Pew research, it is not only affluent adults who have lower participation on Facebook. While teens in households with incomes of less than $30,000 use Facebook at the rate of 70%, teens in households with incomes of $75,000 or more use Facebook at a far lower rate of 36%. It does not inspire confidence in their wealthy peers that rich Silicon Valley parents are, according to The New York Times, drastically limiting the screen time and social media use of their own children and teenagers, and having nannies confiscate their kids’ cell phones. Even if they don’t work or live in Silicon Valley, affluent American consumers now know how much risk they, and their children, face inside unhinged social media sites. Look for consumers to continue to abandon, or curtail participation, in the most egregious social media sites in 2019. Expect the savviest luxury advertisers to follow suit.

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6. The local luxury consumer-to-consumer sales channel takes off

Most luxury goods and services brands think of their distribution channel options as comprised of three choices. They can go the wholesale/third party approach, develop their own retail/sale force channel, or they can sell via e-commerce. Now, new simple, effective app technologies such as Replika Software and others, are facilitating the development of the fourth channel, a network of devoted brand customers who become local influencers and sell directly to friends and family through apps that connect to the brand’s website. This approach, within ethical boundaries, is far more personal and effective than using celebrity influencers who are being perceived more, and more, like mercenaries, who buy fake followers, and are not true brand users or advocates. Look for this consumer-to-consumer channel to emerge rapidly in several luxury goods and services categories in 2019.

7. From omnichannel luxury to omni-personal luxury

Today, customer segments and channels have become the standard and easy way for luxury brands and their partners to attempt to categorize and interact with consumers. Unfortunately, the current customer interaction efforts are executed with the static mind of a software engineer instead of the mind of a wonderfully complex human being. Customers, especially Millennials, who understand what technology enhanced with emotional intelligence can do, think in terms of individualized, seamless brand relationships akin to the relationships they have with friends and family members. The Doneger Group calls the new emerging way of interacting with consumers “omni-personal.” This means seamless relationships comprised of respectful non-linear touches that make sense to the customer and add measurable value. Look for enlightened luxury executives to focus diligently on the real-time, adaptive orchestration of data, algorithms, devices and people to design and deploy genuine omni-personal experiences that lead to long-term client relationships and dramatic sales gains.

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