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David Austin sat down with Contagious Magazine to discuss how the luxury sector continues to experience change.
The luxury sector continues to experience change. With a heightened sense of disruption across the market, our Managing Partner, Global Head of Strategy, David Austin, sat down with Contagious Magazine to help make sense of it all. How can brands navigate these uncertain times? Where do the opportunities lie?
Hot on the heels of a prosperous growth in the pandemic, coined as ‘the roaring 20s’ by LVMH, luxury is now slowing down and in many cases, seeing decline. What’s more, the luxury audience is having its biggest evolution in decades as the world enters into the ‘Greatest Wealth Transfer in history’, as assets increasingly get passed down to younger generations.
Global management consulting firm Bain states that affluent millennials and gen z consumers will make up 70% of the luxury market by 2025 and 130% of its growth.
Contagious: What does the transfer mean for brands?
David Austin:
We are at a pivotal time for brands to start to turn their attention towards younger audiences. There must be a balance. Brands need to recognise that the bulk of revenue is still going to come from older audiences with more disposable income, while also appealing to this next generation of consumer.
It’s important to consider that 40% of luxury sales are made up of the top 2% of customers.
How do brands unlock the top 2%?
The aspirational consumer is great and it’s driving growth in the market, but what does that do for the top 2% that make up 40% of your sales? Do the top 2% want to be carrying the same handbag that the 98% are? No. And that’s what is driving greater exclusivity seen by the likes of Hermès limiting the sales of its top-tier goods. It is protecting the brand. Afterall, luxury is driven by scarcity.
Top, ultra high net worth individuals (UHNWI) need to be treated in a different way to mass luxury audiences, they need that personal touch. They need greater exclusivity.
My advice? Brands need to create a sense of elitism within. Discreetly create the sense that there is a level you can unlock if you are a certain type of customer. Invite them to private dinners or experiences with tastemakers and the elite. We at Camron have been working with Design Miami/ to organise in-person activations for the UHNWI collectors.
Another example is the exclusivity of the global Gucci Salon concept – stores accessible only by appointment. Let the audiences feel the benefit of being in your top 2%.
That feels quite individualised, is there a broader way of reaching this audience?
More than ever, the choice of how the ultra-wealthy spends their millions has expanded. This means we really have to find ways to meet raised expectations while cutting through the market. Take luxury resort brand One&Only as an example. To launch its new urban retreat in the heart of Dubai, we found a way to mix ultra exclusivity with sophisticated extravagance, while having mass reach. The location launched with a star-studded three-day event with performances from JLo, Mark Ronson, and Idris Elba.
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