Experiences are the New Luxury Frontier: Emerging Market Opportunities at the Financial Times Business of Luxury Summit

Business of Luxury Summit

Photos Courtesy of Business of Luxury Summit

At first one might be drawn to think of luxury as the latest high-end handbag which comes at an astronomical price, but the newest frontier in luxury surrounds the experience. While the focus of the recent Financial Times’ annual Business of Luxury Summit was on the next emerging markets—covered nicely with good examples—the more impactful take-away was that “experiences” are where consumers are spending.

The importance of experience became especially clear with Sarah Quinlan’s presentation for MasterCard, which pointed out that fewer consumers are shopping in department stores, with high-end department stores doing worse than before. As a result, retailers are providing deeper discounts in-store to drive consumers back to bricks-and-mortar. Trends show that consumers are investing more in jewelry, not so much apparel, which is especially true in the US and Hong Kong. And while men may not enjoy shopping in-store, statistics show that they are spending more on apparel. MasterCard has seen a dramatic shift in how people display wealth: once seen in products and possessions, popularity is now shifting to experiences. MasterCard finds that the luxury consumer is not price sensitive, but the experience or product needs to be unique and Millennials especially want greater experiences. Travel is the number one luxury that MasterCard reports people spend money on, with the US data showing that airlines and lodging are the top categories for spend over the past few months.

Stuart Foster, vice president of marketing for Hilton Worldwide Luxury Brands, demonstrated this trend to good effect, reflecting that the number one use of discretionary income is on travel, which has grown 14 percent annually for the past 14 years. In essence, his group is selling an experience, as its product expires every night that it isn’t being used. Waldorf Astoria’s vision is to be the fastest growing, most innovative luxury hotel company in the world; it is a rate-driven, not occupancy-driven, business. Waldorf Astoria is all about experiential luxury which needs to offer inspirational environments that deliver a true Waldorf service experience, whereby genuine, authentic service drives revenue, which is done through a personal concierge who helps the guest with their stay (and drives incremental spending during the stay), and authentic moments, which are the memories they take home with them. This is where the experience starts.

Business of Luxury Summit

Conrad Hotels & Resorts is all about globally-inspired, smart luxury and intuitive service with infinite connections to arts and culture. It delivers a world of style in a modern, contemporary way, which thereby provides the luxury of being oneself. Conrad Concierge is also available—a smartphone app which gives guests control of their services before their arrival, so that arrangements may be in place even before they check in.

On the entertainment front, Alejandro Ramirez Magana, CEO of the Mexican movie powerhouse Cinepolis, demonstrated how his company is leading the way in providing new ways of experiencing film, starting with the launch of luxury cinemas in 1999, which offers a movie-going experience much like that in a first class airplane cabin. They also introduced IMAX, and now 4DX technology which comes at a 200 percent premium. In 2014 they plan to introduce special screens just for children. Even in the highly-developed US market, the Cinepolis in Los Angeles is the number one performing eight-plex in the United States.

Lane Crawford’s president, Andrew Keith, also demonstrated the importance of experience at China’s first and only luxury department store. It starts with stores that are reflective of the local community, and for online customers, it allows free returns coupled with same-day delivery. But in order to truly develop a unique experience, it is important to build a strong talent pipeline who are the ones delivering the experiences. Lane Crawford offers its employees over 2,320 courses per year, all devoted to developing its Chinese talent base.

Business of Luxury Summit

Similarly, Bottega Veneta has found a way to engage its staff through an experience quite unlike any other European brand operating in China. Bottega Veneta’s CEO, Marco Bizzarri, outlined the atelier that it built in Vicenza where it brings its Chinese staff. This 55,000 square foot facility blends the history of the 18th Century with modern technology, all in a LEED Platinum level location. This is all done to create a personal experience for the Chinese customer.

And, in looking at the declared topic of the Summit—emerging markets, in an interview with Philip Guarino, co-founder of Emerging Market Luxury Advisors, he notes, "Emerging markets have been the key driver of growth for luxury brands over the past few years and this phenomenon is likely here to stay.” Interestingly, he goes on to say that, “in order to reach emerging market consumers they must adopt a more strategic and global approach than simply opening stores in Beijing or São Paulo or replicating their European or American expansion strategies. The consumer may be Chinese or Brazilian but may shop in New York or Paris.” He recommends that rather than targeting a geography, brands should target a demographic, and maintaining a relationship across borders.

Business of Luxury Summit

Along these lines, Christian Louboutin started with one store in Paris, and now has 90. He does few studies when launching a new store—instead he goes to the place, looks around and listens to how he feels. Very few analytical studies are done. Currently he is producing 850,000 shoes a year. He looks at the collection and selects parts for different markets. As for creative influences, since he was 15 years old he has been obsessed with show girls—and he doesn’t follow the fashion world, for he sees fashion as one thing, but style to be an entirely different, and more important, matter. He noted that when entering a new market, in many cases the sales person’s salary might well be the price of the shoe being sold, and this presents a difficult position for all involved. While he doesn’t have a solution to the issue, it is one people in the industry need to be aware of.

In an exclusive interview with JustLuxe, Burak Celet, CEO of the Turkish retailing powerhouse DESA, outlined some challenges that Western brands have in entering the Turkish market. “The first thing to consider is that Turkey has a highly trained and skilled production facility for most any luxury good, but especially leather goods. Therefore, the counterfeits that are produced in Turkey are of the highest quality.” The local police force is very good at cracking down on the counterfeits, but in order for them to protect a brand, the brand needs to have a local presence & representation. According to Celet, “The other area a brand has to pay close attention to is finding the right local partner. This will take time and it is vital that a brand finds one that matches its DNA—much like finding a marriage partner.” Coach’s recent experience in Turkey re-iterates the importance of this – as they opened an exquisite flagship store, but didn’t sufficiently understand the needs of the local market, weren’t prepared for the market volatility, and then expected their local partner to take the brunt of the losses. They exited the market after a brief showing in Turkey.

There are certainly opportunities in new geographic locations for luxury consumption, but the new frontier for luxury may well not be in chasing the latest developing market, but instead in creating opportunities to bring life-enhancing opportunities to consumers—wherever they may live or happen to travel.&l

Steven Fischer

I see a world where the application of Image, Style & Design (ISD) is a way for organizations to connect with individuals in an emotional and deeper, more meaningful way, creating unrealized value for the organization. Image reflects both one’s self-image, as well as the image of organizations with which people interact. Style can be considered the manner in which an individual or organization r...(Read More)

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