The future of luxury
The second edition of arab luxury world opened with a plenary session titled ‘The Future of Luxury’.
Focused on the disruptive impact of digital technologies on the luxury industry, the session also took stock of the market’s new reality in which China, one of the world’s biggest consumers, is facing both an economic slowdown as well as a crackdown on corruption, which have had a direct bearing on the industry.
“It has created a different dynamic altogether,” said David Friedman, President, Wealth-X.
The luxury industry has been excessively dependent on the Chinese consumer, which has proved to be risky for brands, said Isabelle Harvie-Watt, Global CEO of Havas LuxHub.
“As the Chinese consumer moves, business moves with them,” she said, adding that, while the huge growth China witnessed in the last 10-15 years meant that brands didn’t have to worry – thus far – about sustaining growth, going forward, they will have to be more proactive in embracing concepts like digital innovation.
Technology, the panel agrees, is rapidly changing the face of the luxury industry. “The thumb rule was, it took 30 years to build a luxury brand. Now with the arrival of the internet, it takes 18 months,” said Harvie-Watt.
The internet has also made massive quantities of consumer data available to brands, which they must leverage to engage more effectively with clients, the panel feels.
“Today, brands don’t share data with one another. It is completely siloed,” said Friedman. “There needs to be a paradigm shift in the way information is shared at a global retail and institutional level,” he added, saying that a HNWI client shopping at a brand’s boutique in Paris will expect a comparable experience in the same brand’s Las Vegas store as well, for which it is important to know one’s customer.
Brands today segment their clients based on how much they spend, rather than how much they can spend, Friedman adds, indicating that there needs to be a paradigm shift in this approach.
While all the panelists underscored the importance of technology, there was also broad agreement that it cannot replace the physical experience.
“You cannot, for instance, do an online test drive, which is an important selling tool in the automotive industry,” said Juergen Schmitz, Managing Director at Infiniti Middle East. “If you do decide to spend hundreds of thousands of dirhams, you want to feel the quality, touch the leather, smell the car. All of this cannot be delivered online.”
The consensus was that, while the internet can be a great tool to inform and prepare a consumer for a luxury purchase, it need not necessarily be the final medium of sale.
“Seventy-six percent of customers prefer to buy from physical boutiques, but 70 percent of them plan their purchases online first,” said Harvie-Watt.
One-on-one relationships with clients that are built on a legacy of trust will thus remain critical to selling luxury, “even while online and social media platforms begin to play a bigger role,” said Mohammed Seddiqi, Chief Commercial Officer at Seddiqi Holding, one of the Middle East’s biggest distributors of luxury Swiss watches.