The new world order in luxury business
From fashion and accessories to jewellery and watches, luxury brands have been following each other in their ‘quest’ of the rich in emerging market. Over a decade ago, all eyes were on Russia, followed by Brazil and China. Few of the luxury companies who rushed, back then, to open as many stores as possible, not only in the capital cities, but also in so-called second and third tier cities, anticipated that several years later, the wealthy Russians, Brazilians and Chinese would increasingly travel abroad for luxury shopping and buy less and less locally.
The same ‘trend’ can be found in other important emerging luxury markets such as Turkey, Ukraine and Kazakhstan, despite the development of luxury retail locally, with most of the major international luxury brands operating at least one mono-brand store. Then, there is Indian, with more than half of the HNWIs making their luxury purchases abroad. But why do these local wealthy nationals flock abroad to spend their cash?
Luxury industry professionals have long insisted that pricing is one of the key factors (the same luxury branded products being more expensive locally than abroad). I beg to differ! I believe the two most important determining factors are lifestyle and relevance.
At least 2 thirds of the wealthy in these emerging markets are nouveau-riche who made their fortune in the past decade, hence their craving for a luxury lifestyle which they cannot find in their home countries. Beyond show-off and social status, luxury lifestyle is a 360 degree experience - arts, wellness, dining, sports. It is like membership to an exclusive club, i.e. the ‘leading women’ of Omega or the sports celebrities of Rolex or the equestrian world of Hermes.
All of these wealthy consumers want to be part of this world but in a relevant, genuine manner, which can only be achieved through experience. Riding a gondola in Venice, sipping a coffee in a Parisian street cafe, strolling through the architectural treasures of Florence or Rome, afternoon tea in London’s Mayfair, brunch in a bistro overlooking Central Park in New York or a concert at the Opera in Vienna are just some of the true luxury lifestyle experiences.
Relevance is also about purpose in a trip abroad and that could be: business investments (art, real estate), medical purposes (the best medical expertize in Germany), private banking (Switzerland), education (a master degree or primary and college education of children), wellbeing (the ‘therme’ of Italy). And shopping should come as a natural, integral part of such trips.
It has taken several years for the major luxury fashion and accessories brands to realize that their flagship stores should first shine in their home countries – Louis Vuitton is opening in Venice its second Maison flagship store in Italy (the first country in the world to have two such flagship concepts), La Rinascente luxury department store is adding Rome and Venice to its existing department store in Milan; Gucci and Bottega Veneta are opening in Milan, this summer, their largest flagship stores in the world; Prada is opening in Milan, at the end of this year, its largest store worldwide (over 5.000 sqm), Richemont Group has opened in Paris one of the largest luxury watches and jewellery stores worldwide etc.
Creating awareness and educating consumers from these emerging markets takes time and the answer is not retail exposure and travelling exhibitions demonstrating craftsmanship in a store. The same applies to all luxury sectors, whether hotels, fashion brands or watches brands. Adapting to the ‘new’ consumers also takes time, especially when it comes to service.
The fastest growing luxury consumer segments who travel abroad originate from: China, Mexico, Turkey, Kazakhstan, Malaysia, Chile, Colombia, Brazil. Presently. the biggest luxury shopping destinations, in terms of sales volumes are: Hong Kong, Miami, London, Milan, Paris, New York and Dubai. At the same time, Vienna, Venice, Istanbul, Barcelona are the fastest growing luxury shopping destinations worldwide, with the highest number of new luxury retail openings.