|
Luxury Trends for 2006 from the Luxury Institute
As we move through the third quarter of 2005, several trends that have been emerging for the past several years look ready to come to fruition. Here are nine trends in luxury to keep your eye on in 2006. I. The emergence of "friendly luxury" Whether accurately depicted or not, Oprah's experience with a certain French luxury brand underscores what many wealthy and affluent consumers of luxury brands already know. Many luxury firms, while delivering great products, treat even many of their best customers "sub-optimally" (to put it delicately). As product differentiation continues to blur, smart luxury goods and services providers will wake up to what Neiman Marcus, Bessemer Trust, Ritz-Carlton, Maybach, Giorgio Armani and the Mitchell family of Connecticut already know: the customer relationship is the most critical aspect of the business model. Look for many more luxury goods and services providers to finally begin to make customer service and customer relationship skills a top priority rather than empty buzzwords. Luxury firms that don't take the hint will find that hell hath no fury like a wealthy consumer scorned. II. "I'll take only two of those experiences, please." As wealthy Americans get richer, older, and wiser, they will continue to forego ownership of luxury assets, yet still get what they want "by the experience slice" through luxury membership programs. Many firms see fractional ownership as the big idea, but they are too cumbersome for wealthy people who want what they want when they want it. Membership programs are already popular in jets and luxury real estate. Look for innovators to proliferate in more categories such as yachts, ultra-luxury autos, vineyards, fine art, fine jewelry and watches. Also look for the decline of the traditional country club and golf club models to continue as the wealthy opt for membership clubs that offer truly inclusive affinity, not just snobbery and exclusion. III. "First class air travel" will finally mean something special again. The dreadful airline industry, which has always distinguished itself by seeing who can reach the bottom first, will finally begin to segment into first-class only, business-class-only, and economy-class only carriers. This will bring further strife to the "all bad things to all good people" airline industry, but from that tumult will emerge some rational segmentation and improved economics as outsiders infiltrate the industry with their pure-breed offerings, forcing dramatic changes that begin to focus on true value for the flying customer. Let's hope the next set of players on the field is more rational that the current one, and that they focus on value, not price. IV. "Time to prune the vines." More large luxury goods and services conglomerates will dramatically accelerate the pruning of business units or brands that are either not in the same customer segment, or that have failed to deliver long-term profits. Companies such as Saks are already doing so, and more international luxury goods leaders will do so as well. Even family-owned and family-controlled firms that carry losing businesses for the "sport of it all" will finally have to forego their hobbies and conduct hard-core triage on these "creative" losers. As more private equity firms, with their Darwinian business models, get into the luxury industry, the process will accelerate. V. The hand wringing over the production of luxury goods in China will become "so last year." The heart-wrenching and heated debates about luxury apparel and accessories production in China, and what it will do to the luxury industry's image, will come to an end, as many firms will set up shop in China. The top artisans of Europe will adapt and co-exist. Remember the electronics industry, where quality was everything? How about the auto industry? How about high-level skills such as programming and analytics outsourcing to India and China? Well, high-quality luxury goods are becoming ever easier to produce anywhere in the world, and especially in well-educated, hard-working, low-cost China. VI. The wealthy will rely more and more on "word-of-mouth" recommendations from wealthy peers in making luxury purchases. As wealthy consumers, who are the most well informed lot on the face of the Earth, realize that any sense of objectivity in the media and in industries such as financial services is rapidly eroding, they will look for objective, non-conflicted sources of information, and will even be willing to pay for that information. You can see it in wealth management, where entities such as the Institute for Private Investors protects the privacy of members and delivers objective and independent research and peer-to-peer knowledge to America's wealthiest families for a significant fee. VII. Wealthy women rule. Luxury providers in financial services, private jets, yachts, ultra-luxury autos, art, and other "major league" luxury goods and services will begin in earnest to recognize the vast buying power of wealthy women and begin to communicate with them on their own terms. This is driven by boomer women who have achieved independence, economic power, and who will outlive men, but it has an even more powerful female force of economic power coming right behind it as women vastly outperform men in academic achievement, career progress, and business start-ups in fields that have been the exclusive province of men. Watch out, boys! VIII. "At your (luxury) service." As wealthy consumers continue live full and active lives, look for branded luxury services to emerge from fragmented industries. Wealthy consumers will demand (and get) trusted, branded and proven luxury landscaping, maid, nanny, concierge medicine, interior design, and other specialist luxury services. They will no longer tolerate shoddy service, rip-offs and being at the mercy of unreliable suppliers. And, smart marketers and franchisers will organize these services into reliable, predictably priced industries for the wealthy. America is the land of the franchise, and luxury services will be no different. IX. "Exclusive and unique" gets redefined. As wealth and luxury proliferate, the wealthiest consumers will look for the next level of luxury in more unique products and services from the best providers that truly differentiate themselves. For example, the $70,000 to $90,000 luxury sedan doesn't cut it anymore. Look for the next generation of everyday car to be a model like the $120,000 Maserati Quattroporte or its cohorts, not Mercedes or BMW. |
