As the world ground to a halt in 2020, the pandemic proved the fragility of a luxury, hospitality and sector that’s reliant on physical spaces and the specific individuals who seek out these places, whether Chinese tourists heading for heritage stores, souvenir-seekers or experience-chasing itinerant luxurians.
Indeed, 80% of luxury CEOs say the coronavirus crisis has caused a decline of up to 40% on their top line, according to a report from McKinsey & Co, the Italian Fashion Chamber and Pitti Immagine. Meanwhile, £37.6bn ($49.5bn, €41.9bn) has been wiped from the global duty-free market in 2020 alone, a 68.4% drop compared with the pre-crisis market (source: GlobalData).
Yet, with luxury brands, hotels and hospitality spaces beginning to re-open, they are also facing a new challenge: how to exist in an ever-more virtual world, where being a heritage house or doing one thing exceptionally well is no longer enough.
‘The coronavirus crisis will force the industry to think more creatively and innovate even faster to meet a host of new consumer demands and channel constraints,’ says Claudia D’Arpizio, a partner and luxury specialist at Bain & Co. ‘There will be a recovery for the luxury market but the industry will be profoundly transformed.’
This transformation will be powered by the unfurling of a digital decade for luxury. During the Covid-19 crisis, Bain & Co reports that luxury purchases made online have increased globally, with digital sales forecast to represent 30% of the market by 2025.
More imminently, luxury brands can start to move away from their reliance on physical, tactile and human-to-human moments, as the pandemic has shown that luxury can exist in other realms entirely, providing anytime attainment, anywhere in the world.
Next, we can anticipate luxury brands, goods and services will adapt and follow customers in their daily routines. Travel brands will pre-empt luxurians’ health needs before each trip, aspirational affluents will shop via virtual malls, while others will build sustainable, high-spec homes at the click of a mouse.
But a more conscious global mindset is also emerging among luxury consumers as they recognise the impact of their pre-Covid behaviour. ‘The virus, I think, can be seen as a representation of our conscience,’ says trend forecaster Li Edelkoort. ‘It teaches us to slow down and to change our ways.’
Banking group deVere reports that, since the beginning of May 2020, 26% of its clients have sought environmental, social and governance (ESG) investments. As Nigel Green, CEO and founder of deVere, explains: ‘The global pandemic has brought into laser-like focus how the health of our planet affects human health which, in turn, affects the way we all live and work.’
In terms of fashion, a recent McKinsey & Co survey reveals that 15% of consumers in the US and Europe expect to buy more ecologically and socially sustainable clothing in future. The global pandemic has thus brought into laser-like focus how the health of our planet affects human health.
A similar outlook is emerging in Asia. Research compiled in July 2020 by Spark Ideas and Gusto Luxe reveals Shanghainese luxurians are making more conservative purchases and sustainable attitudes are in the ascendant.
Safe-haven spending
While ESG investments have been on the agenda for some wealthy investors, others have been safeguarding their wealth by spending on longevity-led goods and commodities – even citizenship. This has been particularly notable in the rising gold price – the precious metal being a traditional safe haven – which in early August 2020 set a new record high of £1,561 ($2,045, €1,738) an ounce, having risen by 30% this year (source: LBMA).
‘Clients are investing in lasting, quiet luxury pieces, and there is an increased interest in homewares,’ notes Lisa Aiken, fashion and buying director at Moda Operandi, a platform that sells designs direct from the runway. ‘These types of ‘forever’ purchases show that our clients are looking for pieces that will endure.’
Safe havens are also taking the form of citizenship. Enquiries for citizenship-by-investment jumped 40% between January and April 2020, according to residency advisory firm Henley & with investors paying six-figure sums in exchange for a passport for nations such as Thailand, New Zealand, Portugal, Greece and Malta.
Homebody hospitality
In a recent McKinsey & Co of people in 45 countries, more than 70% said they don’t yet feel comfortable resuming their normal out-of-home activities, with large events and air travel last on the list of priorities.
For luxurians tentatively exploring travel and hospitality in the inter- Covid period, this is playing out through an expectation of brands to support them through the provision of socially distanced services and experiences. In the US, Bergdorf Goodman is now offering same-day delivery to customers in Manhattan – and also to those spending their summers seeking refuge in the Hamptons.
In a study of 45 countries, more than 70% of people don’t yet feel comfortable resuming their normal out-of-home activities. In India, hotel operators such as The Oberoi, ITC and The Lalit are working with home delivery apps to bring five-star fine dining to local luxurians’ homes.
"We have even started Ayurvedic consultations and Salon at Home experiences for our guests to ensure we reach them if they can’t come to us." Gaurav Mishra - General Manager of Marketing & Communications at The Lalit.
Phygital Storefronts
With malls and destination retail going dark during lockdowns around the world, bricks-and-mortar spaces have found a new purpose as providers of phygital shopping experiences. Such pandemic changes come at a time when Bain & Co forecasts the global network of physical luxury stores will peak in 2020, followed by disruption from a slew of new retail platforms and approaches. ‘Customers will be highly receptive to new value propositions and business models that challenge the rules of the game,’ Federica Levato, a partner at Bain & Co.
Seen in practice, Gucci built faux stores in locations including New York, Tokyo and Sydney – complete with cameras and tv-style lighting – for remote clienteling via Gucci Live, a new video service that connects store staff with consumers via mobile or laptop – reportedly the first of its kind among luxury brands.
The luxury sector is responding to the increase in hyper-connected, globally dispersed luxury consumers through omnipresent brand initiatives that bring their goods, services and brand DNAs even closer to today’s audiences.
Digital DNA
With more luxury transactions taking place online – luxury conglomerate Kering Group, for example, reports that in the first half of 2020 its online sales rose by 42% compared with the same period in 2019 – brands are developing their digital platforms to become as central to their storytelling as bricks-and-mortar spaces.
Translating their DNA into the digital realm, they are realising that technology can convey and elevate
the customer experience. ‘Luxury firms must… treat technology as another medium with which to paint a masterpiece,’ says Alex Levin, founding partner of New York- based technology studio L+R
The Dior Virtual Beauty store developed with Obsess mimics the look and feel of its Champs-Élysées store to cater for audiences not able to reach Paris. Visual cues communicate the mood and aesthetic of Dior beauty products, while evocative short films digitally portray the notes of its perfumes.
Elsewhere, Kanye West and Nick Knight’s immersive retail platform for Yeezy Supply – a popular brand
among Generation Z luxurians – builds on West’s inclusive, one world vision. The interactive site features citizen models, including a firefighter and a schoolteacher, who show how items can be styled and have their back stories published on the site.
V-commerce
Alongside growing online sales, as a result of Covid-19 nearly 28% of consumers expect to buy less in physical stores – an attitude that’s higher among Generation Z and Millennials, according to TFL research.
Combined with the potential of Digital DNA, a new retail opportunity is emerging: that of V-commerce,
short for virtual commerce. Presenting luxury goods in an immaterial fashion V-commerce allows brands to reach global, aspirational luxurians, empowering curious consumers to browse, try on and snap up goods.
‘With virtual fashion, luxury can be democratised – it can be for the 99%,’ says Andy Ku, creator of ADA a game that provides access to a simulated luxury lifestyle. Comprising chic digital spaces alongside virtual garments from brands such as Dior, Prada and Marine Serre, the game upholds the tenet of scarcity by offering a limited number of brands’ virtual designs on a play-incentivised, first-come, first-served basis – even when they cost only a few dollars to buy.
Search engines and social platforms can also offer novel V-commerce experiences for the masses. Shoppers using Burberry and Google Search’s AR shopping tool can examine a luxury product – for example, a pair of sneakers or a handbag – as though it’s sitting before them, with links to buy if they wish.
On Snapchat, Gucci offers AR sneaker try-on, encouraging users to snap and share styles with their
followers. ‘The entire industry knows that augmented reality try-on is going to be incredibly important to the future of commerce,’ Says Selby Drummond, Snapchat’s head of fashion and beauty.
Cross-reality design
Inspired by luxury’s increasingly digital existence, the design process for fashion and homeware is reversing as labels take cues from the glossy, synthetic nature of the virtual world imbuing these traits into real-life designs.
As a result, what is considered ‘luxury’ is being challenged, not only at the design stage but also in the physical manifestation of the end product. Brazilian label Amaro is turning digital garments created by its audience in the game Animal Crossing into a real-life capsule collection.
Showcased across a dedicated Instagram page the brand is giving the designers vouchers as a reward for their efforts ‘The lines between online and offline are increasingly blurred – that is why we are always proposing fashion-technological launches,’ explains Luciana Cardoso, the brand’s creative director.
Private Procurement
As access abounds, luxury brands’ omnipresence across multiple platforms and apps is fuelling a new attitude to communications and customer service – moving away from a one-for-all approach to nuanced, individual connections through dedicated brand interactions.
At present, affluent Chinese consumers are most likely (37%) to receive frequent personalised offers from luxury sales people, while those in the US are least likely to, at 9%, according to the Luxury Institute. Known as ‘private traffic' in China, this type of customer service for micro-communities – in which brands market to customers via moderated chat groups, purpose-built brand apps or via WeChat and QQ – is set to scale globally. In China, 37% of consumers receive frequent personalised offers from luxury sales people, versus 9% of shoppers in US.
Building on this kind of personalised feedback, private traffic like this bolsters loyalty, while also earning
brands valuable insight into purchasing behaviours and wants. Crucially, it also minimises brands’ dependency and management of third-party social platforms. For example, Burberry’s R Message platform has come to the fore during the pandemic; recognising if a customer has been viewing its website, store associates will be prompted to message that client to begin a private interaction.
Luxury as a service
But at a time when 77% of luxury consumers would buy a product or service simply for the experience of being part of the community built around it, according to the Global Web Index, brands are beginning to offer Luxury as a Service through membership.
Private spaces and platforms are emerging that offer access to people, products and rare experiences – maintaining an aura of super-exclusivity in the era of luxury omnipresence. ‘This is the age of whisper communication: micro-communities, private clubs and intimate settings,’ explains brand strategist Ana Andjelic.
In Los Angeles, Chateau Marmont has transformed itself into a members-only hotel, with access granted by owning shares in the property. In exchange for their investment, members can use private dining areas, have a personal butler and have the freedom to leave their belongings during extended stays.
Elsewhere, app-based memberships unite users’ shared interests to give them access to typically off-limits individuals and experiences. Whispers by Rolls Royce provides its clients with secure, private connections to other like-minded people and business leaders – including the company’s board members.
Users can also access curated experiences such as photography and abstract painting courses and virtual performances by renowned theatre groups. ‘It is a digital gateway to a fascinating world beyond… tailored to meet the demands and tastes of our eclectic and highly valued community of clients,’ says Torsten Müller-Ötvös, CEO of Rolls-Royce Motor Cars.
Holistic Hospitality
In order to retain year-round relevance for clients, travel and hospitality brands are expanding beyond the temporality of holidays with omnipresent pre- and post-travel services.
Realising the potential to instil confidence and provide ongoing support for Covid-cautious travellers, premium airlines such as Emirates are offering free, loyalty-bolstering Covid Insurance: medical expenses and quarantine costs, up to a specified limit, are covered for customers who contract Covid-19 within 31 days of their flight.
Similarly, luxury hotel group Montage International and One Medical offer round-the-clock telehealth services for guests during their stay – and for one month after returning home, even helping with care plans if they fall ill. Holistic Hospitality isn’t just a pandemic priority, however – it can also help to bolster loyalty and brand sentiment.
Hawaii’s Mauna Lani Lahotel sends guests booking its Ocean View suites a special-edition Arlo Skye
carry-on suitcase ahead of their trip, as well as invitations to a guided stand-up paddleboard excursion.
"The idea of shipping it to guests in advance raises the bar of what a pre-arrival experience should look like." Mayur Bhatnagar - Co-founder and CEO of Arlo Skye.
Finally, in the decades ahead, as we’re discovering at The Future Laboratory brands will make themselves indispensable in luxurians’ everyday existence through new approaches to travel, lifestyle curation and customisable living.
Building on Luxury as a Service, tomorrow’s brands will evolve from purveyors of goods to curators and taste-makers, becoming omnipresent in previously overlooked areas of luxurians’ everyday lives.
Brands will also think more creatively about their output in order to speak to customers beyond products alone. As seen with Bottega Veneta’s online residencies they will serve film music and recipe inspiration from emerging artists, creatives and the brand’s collaborators during lockdown.
Brand communications will likewise evolve to let the audience enjoy them as they wish. Loewe’s Shoes in a Box concept dreamed up by creative director Jonathan Anderson for its spring 2021 menswear collection, featured a build-it-yourself set, fabric swatches and even a pattern to create a garment at home, bolstered by 24 hours of digital content.
"I wanted to present something that allowed people to experience the concept in real time, without travelling or staying up all night… [by] covering all time zones that truly reflected the moment we are all living." explains Anderson.
By letting go of creative control in this way, writes Christopher Morency for Highsnobiety, luxury brands will become more relatable – and in future, will filter into the minutiae of our lives. ‘We might see a Prada grocery list with the brand’s favourite products, a talk show created and hosted by Gucci ambassadors, a Dries Van Noten flower shop or a Supreme video-streaming subscription. The opportunities become endless,’ explains Morency.
Looking ahead, hospitality and property brands will build ‘physical twins’ of their digital platforms and
services – real-world experiences informed by a brand’s digital presence, where mimicry flows from URL to IRL.
Taking cues from V-commerce and the growth of digital-first homewares, developments will have an aesthetic and infrastructure inspired by gaming and virtual platforms. Hinting at the early iterations of Mimicry Architecture, Bjarke Ingels Group’s (BIG) Voxel is a modular sofa that’s inspired by pixels and the building blocks found in Minecraft.
Future developments will also have an aesthetic and infrastructure inspired by gaming and virtual platforms. Pushing this further, Zaha Hadid Architects’ design platform lets luxurians create and curate their own home in the high-end Roatán Próspera Residences in Honduras. ‘This digital platform adapts varying configurations of standardised parts to create individual residences that suit each home-owner,’ say the architects.
Owners can use the platform to customise the size and layout of their residence, with at least 15,000 variations, and explore furniture modules. Roatán Próspera is designed to be ecologically sensitive, and aims to support nearby communities and provide employment for local people.
As Omnilux Lifestyles develop, multi-channel luxury brands will become the norm. Soon, a company’s presence will span everything from physical and online spaces and stores to live-streaming and films – even tv – as customers jump between platforms to watch and comment on shows as they air.
Demonstrating this in 2020 is Amazon Prime Video’s fashion reality tv series Making the Cut which features instantly shoppable, limited-edition garments from each episode available to buy immediately on Amazon Fashion. Lux-tainment will appeal to Generation Z in particular, something Tmall Luxury is tapping into with entertaining, engaging and educational content for younger audiences. Its Soho Live platform is a daily streaming service focusing on all things luxury, while its content-marketing tool Soho Mag offers trends insight and shoppable editorial features.
Last but not least, brands must appeal to content-obsessed luxury consumers who tune into the latest
reality tv shows and digital luxury magazines, turn on the social media buzz among their peers, and grab the latest goods for their own collections. The digital tools and platforms with which luxurians come to discover, try on and buy virtual and physical garments will, in future, allow them to make purchasing decisions based on sustainability and ethics.
This will build on examples such as Farfetch’s Fashion Footprint Tool which provides information about the amount of carbon and water used to make 1kg of popular material, such as cotton, silk and leather. Shoppers are given tips about sustainable options and will be encouraged to consider buying pre-owned luxury items.
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