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GLOBAL 2016: Youthful spirit, appreciation for craft invigorate luxury

But slower economic growth constrains spending

Bright colored fabrics and the return of the logo energized luxury at a time when customers felt more comfortable with displays of affluence than at any time since the global financial crisis, over eight years ago.

Luxury shoppers curated carefully selected articles to share with knowledgeable and appreciative friends and acquaintances, but they also purchased logo merchandise for social recognition and to signify discerning taste for quality and craftsmanship. Brands presented logos with more subtlety and on selected items rather than across entire collections.
In their products and marketing, many brands sought a balance between conveying exclusivity to their primary luxury customers and accessibility to prospective customers who have the potential to develop in affluence and personal style.
Driven by the more casual preferences of younger consumers, both women and men, luxury brands expanded luxury into high-end sportswear, exercise clothing, jeans and sneakers, aiming at the customer who purchases a well-appointed SUV rather than a traditional luxury car model.
Slower growth in Brazil, Russia, and China impacted the values of certain brands. And the strength of the U.S. dollar also negatively impacted the sales of American brands sold overseas or purchased in the U.S. by visitors from abroad. Some of the most valuable brands in the BrandZ™ Luxury Top 10 grew in value, but the Top 10 overall declined 5 percent, following a 6 percent drop a year ago.

Reaching a wider audience
In another step of its ongoing update of a heritage English brand, Burberry boldly changed its business model. Eliminating seasonality, the brand introduced collections only twice a year and made the collections available immediately after they appeared on fashion show catwalks.
Burberry accelerated the product cycle, both to satisfy younger customers who expect fast fashion and to make it more difficult for the fast-fashion brands to copy Burberry designs. The immediacy presents supply chain challenges, but it is consistent with Burberry’s commitment to keep the brand relevant and accessible. The changes also acknowledge that seasonality is less relevant for a global brand that conducts business across all weather zones.
To create excitement around the brand, Gucci reinvented its traditional look, introducing bold patterns and colors. Gucci began to redesign its 525 shops to reflect this lighter pallet, and it accelerated the supply chain. Gucci also redesigned its website and re-launched it in the U.S. and Canada, with further rollout planned for 2016. The financial impact is expected with full implementation of the changes that followed the appointment of a new CEO and Creative Director.
Although the Christian Dior brand was in an interim period between designers, the lively and innovative treatments of clothing, accessories, and makeup that have characterized the brand for the past several years drew consumer interest. The consumer demand for haute couture, the high-end tailor-to-made collection, continued to drive the growth of Christian Dior. Several perfumes performed extremely well, and Christian Dior appeared for the first time in the BrandZ™ Luxury Top 10.
Communicating the brand story
Brand story and experience remained an important aspect of consumer engagement with luxury brands. Brand websites provided access to fashion shows, and even glimpses of backstage activity. Going further, Chanel produced an online film about its founder, Coco Chanel, starring actress Kristen Stewart, who models Chanel’s makeup line. The company continued to have a clear message about empowering women.
Rolex, the most valuable of the iconic luxury watch brands, continued its association with achievement and with cars as a sponsor of the Rolex 24 at Daytona. Positioning technology devices as luxury products, Hermès partnered with Apple to offer an Apple Watch with a Hermès leather band. Leather was an area of strength for Hermès, compared with its silk and perfume ranges.
Louis Vuitton evoked its brand heritage as a maker of trunks and other travel goods by creating an exhibition of trunks, tools of the craft, and other elegant travel articles from its collection for the Grand Palais in Paris. The brand originally displayed its wares at this grand venue during the Universal Exhibition (World’s Fair) of 1900.
Other brands also communicated brand experience in the physical world, with flagship stores and with bespoke events such as factory tours for select customers. Cartier renovated key flagship stores on the Champs-Elysées in Paris, on Fifth Avenue in New York, and in the Ginza in Tokyo. The brand also planned an e-commerce site in China, although the country’s anti-corruption campaign, which continued to dampen gift giving, hurt Cartier sales.
Well known as a brand for gift purchasing, Tiffany & Co. worked to increase the brand’s appeal to customers purchasing luxury items for themselves. Tiffany & Co. enhanced its website, catalogs and in-store visual merchandising. The brand added to its entry-level silver jewelry collections of items selling for under $500.
Slower economic growth impacts luxury
Along with other luxury brands, like Prada, Tiffany & Co. felt the impact of the slowdown in China’s economy and the anti-corruption measures, which reduced gift giving. Fluctuations in international tourism, a key driver of luxury sales, also hurt the brand. The Tiffany & Co. flagship Fifth Avenue store in New York derives around 40 percent of its sales from foreign tourists.
Despite the economic slowdown, China continued to lead the world in outbound travel, according to the World Tourism Organization, an agency of the United Nations. But tourist spending weakened. In addition, the Chinese government lowered taxes on luxury to encourage purchasing at home rather than abroad.
Chanel enjoyed great popularity in China, partly because of its presence on social media platforms like Weibo and WeChat, but also because it encouraged domestic Chinese spending by lowering prices in China to make them more equivalent to prices in Europe.
Rapidly becoming sophisticated and more discerning across most categories, Chinese consumers selected luxury items not simply for the bling effect, but also for their brand stories. Christian Dior increased its media presence in China, particularly to market its perfumes as a way to build the brand’s awareness.
Many luxury brands created monkey-themed items for the Chinese New Year. In more substantial initiatives, some brands modified designs to appeal to a more diverse audience of luxury shoppers from other regions of the world. Hermès created silk saris for Indian shoppers. Other luxury brands designed burqas for Muslim women.

Brand Building Action Points

1. Celebrate occasions.
Develop sales strategies around more occasions, and create original ways to present the brand.
2. Find the right balance.
The balance between exclusivity and accessibility is delicate. Greater accessibility can drive revenue but dilute the brand. Some brands manage by channel, offering limited items online, and more customized versions only in a physical store.
3. Personalize the offering.
Deliver exceptional personal experience. Study the attention to detail and the unique individual services that some airline and cruise brands provide for their high-volume customers.