Attracting Millennials has been key for retailers, but the consumer population, characterized by rapidly shifting expectations in light of digital transformation, has remained elusive to many traditional retailers and buying categories, resulting in piles of literature on how to appeal to this influential group.
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And recently, marketers have all the more reason to focus on Millennials: they are integral in luxury retail’s comeback.
The 16th edition of the Bain Luxury Study found the luxury market grew by a whopping 5 percent to €1.2 trillion globally last year. Luxury sales grew in a broad array of industries including cars, food and wine, travel, hospitality, clothing, and accessories – and much of the growth is thanks to Millennials.
Despite the comeback, it’s clearly not your mom’s luxury shopping climate. Jewelry brands are still working to find their stride with younger cohorts and high-end department stores are scooping up Amazon employees to focus on digital growth. Here are some pointers for thriving as a luxury brand in today’s retail environment.
According to the study, while the boom in luxury sales is primarily led by economic growth in China, demand for personal luxury items is also increasing worldwide. Japan, Europe, and the U.S. are standout markets for luxury retailers, growing at 4 percent, 6 percent and 2 percent, respectively. It is worth noting that tourism had a part in luxury’s rebound: “Globally, the share of personal luxury goods purchased by Chinese nationals reached 32 percent in 2017.”
The study focused largely on Millennials as a key demographic, but also on the “millennialization” of luxury shoppers, referring to a shifting consumer mindset. In addition to Millennials, Gen Z and men are contributing to the sector’s recovery, and brands are taking notice, adapting to changing customer profiles.
Menswear has become a focus area for high-end fashion brands. Conglomerates like LVMH (including the brands Louis Vuitton, Bulgari, and Dior, among others) and Kering (including the likes of Gucci, Yves Saint Laurent, and Girard-Perregaux) have focused marketing efforts on mens fashion. Louis Vuitton, for example, is exploring high-end streetwear to tap the male Millennial zeitgeist, and Saks Fifth Avenue says their menswear has gone “from just category addressing to…designers looking at how they’re going to wardrobe a man’s lifestyle,” according to Saks Fashion Director Roopal Patel.
Moreover, to appeal to younger cohorts, many luxury brands have expanded their product lines to include footwear, hoodies, purses, t-shirts and other more affordable items. Understanding the key demographic purchasing trends will allow retailers to tap into new segments and capitalize on timely opportunities.
According to Valérie Moatti and Céline Abecassis-Moedas of ESCP Europe Business School, the luxury retail sector has been uniquely reluctant to embrace digital technology. But 2017 saw some luxury brands, including Chanel, successfully embrace a social media presence.
Although Chanel was one of the last luxury brands to sell online, they now have a Paris-based Instagram team churning out 3-4 posts per day. The success of their Instagram presence earned them 9.6 million new followers last year, making them the platform’s most followed luxury brand. Over half of Instagram’s 1 billion users are under 35, making it a prime platform for reaching the luxury-purchasing cohorts, Millennials and Gen Z.
“Instagram is well-suited to fashion brands to whom the visual and ‘community’ dimensions are essential,” Moatti and Abecassis-Moedas write. “This generation has a different relationship to brands, placing emphasis on use rather than possession and proving more sensitive to the power of the image.”
Aligning with meaningful influencers can be effective, as well. Yves Saint Laurent struck social media gold last year by partnering with influencers to promote their fragrance, “Y.” Their strategy focused less on their own social accounts and more on product placements with edgy and notable personalities. The campaign earned them a 69 percent boost in followers and over $16 million in earned media value.
Of course, any one campaign is not enough to build a relationship with customers. Research by Deloitte shows that Millennials are listening to multiple channels at once, making an omni-channel approach to communication and branding all-the-more essential.
In-person shopping still has an appeal, particularly with younger cohorts and luxury shoppers. Deloitte’s research shows 43 percent of American Millennials still prefer to buy luxury items in person. They cite the abilities to touch, feel, compare, and try products as key benefits.
The brands that are making physical retail work for them are using an experiential approach. Ibrahim Al-Haidos, founder of luxury handbag brand Fursan, built a storefront with an environment he describes as being dedicated to opulence and consummate beauty. “We want people to feel special when they enter our store,” Al-Haidos said. “The environment we have created is one of high luxury. It’s important that people begin to feel luxurious from the moment they enter our store.”
The notion of inviting customers into aspirational lifestyle is common among successful luxury retailers. Many are looking less like traditional storefronts and more like lifestyle touchpoints, sometimes reminiscent of an open house or a ‘permanent pop-up.’ Inviting customers to participate in a lifestyle defined by a brand’s ethos allows them to actually contribute to a brand’s narrative, blurring the line, and strengthening the relationship, between retailer and consumer.
Partnerships with other brands and influencers that reflect a retailer’s particular ethos can also be effective. Take Ferrari, for example. Their brand aligns closely with Formula 1 racing, surrounded by those passionate about high-performing cars.
Or look at Max Mara’s partnership with street artist Shantell Martin. The pair collaborated on limited edition sunglasses, using sunglass frame-shaped cut-outs from a custom piece of art by Martin to create a one-of-a-kind product for each purchaser. Reflecting Martin’s whimsical and uplifting stream-of-consciousness style that focuses on the interplay of audience and creator, the limited edition pieces invited their purchasers to effectively participate in the art.
“I’m always looking for great non-traditional canvases to spread my message out into the world to a new demographic and in a new way,” says Martin. “This collaboration was a great example of that done well.”
The partnership shows the brand’s acute awareness of what their customers like outside of Max Mara, enabling them to capitalize on the sentiment of Martin’s art and alluding to a broader narrative in which they are a key fixture.
The luxury retail sector does not look like it did in the days of Elizabeth Taylor.
But new channels are opening and new markets emerging to support high-end retail.
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Creative approaches to social media, an innovative brick-and-mortar presence, and meaningful lifestyle partnerships will put your luxury brand in the coveted crosshairs of young spenders.
Millennials may be a tricky market in their ad-proof armor, but the luxury brands who can strike the right chord will find promising returns.
(Source: Forbes)