I wish to propose the paradoxical motion that ‘luxury’ has become democratised by digital, by which I mean three things that can be represented by an equation: dL=A3. The democratisation of luxury is the product of the three “A”s in aggregate.
Luxury today is open to more people, in part, due to a growing middle class but mostly because digital has delivered something that was once distant right to the doorsteps of many. But this new and greater accessibility creates a problem for luxury brands whose distinctive allure is supposed to be ultra-exclusive: scarce, elusive and mysterious, especially in terms of price. Since their inception, luxury brands have existed to elevate and distinguish the elite from the tastes and trappings of the proletariat.
Conversely, the fundamental tenet of digital is that it’s welcoming and relatively wealth-blind. Digital tries to reach as many people as possible, allowing them to connect and interact. Where luxury is divisive, digital is inclusive.
One luxury brand that has notably embraced the appeal of greater reach, however, is Burberry. In September 2015, Burberry debuted its Spring/Summer 16 collection on Snapchat ahead of its formal catwalk show during London Fashion Week. The online event reached 100m people creating a huge boost in brand recognition, but how many new customers were gained and what was the true ROI?
Figure 1: Digital vs Luxury
Figure 1 further illustrates illustrate some of the tensions: where luxury is discreet and discerning, digital’s way is often intrusive and always agnostic. In fact, the only characteristic valued in both domains is the appetite and ability to deliver experiences that are personalised. So, it’s this set of dichotomies that explains why there’s always been an uneasy relationship between luxury brands and digital.
The second “A” is availability. Luxury brands, which were once reserved for informed connoisseurs, are now freely available to an unvetted nouveau riche who lurk anonymously behind computer screens.
Where once there was the intimidation of having to go to luxury and purchase on its terms, digital has brought luxury into the bedroom where invisible consumers purchase in the comfort of their pyjamas. And let’s not forget the huge increase in availability opened up by eCommerce channels, especially those like Net-a-Porter’s The Outnet, where luxury brands can distribute and monetise their unsold inventories discreetly online.
The third element of democratisation is arguably the most powerful “A”.
The term “democracy” has its origins in two Greek words: dēmos, meaning ‘the people’ and kratia ‘power or rule’ and yes, this third “A” of democratisation is shaping a world in which the people do rule and in which their opinion counts for more than the stellar reputation of the luxury brands.
Brands are constantly being judged by all of us but none more so than luxury brands that command higher prices, create greater expectations, and for whom the stakes are higher. With the advent of Amazon, Yelp and their like, in the online court of public opinion, we’ve reached a point where popular reputation outweighs insider brand image.
My third “A”, therefore, is accountability because online reviews, posted by ordinary people, have become one of the most powerful disruptive forces of the information age. With 70% of us consulting online reviews before purchasing, producers and their brands have had no choice but to become wholly accountable for who they are and what they do.
Let’s examine this principle of accountability in the world of luxury hospitality. Being a 24/7 service business, hospitality is one of the most advanced industry sectors for integrating customer feedback into its operational management. As we’ve seen, this democratisation of opinion, fuelled by the rise of peer review sites, has aggregated and amplified the consumer’s voice to such an extent that the hard-built reputations of brands like Four Seasons and The Ritz-Carlton are being recalibrate by real-time ratings.
So, although word of mouth has always been the marketer’s holy grail, digital has enabled that word of mouth to grow in influence from a private whisper to a public broadcast shared with millions of people in minutes. In the last five years, despite having initially been rejectors of TripAdvisor and other review sites, most luxury hotel brands have come to terms with the simple fact that they have lost control over who says what about them. The new reality is that luxury hotel brands are now being fabricated in the minds of their customers contemporaneously, rather than being the product of a tightly curated myth.
Whereas General Managers would once have simply turned their backs and hoped the clamour would die down, they are now using TripAdvisor and other digital feedback mechanisms not only to implement continuous improvement but to build community and demonstrate responsiveness with their customers. And that makes good business sense because it’s been shown that if a luxury hotel increases its online reputation by 1%, then its Average Daily Rate will rise by 0.9% and its occupancy by 0.5%. These are hugely significant incremental gains.
Isn’t it fascinating how our decision-making as consumers has been changed by the Internet? Somewhere along the line our capacity to make a selection for ourselves has been critically compromised. Our default setting is to Google, to establish if there are any reviews and then to ignore any businesses that receive poor ones. It’s a new human condition, which illustrates the huge shift in consumer behaviour that has resulted from the phenomenon of digital democratisation.
What makes this particularly challenging for the world of luxury is that in the past just being considered ‘luxury’ was enough to instil trust – that barely spoken promise of quality and excellence. However, with the democratisation of luxury, trust of a consumer is no longer a given. We all want to double then triple check if something is generally considered good, enjoyable or reliable by others.