On November 10, 2017, Intercontinental Grand Hotel’s Salon Opera hosted the Second Edition of the INSEAD Global Luxury forum, themed The Future Luxury Consumer. In the tasteful hall of mirrors, Luxury Heavyweights reflected on the rising power of the consumer with specific focus on how brands are evolving to better create customer value. Through a mix of keynote presentations, panels and networking sessions, experts floated deep insights to equip guests and their brands with a roadmap for the up, close and personal future. In his opening address, INSEAD Deputy Dean Peter Zemsky highlighted the role of technology in that future. What matters to the future customer? Are luxury brands evolving fast enough to meet these needs? With these questions, Martin Roll, founder and CEO of the Martin Roll Company, set the stage for a day of golden nuggets, stepping stones in the turbulent luxury stream.
Photo by Elya Nadezhdina
Digital, the New Middle Man
By 2025, the self-aware Gen Z consumer will constitute 45% of global consumers. Already, 25% of US beauty products are sold on her playground, the digital highway. She demands personalization, quality and sustainability, and she wants it all now. Clarins’ CEO, Jonathan Zrihen leverages Social, Search and Site data to offer her a personalized purchase experience, as digital distribution replaces the middle man and transforms prestige cosmetics distribution from push to pull. Oliver Wyman’s Retail and Luxury desk forecasts direct-to-customer sales in prestige cosmetics will rise to 25% by 2035, as customers demand personalized shopping experiences. In the race to become the first $15 billion beauty brand, NYX and MAC harness experiential marketing, complementing in-store experiences with online tutorial videos and user testimonials. Oliver Wyman proposes that for effective D2C, brands need omni-channels strong in Customer Value Proposition, Direct Marketing Capabilities and Experiential Store Operations.
Experiential Luxury, The Golden Egg Hunt
The panel on Digitalization of the Customer Experience featured Geoffray Maugin, SVP at Accor Hotels; Pierre-Edouard Martial, Maison & Luxe Director at Nelly Rodi; Mark Bohn, Head of Strategy Nike Western Europe, and Andrew Robb, COO of Farfetch.
All see the future customer through a one-world, one-experience framework, through which Farfetch has carved a niche beneath the surface. Farfetch connects digital applications at the data layer for effective customer targeting, with machine learning algorithms that predict buyer conversion even before the first purchase. Farfetch urges partner boutiques towards real-time stock visibility to close the omni-channel loop around mobile, which 75% of users between ages 12 and 25 prioritize over sleep. Mobile inspires adventures in physical stores, which continually evolve into experience centers, serving a fine balance of human and digital functions. This inspires Italian brand, Faber Novella to combine tradition with technology, offering beautiful customizable shoe designs via its website.
Nelly Rodi advocates retail-tainment, for increased product interaction by customers seeking unforgettable experiences (Luxus+), transferring more of today’s sales functions to the customer. Revolutionary changes may be easier than imagined, through transference of customer habits so commonplace in one segment that they simply make sense in other segments. Farfetch and Nike expect machine learning to close the gap between the 3% online conversion rate and the 55% in-store, while acknowledging the salesperson advantage of physical stores and the need for metrics to capture in-store impact of the online experience.
Customer Intimacy, The Bot and The Butler
John Paul Group, Conde Nast and Zalando are employing different strategies for converting tech-hungry customers into brand advocates. John Paul Group, the concierge service leverages patented profiling software to enrich hospitality purchase journeys, by personalizing discovery and conversion, and encouraging expression on social media. Beyond technology, John Paul CEO, David Ansellem preserves the human touch for effective change management, to convert the 8% of Accor Hotels visitors with less-than-perfect experiences.
Content, Paving The Rocky Road to Discovery
Executive Director, Matteo Gabba explained how Conde Nast is cutting through the noisy digital media space with branded content, by investing time, trust and technology in quality content, emotional connection and targeted distribution. With the resulting highly relevant content, Conde Nast scales the AdBlock wall, 29% of which targets disruptive advertising. Yet, quality content is not enough. Thus, Conde Nast ensures contextual relevance of its content by employing targeting algorithms.
Similarly, Zalando has leveraged personalized media to grow a successful store-less luxury business, by showcasing the emotion of fashion through the Zalando Media Experience. On a panel with Federico Barbieri and Matteo Gabba, Zalando’s Fashion Librarian Aimee O’Beirne made a case for intermediaries in the luxury value-chain, as rapidly evolving business models limit the possibility of full vertical integration.
Exploring luxury retail in the age of discovery, Facebook’s Luxury Retail Client Partner, Liza Bate praised brands that create purchase intent rather than wait for it. Winners target mobile, the key to the millennial’s $1 trillion purchasing power, using thumb-stopping content that is relevant, fast and visually exciting. Liza spotlights Zalando’s collaboration with Topshop, featuring fun videos of Cara Delevingne pronouncing names of remote cities served by Zalando. Beyond text, picture and video, Liza anticipates the impact of virtual reality, which is fast growing on Facebook’s ReactVR platform.
Neo-Reality, Immersive Shopping Experiences
Growing on a mobile-first advantage and demand for deeper omnichannel integration in luxury, web-based virtual reality is tipped as the next step in retail evolution. Gartner Hype Cycle for Emerging Technologies expects scalable virtual reality within five years. In anticipation, Blumenlab through its Luxus-xr platform, is helping retailers develop and deploy web-based VR experiences of physical stores.
Another start-up, PARIS.shopping, approaches VR from the consumer’s perspective. As co-founder Kevin Tayebaly recalls, PARIS.shopping was built to digitally recreate the originality of Paris street shopping, with diligent product curation from Parisian boutiques. Through advances in Virtual and Augmented Reality, PARIS.shopping looks to expand its offering, bringing fully immersive shopping experiences from luxury capitals, to customers halfway across the world.
Photo by Elya Nadezhdina
Technology and Tradition, Reconciling the Paradox
El Dorado, The Big Data Mine
McKinsey’s Nathalie Remy examines the potential of big data in luxury, where 8% of shopping is online, with 78% of total sales being influenced by the online experience. Still, majority of touch points on the consumer journey remain in the physical layer, where distribution through indirect channels weakens data collection, worsened by low purchase frequency of luxury and multiplicity of digital devices. Even as behavioral factors like confidentiality and qualitative expectations restrict data utilization, McKinsey sees opportunities through big data across four quadrants in customer experience. Leveraging contextual marketing, brands can now provide intimacy to many through profiling and targeted activation. More importantly, products can be better made-to-desire through personalization of goods and services, built on enriched purchase journeys.
Carving Niches in Big Data
Led by Luxurynsight’s CEO Jonathan Siboni, experts dined on a cocktail of data and artificial intelligence. CEO Jade Huang, explained how StyleSage is combining its proprietary Social Media Image Recognition with search data and influencer posts, to help brands predict trends for product curation, brand enforcement and pricing. IFDAQ hovers at 33,000 feet, deploying AI through its robust network of databases for a broader market view. IFDAQ facilitates the valuation of luxury elements, from brands to human resources, gradually demystifying a once data-averse industry. Launchmetrics focuses on the launch lifecycle by positioning close to the customer. Via GPSRadar, its exclusive community of 40,000 verified influencers, brands and retailers, Launchmetrics helps brands record high-impact product launches. Behind the mirror, Heuritech analyzes 100 million images daily with advanced deep-learning algorithms, to spot trends in customer online behaviour and preferences. Awarded by LVMH and Lafayette Plug and Play, Heuritech leverages a community of 3,000 deep learning experts and PhD’s.
To assess how retailers are turning these insights into better customer engagement, Contactlab ranked 34 luxury retailers by customer engagement across nine steps on the purchase journey, assigning points for personalization, product presentation and omni-channel integration. Le Bon Marche’s e-tail platform, 24Sevres stood out at the top, for its commitment to luxurious detail and personalization, which outdid packaging by brands in D2C sales. Galeries Lafayette excelled at omni-channel integration through social media, which along with poor packaging of online orders needs improvement by many luxury retailers.
Upstarting Tradition; The Startup Scene
Geoffroy Rosset, Co-Founder of Luxury Tech Fund delivered a primer on how innovation is shaping the future of luxury. Over €50 billion has been invested in the last 10 years, in three start-up categories; enablers through digital technology, disruptors of business models and inventors of new product categories. Advised by a network of 40 mentors and partners with domain expertise, LTF accelerates innovation in luxury. LTF positions strategically for international scope and cross-fertilization within its portfolio of start-ups, as successes with Devialet and the Vestiaire Collective drives deal flows across stages of the start-up cycle.
Galeries Lafayette is approaching innovation differently, through the Lafayette Plug and Play Accelerator, a partnership with Silicon Valley’s Plug and Play. To this partnership, Galeries Lafayette contributes mentorship, pitch workshops and 1000 square metres of co-working space in Paris. During the three-month program, selected start-ups are mentored by corporate executives to pitch their ideas to investors, who stake up to €100,000 per ticket.
Photo by Elya Nadezhdina
Rising Customer Clusters
Dubai, a Global Fashion Capital
Flanked by Chopin’s manuscripts, Ramzi Nakad, Co-founder of Fashion Forward discussed the company’s drive to make Dubai a global fashion capital by 2020, as mandated by the Dubai government in 2013. Fashion Forward is filling the Blue Ocean between a rapidly evolving fashion business model and the elitist B2B structure of the Paris, London, Milan and New York fashion weeks, as democratization of fashion trends is reversing the flow of style inspiration. Quoting a WWD report that headlines a disconnect between shoppers’ demand and retailers’ stock, Ramzi underscored the need for a fashion week that caters to the consumer. At its last show, Fashion Forward’s 30,000 audience were mostly influencers and consumers, with another 250,000 joining daily via livestream. Fashion Forward attracts the strongest couture and street-ready collections, by offering affordability of participation, access to the 300 million MENA population, and platforms for innovative entrepreneurship, spotlighting emerging brands to meet the growing demand for authentic niche fashion. On a mission to become the first destination for global fashion, Fashion Forward exhibits brands with diverse influences.
Riding the Orient Express
Focus soon shifted to East Asia, on a panel featuring 80 years of regional experience from senior executives. Elie Papiernik, Co-founder of centdegres describes the Asian luxury consumer as obsessed, the Japanese with special products and the Koreans with deep product knowledge. Bluebell’s Guillaume Durdan agrees, adding that Korean and Chinese shoppers are the most expressive. Over 9 years at Bluebell, Guillaume has watched Asian consumers evolve from adopting western fashion trends to expressing personal preferences. Catherine Yu Aymard, President of Wallace Chan International echoes this rising creative consciousness, expressed through collection of high-end art.
Still, the popularity of flash sales signals unmet potential demand. The world’s biggest sales event, Alibaba’s Singles Day was barely minutes away, opening with a performance by singer Pharrell Williams. Alex Misseri, Bluebell Group’s e-commerce director, describes months of preparation his team put into Singles day. Seamless integration is required across digital and physical infrastructure, including payment platforms to handle over 1 billion transactions, fulfillment systems for 660 million orders and user interfaces rich in customer experience, as Ali Baba strives to beat its 2016 Singles Day GMV of $17.3 billion.
Glocalization for the Asian Shopper
With Chinese tourists accounting for nearly 40% of aggregate shopping in Paris, China looms large in global luxury. In response, Europass is building a bridge to facilitate WeChat selling capabilities for Parisian e-tailers. CEO, Guillaume de Roquefeuil, highlights the value in integrating social media profiles of retailers into WeChat for a shopping experience familiar to Chinese shoppers, even as retailers increasingly stock with glocalization in mind. Catherine Yu Aymard believes this is only half the adjustment international retailers need to satisfy the Asian consumer, with potential to improve in-store experiences. Preempting this need, Gentle Monster is replicating the Korean shopping experience across the world through its authentic gallery store concept.
Photo by Elya Nadezhdina
The Leadership Challenge
Going Digital, Leading Neo-Luxury
Mastering these capabilities requires radical shifts in leadership perspective. Federico Barbieri, Maison Margiela’s omni-channel director offers a roadmap for leadership in the digital era of luxury, urging luxury companies to take a grounds-up perspective to deploying digital strategies, combining intimate customer engagement with fluid omni-channel integration. “Companies must assume they are building their businesses from scratch today... adopting cross-pollination of functions for total digital transformation.” He advocates prioritizing small data to unearth the nuances of customer clusters for true luxury, a unique experience that flatters all the senses.
Media Quest is facilitating leadership in the Middle East through the Arab Luxury World, a platform for the demystification of the fast-growing Arab luxury market. CEO, Julien Hawari underscores the interdependence of global luxury networks in demand and supply, to emphasize the power of the small but wealthy Middle Eastern population. In a region that has swung from scarcity of luxury brands to abundance over the last two decades, this platform provides a clear view of the market, leveraging academic support from the INSEAD community.
Distinction Remains the Soul of Luxury
S.T. Dupont was present to testify about its return to authenticity. The brand had lost its identity over a 145-year history, having diversified into ready-to-wear to capture more of the demand curve. On assuming office in 2006, CEO Alain Crevet, initiated a campaign to return the brand to its savoir faire in the arts of fire, writing and leather goods. He closed the ready-to-wear business, and opened collaborations with skilled craftsmen to produce exclusive pens, lighters and leather goods. He entered partnerships with relevant movie franchises to reinforce the luxury image and social relevance of the brand. To appeal to a tech-savvy demographic, S.T. Dupont pursues product innovation intent on producing the world’s first USB-rechargeable lighter. These efforts have returned the brand to profits, with greater expectations on the horizon.
The night ended on a cautionary note, struck by Bridge to Luxury CEO, Frank Mueller, as he looked 30 years into the future of luxury. He warned that the millennial frenzy is driving tunnel-vision within the industry, noting that German millennials still consume more print media per capita than any other age category. He underlined lost opportunities in other demographics, like the wealthy over-60-year-olds, projected to grow faster than any other population bracket by 2050. He expressed concerns that modern concepts of luxury are stifling true differentiation, by converging towards the mainstream, driven by rising notions of political correctness, improper market segmentation and advances in small-scale production technology. Advocating a return to product leadership, Dr. Mueller proposes lobbying to protect original arts, urging luxury proponents to invest in milieu-focused research, beyond classical definitions by age and gender, concepts which fail to capture the uniqueness of the future customer.