The Luxury Institute’s top eight trends for 2008

The Luxury Institute has published its trends for 2008 and beyond. The organisation, which recently set out its top myths about luxury and wealth on this blog, has now set out its vision for the year ahead.

The Luxury Top Eight Trends for 2008 and beyond

1.) Old Guard of Luxury Passes the Baton to a New Generation.  Are They Ready for a Flat World?

Throughout Luxurydom, the founders, family members and their trusted lieutenants who built the grand luxury behemoths and boutiques alike have begun to retire, to sell, and consider family legacy and philanthropy. The new generation of leaders who will inherit these brands must not seek to merely replicate old business models.

Attend luxury conferences and you hear the same old messages, tired strategies and tactics, with lively debate on whether or not to sell to the masses, or on the Internet. Attend a Silicon Valley conference and you will understand that the luxury industry lives in another galaxy, detached from its consumers, who have already moved beyond Web 2.0 and into ‘community’. Either the new leaders are being reserved, or they do not yet fully understand how technology, globalization and commoditisation are transforming their world. Either way, look for innovative luxury leaders to emerge from the chaos.

2.) Luxury Rediscovers Great Service as a Differentiator

As economic slowdown in the U. S impacts the luxury industry, particularly those who sell to the affluent masses, luxury firms will rediscover or perhaps discover, that mainstream millionaire consumers, not just celebrities and heirs, require great service to earn their loyalty.

With so many “luxury” categories inundated with brands vying for the attention of the same consumers, luxury CEOs will begin to allocate resources to continuously train their well-intentioned, but generally unskilled, salespeople and customer representatives who must prove competence and trustworthiness to discerning customers. Luxury Institute surveys show 29 % of wealthy consumers have had a problem with a luxury firm that required resolution in the past year. Ironically, getting luxury firms to admit to problems is one of the biggest problems. Seller beware.

3.)  The Luxury Access Revolution, Phase Three

A few years ago, the Luxury Institute was among the first to predict the advent of the “Luxury Access Revolution,” an accelerating phenomenon at every price point on the luxury-spend spectrum.   Jets, yachts, vacation homes, autos, vineyards, golf clubs, even typically less pricey items, such as handbags, jewelry, and watches, were embracing membership – selling variety, convenience and utility, without the hassles of ownership.

We also predicted that brash entrepreneurs would drive the first phase of innovation to be eventually overrun by better-capitalised luxury brands. Right on cue, in 2007, we saw many entrepreneurial providers of these membership models merge, consolidate, or disappear.

Next, top luxury brands and original manufacturers will take over, leveraging their trusted brands, synergistic offerings, fixing flawed business models, providing direly-needed transparency, and using vast resources to legitimise these access models for the mainstream affluent and the wealthy. For all those savvy millionaires waiting on the sidelines, it may finally be time to become a member.

4.) Beyond Concierge Services

It seems that these days everyone provides concierge services, along with their product or service. From credit card companies to private banks, concierge services are the rage. Well, expect these commoditised, low-margin services to begin to morph into high-fee, high-value consulting services, worthy of the name.

Companies, such as Quincy Consulting Group, are reshaping the industry, applying a McKinsey-like model to serving the seamlessly personal and professional needs of the wealthy. While they will not manage your assets, they will handle many critical needs beyond the basic restaurant and theatre reservations call-center model. They will, for example, plan a wedding, charter a mega-yacht; find a trained nanny, a competent wealth manager, a trustworthy art dealer, etc. They will bring in
specialists to help execute each task, and manage the project. Most importantly, they will do so in an objective, independent manner not typical of most concierge firms, which have created conflicts of interest by steering clients to “preferred” suppliers. Concierge services will never be the same again.

5.)  Philanthropy Industry Shakeout-Phase Two

Bill Gates and Warren Buffet’s entry into big-league philanthropy did not just create the “alms race” we predicted. Their participation, and the trend they started, have brought with them great media attention, and a level of accountability, that has lifted the veil to expose the incompetence and, sometimes dishonesty, that plagues a large segment of this tax-sheltered industry. What these icons of efficiency have done is to bring upon charities a level of scrutiny and transparency that will force out bad apples and eliminate conflicts of interest. New
transparent models of philanthropy, often web-based, will accelerate the trend so that the neediest can benefit from this generosity. It cannot happen soon enough.

 6.) Luxury Brands Will Embrace Communities of Raving Fans

If any brands have truly devoted, emotionally invested fans, it is
Luxury brands. However, luxury firms, many of which are trapped in traditional media, have failed to listen to, engage, and create a community dialogue among their most ardent fans (read: customers; current and future). Could it be because when you inspire fans to have a sincere dialogue online, and make it transparent and public, you lose control?

You have to earn the right to facilitate a community dialogue with good, old-fashioned trust. Giving up control to communicate honestly with the customer community is exactly what leading luxury brands will do. By creating a community of fans, and listening to the good, the bad, and the ugly, and then acting on it, the best luxury brands will begin to enhance the experiences of their customers in ways loyal customers want,
and will begin to co-create products that their customers desire. That will be extremely hard for many luxury brands to do. Expect more than a few to wither into irrelevance.

7.) Luxury Discovers Mass Scalability is Hard When You Leave Out the Customer Service Experience

Oops. Looks like all those luxury brands racing to transform themselves into affordable luxury (a contradiction in terms) by making deals with mass retailers, forgot the business model is not just about stamping out more luxury widgets. Quality production (never mind the quality of raw materials, that’s a detail) may be scalable when you serve the masses, but has anyone noticed that part of the experience of luxury is great,
over-the-top, personalised service?

Just walk into any mass retailer and indulge yourself in the service levels they provide (you do get what you pay for, though). That may not be the service level you want your luxury brand name to be associated with because in a transparent world consumers will share and rate their experiences and define your brand for you. Look for some luxury brands heading back to Madison Avenue in a hurry, albeit not with reputations intact.

8.)   Luxury Retailers Eliminate Marginal Brands

Top luxury retailers -Nordstrom, Neiman Marcus, Barney’s, Bergdorf’s and Saks – have long prided themselves on being expert guides to luxury for their wealthy customers. But brands such as Vivre have created inroads by becoming curators, delivering connoisseurship, and a higher level of consistently unique and exclusive offerings. Now look for retailers to go up-market and start to eliminate marginally luxurious product lines as they embrace and experiment with unique, new designers
who wish to remain bespoke. Luxury retailers will earn their curatorial stripes with their wealthy customers once again.

Do you agree? If you want any more information about these ideas, get in touch with Milton Pedraza, chief executive of The Luxury Institute.