In 2017 the luxury industry will be faced with a precarious balancing act on multiple fronts. Brands will be forced to find an equilibrium between an exponential growth in technology and their traditional emphasis on the human hand; between understanding their customers’ behavior and surveilling it; between their global presence and their local consumer groups; and between the poles of a customer spectrum that stretches not just around the world, but over decades, from Generation Z to the silver dollar.
If they do not, they risk failure — not because of the macro environment of economic and geopolitical uncertainty, though that cannot be ignored, but because of their own inability to change with an ever more rapidly changing world.
Risk is no longer defined as “doing something new,” but rather “doing what was done before,” while the greatest opportunity lies in accessing, and embracing, “the soulful economy.”
Such were the conclusions of the Global Leaders’ Collective, a gathering of chief executives from companies like Ralph Lauren, Calvin Klein, Gucci, Carolina Herrera, Oscar de la Renta, Chloe and Jimmy Choo, as well as the Four Seasons and Taj Hotels, among others, hosted by The New York Times this past week. They came together at the Watergate Hotel in Washington for a day of briefings on the world in 2017 from speakers that included Denis McDonough, the White House chief of staff; Ray Kurzweil, the futurist; Penny Pritzker, the United States secretary of commerce; Meridith Valiando Rojas, the founder of DigiFest; and Al Gore.
The following discussion shone a new light on some of the internal challenges of the industry, which is predicted by the Bain Global Luxury Study of 2016 to grow between only 3 percent to 4 percent in 2017 — far from its double-digit numbers during and after the recession. Though the slowdown, which began in 2014, was previously often attributed to the crackdown on gift-giving in China as well as the growing sophistication of the Asian consumer and overexpansion, the study identified digital disruption, the pace of change and the need to reframe the relationship between technology and luxury as the most crucial issues in the coming year, no matter the geography or product focus.
It was a constant theme, stretching from the potentially positive effects on manufacturing and the supply chain to the issues of cybersecurity and big data collection, via the complicated question of social media and communications. It’s not just about Facebook anymore, especially when it comes to new and younger consumers who “rule the internet” but whose attention span is subject to “constant churn,” in the words of Ms. Valiando Rojas, and who have a deep-seated antipathy to traditional marketing.
Meanwhile, the data collection that has been so lauded in the luxury world, which has been focused on the need to connect intelligence across the retail chain to better serve a constantly traveling customer, contains within it an often unacknowledged threat that could prompt a backlash if not carefully monitored: People want to be recognized, but not known — which may sound like a specious distinction, but it needs to be parsed on micro level.
How to add “soul” to the virtual world — and what exactly that means (character, ethics, entertainment and experience; not avatars) — is a conundrum for all luxury brands.
Yet understanding what it means to create and maintain brand-centric communities will become a strategic imperative, because it offers a solution to two problems: first, the isolating effects of technology on the individual; and second, the global trend toward national isolationism and protectionism, along with the risk (as yet unfulfilled but real, according to Mikhail Khodorkovsky, founder of Open Russia, as well as Ms. Pritzker), that geopolitical powers will begin to disengage and unions fracture. To successfully navigate that possibility, however, requires that brands think about their constituencies on a variety of levels at the same time.
It puts new emphasis on identifying and responding to local tastes (to hew only to a single message may seem irrelevant in a walled-up world), and essentially iterating the overall message in a variety of tailor-made ways. Though social media may be connecting the message across borders, it also encourages a multiplicity of voices that should not be ignored. And it acknowledges the need to create internal communities to retain talent.
It is this paradox — that technology, while “improving connectivity and reducing complexity” as Mr. Kurzweil said, also casts an evermore seductive light on what it lacks: the human element — and how it is resolved that will define the future of an industry based on the work of the hand. “Corporate” and “creative” are no longer enough. Of equal weight is “connected.”
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