Re-Thinking Luxury in an Era of Digital Darwinism

How new technologies are changing the luxury industry and its brands

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Image: Hubspot

Today’s era of digital consumption has impressed a number of challenges on businesses, as technologies, markets, and client behaviors develop more rapidly than ever. These trends and technological developments occur faster than businesses can even realize. In turn, businesses must constantly adapt to modern social practices in order to maintain relevance and ultimately, survive and succeed in an era of Digital Darwinism. These new realities have been particularly disruptive to major luxury retailers, as changes in consumer behavior have leveled the playing fields within luxury sales. Modern digital marketing and branding techniques directed towards self-image have revolutionized the ways in which luxury products are effectively sold. In fact, the notion of “luxury” itself, must be redefined in order to resonate with a new generation of customers.

This new wave of luxury brand consumers enters the market with different objectives and interests, influenced and empowered by social media to make informed, individualized decisions and judgments towards brands. Luxury brands across different sectors experience this same challenge: to redefine themselves and their images through a process of digital transformation. To survive and remain notable in today’s competitive luxury markets, businesses must adapt to modern customer perceptions and behaviors. Meanwhile, it is essential that luxury retailers uphold their premier brand image and maintain social relevance. As many established luxury retailers struggle to adapt to these challenges, new, niche brands see great success through their unique, modernized approaches to sales and marketing.

Within the global luxury market, online sales have risen consistently for more than a decade, as the digital era has set in. In 2016, digital purchases represented around 8% of the global luxury market’s total sales. However, by 2025 it is projected that these digital sales will represent roughly 20% of luxury sales. If this is the case, the establishment of strong, hyper-personalized digital platforms should be the main priority for all major luxury retailers moving forward. The role of the consumer is increasingly centralized as luxury retailers utilize digital platforms to precisely craft their images to build social capital.

Digital influence has become an instrumental factor behind luxury sales, as roughly 80% of global luxury sales today are “digitally influenced,” meaning that most luxury consumers are influenced by popular digital trends and social media forces. Younger luxury brands which have emerged into global markets have not faced such steep adaptation challenges, as their models have been built entirely around their digital presences. Pre-established luxury giants have been challenged a bit more, being forced to make rapid, large-scale digital transformations to maintain a competitive edge. Newer luxury brands with major social media presences hold the future of luxury sales in their hands with the mass social influence.

Established retailers can learn from these newer brands, employing similar approaches to build desire around their products, and above all, stay relevant in the public eye. Traditional luxury sales models have been disrupted by these new trends, and will soon become totally antiquated before digitalization is taken even further. An industry leader that has revolutionized the sale and marketing of luxury products is skateboarding shop/clothing brand, Supreme. The brand has been a driving force behind the rapid growth in “streetwear” sales around the globe. According to 2017 research by Bain & Company, streetwear sales boosted global luxury sales by roughly 5%, around 263 billion euros’ worth of growth. Additionally,

millennials and generation Z represent around 30% of luxury retail sales, the fastest growing and most consistent demographic in luxury today.

To maintain the loyalty and pristine brand reputation which it upholds, Supreme creates a “hype” around all of their products, offering exclusivity through limited amount, flash sales, pop-ups and other strategic branding techniques to create a social desire for their products. Only 11 storefront locations exist in the world, speaking to their exclusive image. Social media influencers are a major source of marketing for brands like Supreme, as these their reach, visibility, and sway are virtually unprecedented.

This modern approach to marketing and sales can certainly be taken and applied elsewhere within luxury industries, as newer, younger client bases emerge across specific sectors. Established luxury brands may be retaining customer loyalty for now, but must optimize their digital platforms in order to remain relevant into the future digital age of luxury sales, which will only get more competitive. This is especially true within the Luxury Beauty industry, in which major, established brands have traditionally dominated the market. However, with the rise of digital platforming, new, online-first cosmetic and fragrance shops like Volition and Glossier are emerging and competing with larger, traditional beauty brands.

As seen in other luxury markets, new digitally enabled practices have disrupted traditional models used by legacy brands. Social media influencers play a major role in marketing for luxury cosmetics, as many will follow after these online personalities (Instagram, YouTube, Twitter, Facebook), engaging in a community of sorts. The use of these distinct, well-known personalities helps to form more of a personalized, identifiable brand image, a key feature for health/wellness/beauty businesses that allows them to remain relevant and visible while appearing authentic. In addition, new digital technologies using both artificial intelligence and augmented reality allow for individually personalized, beauty shopping experiences. While these technologies are still developing in some respects, their role will only become more important as digital sales represent more and more of global luxury sales.

Conclusion

Moving forward, luxury companies will continue to be faced with the challenge of adapting to modern consumer practice and behavior. A 2018 McKinsey Report refers to this change in company strategy as a shift toward a Luxury 4.0 Operating Model, based on the concept of the Industry 4.0 Model. The Luxury 4.0 Model prioritizes customer knowledge, understanding past behaviors, interests, and predicting future behaviors. Artificial Intelligence technologies and other digital powers have created new possibilities and understandings within CRM. The other key feature of Luxury 4.0 is the importance of a brand’s positioning within the luxury ecosystem. Partnerships with other luxury organizations and social media influencers can significantly increase brand exposure, while simultaneously creating excitement and hype around a product, especially if it is (or perceived to be) sold in a limited amount.

The future challenges for all luxury brands will be building and retaining social capital in order to remain relevant in an increasingly competitive world of luxury products. As the Luxury 4.0 Model goes further into effect, it is now or never for some luxury brands. Ultimately, they must adapt to the inevitable digital future to survive our current era of Digital Darwinism.

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