Talking Business: Nick Stickland, Founder & Executive Creative Director at ODD asks on Drapers Online; what can luxury brands do in the face of China’s economic slowdown?
In 2014, China surged into second place for the country with the most millionaires (only surpassed by the US) and now has 213 billionaires (versus 117 in the UK). Such rapid economic development created a population with a newly-found wealth and a race to search for ways of displaying it. China has primarily looked to the West for inspiration, a significant 30% of luxury sales on average, derive from Chinese spenders. However, in the current economic climate, the incentive for Chinese shoppers to travel abroad for luxury goods has become less appealing. Luxury fashion brands are eyeing the depreciation of the Yuan and subsequent economic slowdown in China with increasing apprehension. While a raft of European luxury brands had enjoyed huge growth in recent times, brands including Burberry, Prada and Jimmy Choo have all recorded double-digit declines there since the start of the year. Beyond what’s happening in China, the problem lies in brand perception: some are becoming saturated or, worse still, considered ordinary. Wealthy consumers are starting to look for even more exclusive, undiscovered and unique products and brands.
Meanwhile, Western cash-strapped millennials are shifting their priorities from the more material statements of success and luxury like owning a property or having the newest car; to acquiring experiences. This has resulted in the thriving ‘sharing economy’. Rent the Runway, an online designer clothes rental service, is using the sharing economy to introduce a new element to luxury: accessibility. Dutch concept LENA brings this phenomenon into the physical world with its ‘fashion library’, which enables its pay-as-you-go members to borrow from its collection of vintage, upcoming and eco labels for little more than the price of a Spotify account.
If luxury products no longer hold the same exclusive attributes, they become far less desirable. Now, some brands are starting to push back and redefine what is seen as luxury. By adjusting the focus from products to experiences, brands are allowing luxury to continue to embody preciousness. And in terms of sales, it’s working. A 2014 Eventbrite nationwide study found that 78% of millennials would choose to spend money on a desirable experience or event, over buying a desirable product.
In order to stand out in today’s new luxury landscape; brands must focus on delivering incredible customer experiences and create a value beyond the product. Alexander Wang has achieved a great mix of luxury in terms of product and aesthetic but with enough grit and pace to make it feel a little more accessible. Its social and digital efforts are impressive, and its ever-changing flagship stores have become real destinations. Alexander Wang successfully bridges the gap between accessibility and exclusivity while retaining cutting-edge fashion credentials.
Meanwhile at Balmain, 29 year-old Olivier Rousteing has been taking the brand in a new direction. For the last five years, he has made waves in attracting a new generation of luxury consumer, revolutionising Balmain’s use of social media as a catalyst for growth. Rousteing has commented that, while his role is to create catwalk fashion for his admirable front row (which includes Kim Kardashian-West, Rihanna and Rosie Huntington-Whitely to name a few), he’s also doing it for young girls who can’t afford a thousand pound jacket and instead wear their version from the high-street. This appreciation and respect for millennials is not limited to Balmain, it’s an industry-wide movement impacting the way luxury brands market themselves.
Brands need to broaden their interests and offering from being manufacturers of luxury goods to facilitators of luxury moments. And it’s not just about standalone experiences and events. In-store experiences need to have a bigger focus on curation and inspiration. Crucially, these need to be at a pace that moves as quickly as millennials, who represent the future of the luxury consumer. Do this well, and these experiences will not only enrich people’s lives but, crucially, provide an environment where the product itself becomes a cherished keepsake of that moment of luxury.
Read the full article on Drapers online here.