Digital Luxury: How The Digital Transformation Shapes Luxury Brands
Digitalization, changing consumption requirements, and new target groups are revolutionizing the world of luxury goods in disruptive ways. The study is an international caomparison of the effects of digitalization on luxury brands and the perception of luxury.
The drastic changes brought on by digitalization are making one thing abundantly clear: It is no longer the unique innovation, the outstanding product, or the superb service that makes or breaks a company. It is closeness – the total melding of brand with customer: "Zero Distance". Digitalization brings people closer to each other, and for brands, the race for closer customer relationships is officially on.
The generation of millennials was born into this digital age. Digitalization is part of their lives, and for them it is a means to an end for their self-presentation. Millennials are considered the luxury buyers of the future, because they love luxury and will gain buying power in the coming years. By 2025, this group of customers will account for about 40 % of sales in the luxury segment.
Luxury brands now have to step up. They have to react – without being untrue to themselves. But how? Based on the two previous luxury studies conducted in 2007 and 2012, the current study explicitly deals with the topics of digitalization, millennials, and changed behaviors in the luxury context.
As in 2012, we are looking at the DACH countries (Germany, Austria, and Switzerland), China, and the USA. An essential innovation is that we included the viewpoints of different age groups: the older elite luxury buyers (above age 35) and the emerging group of luxury customers, the millennials (younger than 35). We focused on the three segments Watches & Jewelry, Textiles, and Automobiles.
The study answers the following questions:
- What are the differences between the luxury perceptions of millennials and older elite luxury group?
- How is the luxury perception developing (material vs. immaterial) in the different cultures (DACH, China, and USA)? On what questions are the perspectives homogeneous or heterogeneous?
- What must luxury brands do in the future to remain internationally attractive and relevant?
- What digital demands are millennials and older elite buyers currently making of luxury brands? How will digitalization revolutionize the luxury market in the long term?
Some of the key insights gained by the study are:
- Despite digital transformation: The tradition of a brand is incontrovertible. It gives the brand mystique, elegance, and authenticity. The challenge is to skillfully connect this tradition with the digital world, in order to grow organically as a brand. The question arises how much innovation is good for a brand, and whether co-creation can be of benefit to a brand.
- The purchase phase is losing importance, the pre- and post-purchase phases are increasingly considered central to the customer journey. They have to create a unique brand experience in order to leave a lasting impression with the customer.
- Amazon is the new protagonist in the luxury segment and is becoming more relevant during the customer journey due to its function as a customer review hub.
- Survey respondents appreciate the No-Line principle: The merging of all online and offline brand touchpoints, which make for a consistent customer journey and envelop it in the "brand ecosystem". Omnipresence and the exclusivity of luxury brands by no means rule each other out.
- Study participants are rather skeptical about the relevance of influencers on channels like Instagram. The question arises whether these protagonists in the digital world distort the identities of luxury brands or even weaken them.
Study design: Puls Marktforschung questioned 1,514 respondents. The sample consisted of 506 participants from Germany, 238 Austrians, 238 respondents from Switzerland, 272 from the USA, and 260 from China. The survey was carried out in July 2018. Most of the participants were of the top ten percent of the income range, the most relevant income bracket for luxury brands. Another filter was applied to query the knowledge and general affinity of millennials for luxury brands. However, we also added "prospective buyers" – millennials who are not yet among the top 10% of earners.
Find out more in our study "Digital Luxury: How The Digital Transformation Shapes Luxury Brands"