OK, giant luxury conglomerates: time to think even more broadly about brand extensions. According to a new report from Boston Consulting Group, the luxury experiences market is now worth a whopping $980bn (luxury experiences being defined as cars, art, home, tech, dining, hotels, travel, spas, yachting, etc.). Aka almost $1tn. By comparison, the personal luxury goods market is a piddling $390bn. Now, where would YOU put your investment?
Driving this spend is what the report calls a shift from “having” to “being”, and it is happening in two big consumer segments: the old and the young. As luxury consumers age, they have enough stuff, so what they want to spend their money on are experiences and environments. How many alligator belts and Savile Row suits can one man own? But, oh, those safari opportunities!
Meanwhile, the millennials are driven by that old IWWIWWIWI thing – I want what I want when I want it – and so would rather spend money on immediate gratification services (such as Rent the Runway) as opposed to save up for that one, last-forever handbag.
All of which means what?
Well, according to partner Jean-Marc Bellaiche, LVMH’s decision to create an entire “hotel and hospitality” branch, and invest heavily in brands such as Cheval Blanc and its five-star potential, or the Bulgari hotels, is a smart move when it comes to that spread-the-risk-watch-your-back thing (it might offset the slowing rate of growth, as seen in their just-reported 2013 results; this will provide an alternative source of revenue in the future).
It means the whole “in-store” experience thing is going to be taken to ever-higher levels (à la Solange Azagury-Partridge’s jewellery “maison” in London, which is more akin to a posh private home than a store).
And it means, I guess, if brands are smart they will start thinking about how natural ways product-based names could be transformed into service purveyors. A Puma adventure holiday, for example? Or football tour, now they’ve partnered with Arsenal? A meaningful tie-up between, say, a tech company and a luxury group, to do more than simply design tablet or phone cases, but perhaps look at the hardware itself?
Whatever the specific answer, in a more macro sense it means we will see the brands that specialise in that little triangle at the top of the consumer pyramid across sectors formerly viewed as discrete areas – traditional luxury (silk, leathergoods, apparel, watches and jewellery); luxury hospitality; automotive luxury; home furnishing; luxury kitchens; what have you – grow ever closer, as they all chase that same slice of the consumer pie. Ferrari and Porsche are already making gestures towards moving into clothing.
Then the fight for market share will really begin.