The chang­ing face of the lux­ury mar­ket

With dis­rup­tion tak­ing hold in the re­gion’s lux­ury sec­tor, Maya Kusybi ex­am­ines how brands are be­ing forced to re­think their mind­set and op­er­ate in a new re­tail era

Gulf Business - - CONTENTS -

Lux­ury was once de­fined sim­ply by price and qual­ity, but un­less you have been liv­ing in a par­al­lel uni­verse, you will re­alise that this is no longer the case.

Today, the ques­tion of lux­ury is ul­ti­mately a per­sonal one. A black cot­ton Ar­mani T-shirt can be some­one’s trea­sured closet piece, while for some­one else, an ul­tra-rare Her­mes Birkin could be just another col­lectible. In both cases, lux­ury is not easy to de­fine and is def­i­nitely not limited to a sin­gle phys­i­cal item. The evo­lu­tion of this in­tri­cate cat­e­gory has def­i­nitely had an im­pact on how con­sumers per­ceive lux­ury today, and how brands and mar­kets are shift­ing to keep up with th­ese changes.

The global lux­ury mar­ket is a mas­sive plat­form and con­tin­ues to grow, ex­ceed­ing $1 tril­lion in 2016. What is in­ter­est­ing, how­ever, is that al­though the phys­i­cal prod­uct seems to be the star of any lux­ury pur­chase, the per­sonal lux­ury goods cat­e­gory is es­sen­tially flat, with the ex­cep­tion of lux­ury au­to­mo­bile pur­chases. Today, there is an ob­vi­ous shift in lux­ury con­sump­tion habits with the growth of out-of-home ex­pe­ri­ences. This new sect comes in the form of travel, gas­tron­omy, hos­pi­tal­ity, and is grow­ing faster than any lux­ury goods di­vi­sion, by at least 5 per cent.

While whole­sale re­mains the largest chan­nel for per­sonal lux­ury goods, the re­tail chan­nel is mas­sively evolv­ing in the form of e-com­merce and off-price stores, al­low­ing for a smooth and in­stant pur­chase jour­ney for today’s de­mand­ing cus­tomer. Not only is ev­ery­thing avail­able on­line, but prod­ucts within lux­ury cat­e­gories have also been made more ca­sual, with sneak­ers and back­packs amount­ing to a mas­sive $3bn and $2bn mar­ket re­spec­tively, while sales in the hard lux­ury cat­e­gory in­clud­ing watches and jew­ellery have de­clined by 5 per cent in 2016. In the UAE, money never pre­vi­ously seemed to be a vari­able in any pur­chase, let alone lux­ury pur­chases. But sev­eral eco­nomic fac­tors have had a ma­jor im­pact on the coun­try’s lux­ury sec­tor. The de­val­u­a­tion of Rus­sian and Chi­nese cur­ren­cies, de­crease in touris­tic spends, oil price changes and re­gional politi­cal ten­sion are the main drivers of the past and there are more im­pli­ca­tions to come. In 2018, it is ex­pected that con­sumer con­fi­dence and spend­ing will be dis­rupted mainly among the mid­dle and mid­dle-up­per in­come class with the in­tro­duc­tion of VAT.

Be­yond eco­nomic fac­tors that are out of our con­trol, the young coun­try has also wit­nessed sev­eral nat­u­ral fac­tors within day to day life that have had im­pli­ca­tions to­wards the shift in lux­ury per­cep­tion and be­hav­iour.

The ex­plo­sion in high-end ‘ hip­ster’ cul­ture has cre­ated an in­ter­est in min­i­mal­ism and a sim­pler life­style. Liv­ing in this coun­try, many of us have heard sto­ries of be­ing re­jected en­try into a cer­tain club for wear­ing sneak­ers, but


what has hap­pened now that sneak­ers have be­came the ul­ti­mate fash­ion icon, and every brand from Kenzo to Gucci is fea­tur­ing the state­ment piece in their lat­est col­lec­tion? Are we still banned en­try or has this trans­formed into ac­cept­able fash­ion and pre­mium at­tire? Min­i­mal­ism also comes in the form of pop-up en­ter­tain­ment events and spa­ces, health and fit­ness ex­pe­ri­ences, and the growth of lo­cal fash­ion brands – all the while shift­ing af­flu­ent con­sumers away from an ex­trav­a­gant and de­signer la­belled cul­ture.

Things to do and places to visit have be­come far more sim­ple, af­ford­able, and ca­sual. One would never have ex­pected that dur­ing her short visit to Dubai, A-list pop star Ri­hanna would visit the muchloved ur­ban and ca­sual Ja­maican venue, Miss Lily's, in­stead of din­ing at one of the city’s top-end restau­rants. Lux­ury in the UAE has be­come sim­ple and di­verse in def­i­ni­tion, and in ex­pe­ri­ence.

Mil­len­ni­als in the coun­try are an ad­di­tional driver of the sim­plic­ity of life, while fu­elling a cul­ture of en­trepreneur­ship ver­sus full-time em­ploy­ment. With that, an ex­pe­ri­en­tial life­style is driven by a work-life con­tin­uum where travel ex­pe­ri­ences are all the more fre­quent and im­por­tant. This has in­spired non-en­trepreneurs and full time em­ploy­ees to fol­low suit. In­vest­ment in travel, self-ex­pe­ri­ence, and ex­plo­ration are be­ing recog­nised as a much higher pri­or­ity than buy­ing the lat­est Chanel boy hand­bag.

Al­though such rea­sons sug­gest a much sim­pler def­i­ni­tion of lux­ury, dis­pos­able in­come con­tin­ues to grow in the coun­try de­spite damp­ened con­sumer con­fi­dence due to fall­ing en­ergy prices.

Sup­ported by high mo­bile pen­e­tra­tion, pay­ment meth­ods us­ing smart­phones are on the rise and the trend is spread­ing against nu­mer­ous cat­e­gories. Not only are th­ese high pen­e­tra­tions al­low­ing for in­stant con­nec­tiv­ity and pur­chases, but they are also are linked to the boom of so­cial, con­tent and in­flu­encer mar­ket­ing. Lo­cal am­bas­sadors and con­tent integration are al­most force­fully a part of the daily rou­tine within the lux­ury world and ex­pe­ri­ence. This ex­po­sure not only cre­ates crav­ings and the urge to own cer­tain items, but also clearly demon­strates a head-to-head col­li­sion with the min­i­mal­is­tic cul­ture tak­ing place. In light of this eco­nomic re­al­ity and the con­tra­dic­tory changes in lo­cal UAE cul­ture, what re­ally de­fines lux­ury for a UAE con­sumer? Do we find our­selves trapped or un­will­ing to let go of the old mind-set, or are we ac­cept­ing the new?

This ‘old’, rep­re­sents the tra­di­tion­al­ists, whom are lux­ury am­bas­sadors hold­ing on to the ma­te­rial world, the legacy brand her­itage, and the time­less­ness of phys­i­cal prod­uct. Mean­while, the ‘new’ rep­re­sents lux­ury fu­tur­ists, who be­lieve in own­ing ex­pe­ri­ences over things, and a knowl­edge shar­ing econ­omy driven by sto­ries and pur­pose be­hind each brand. Where do we re­ally stand as UAE lux­ury con­sumers?

Sug­gested re­search, fo­cus groups, and stud­ies can­not de­fine an ex­act an­swer. In fact, re­sults sug­gest that we are stuck some­where in-be­tween where we may feel like lux­ury fu­tur­ists, but think and act mostly like lux­ury tra­di­tion­al­ists.

That be­ing said, the re­search sug­gests that UAE lux­ury buy­ers seem to have em­braced new think­ing, with 66 per cent fall­ing un­der the new, and 34 per cent ex­ist­ing un­der the old lux­ury mind-set. Mov­ing for­ward, lux­ury brands must put the con­sumer, the con­sumer jour­ney, or more ac­cu­rately, con­sumer ex­pe­ri­ence plan­ning at the very heart of any model or method. Ac­cord­ing to Publi­cis Me­dia’s lat­est Busi­ness Trans­for­ma­tion study, the fash­ion and re­tail cat­e­gory is the most likely to ex­pe­ri­ence high dis­rup­tion in the next five years, so con­tin­u­a­tion to a new model is nec­es­sary to make brands rel­e­vant to their end users.

Over­all, lux­ury is a form of self­ex­pres­sion, rather than a sta­tus sym­bol. It has be­come more ac­ces­si­ble to a wider au­di­ence of peo­ple through­out a chang­ing shift of con­sump­tion, econ­omy, and most im­por­tantly, ex­pe­ri­ence it­self. In light of those shifts, the evo­lu­tion of this sump­tu­ous cat­e­gory has not only re-shaped con­sumer per­cep­tions and un­der­stand­ings of lux­ury, but also en­cour­aged brands to fo­cus on ex­pe­ri­ence over own­er­ship and adapt to fast-chang­ing con­sumer needs to sur­vive th­ese tur­bu­lent times.

Maya Kusybi is as­so­ciate direc­tor – me­dia at Zenith Mid­dle East

Newspapers in English

Newspapers from UAE

© PressReader. All rights reserved.