What does the Next Normal of the luxury landscape look like during and after the Corona crisis, and how are trends changing? A big bang to the advantage of agile, digital, sustainable and social business models agile, digital, sustainable and social business models
By expert Julia Riedmeier "Neo Luxury"
Author: Julia Riedmeier
The Next Normal of the luxury landscape - What comes after revenge spending
The pandemic has and will change fundamental aspects of the luxury industry and the understanding of luxury. A look into the Baccarat crystal ball remains cloudy, because the future, the Next Normal, is too uncertain. Whether the luxury landscape becomes more fragmented or polarized, on the part of companies and consumers, remains to be seen. Especially once the initial revenge spending is over. What is safe to say is that the luxury market is sensitive, like an orchid that sheds blossoms when there are signs of crisis and begins to form buds when there are signs of recovery.
After the financial and economic crisis of 2008/2009 and the Chinese Bulimia that followed, the luxury market would have arrived at the New Normal. 2020 looked promising for the luxury industry in general. The 2019 financial year ended on a positive note - with €281 billion in global sales, according to Bain & Company, representing four percent growth - and the first few weeks of 2020 seemed to continue the successful trajectory. But suddenly, the pandemic shattered global normality.
Big Bang because of COVID-19 - agile, digital, sustainable, social
After initial survival strategies, the crisis caused us to question: what are we actually doing here, what is important to us, what is relevant? As a company, as an entrepreneur, as a consumer. What is our drive, our concern, our purpose? It feels as if the constant "higher, faster, further", the striving for growth, sales, margins has known no bounds in recent years. Consumption was often (still) driven by the next hype, the next limited edition, the next instagrammable travel moment. Sustainable? Hardly at all. Now we come to a stop. To reflect. To change. Hopefully. The Big Bang is here and we suddenly had to react. Agile, digital, sustainable, social.
But whether this attitude will prevail in the long term after this bang remains to be seen. Because as can be observed, these movements were already visible before, but the change was slow, as the sense of urgency probably did not seem acute enough. Also, after overcoming the shock rigidity and first steps into the Next Normal, the general desire for the accustomed normal seems very strong and the old patterns tempting. On the consumer side as well as on the corporate side. But now it is up to companies to show backbone, to use their power and role in the sense of purposeful leadership with a social, ethical and ecological awareness and, above all, to mean business.
Importance of NEO luxury in times of crisis - quality over quantity
Julia Riedmeier and Dr. Jörg Meurer have elaborated and defined the phenomenon in the NEO Luxury study. According to this study, NEO luxury is the third evolutionary stage of luxury, after the traditional luxury of possession and the new luxury of experience. As a luxury of meaning, it seems more relevant today than ever before. Characterized by seven trends, of which the top trends sustainability (relevance: 72%), health and mindfulness (relevance: 70%), digitalization of luxury including the digital detox countertrend (relevance: 71%) point the way to the next normal. What is new is that the weakest trend "Lean Luxury" (relevance: 35%) and thus the conscious renunciation, the focusing of consumption could get a strong lift against the current background.
The crisis reinforces this and shows us to make do with what we have and to put quality even more before quantity. This also raises the question of what luxury consumers will still be willing to spend money on and to what extent when economic and financial systems are subject to unpredictable dynamics. Will non-luxury be the new luxury? Or is the luxury of ownership experiencing a revival as an investment luxury - also because experiential luxury is currently not possible?
NEO Luxury definition
Source: LBR Luxury Business Report, NEO Luxury Study
If luxury is experiencing a return to ownership, are the winners icons like a Montblanc Meisterstück, a Porsche XNUMX or a Robbe & Berking collection? And losers "Gucci" newbies waiting to hunt down trendy truffle pigs? Regardless of which direction luxury moves in, one thing is clear: consumption will become more conscious. One opportunity lies in particular in the "Made in Germany" seal and manufactories that impress with national supply chains and can best satisfy the consumer's desire for transparency, social and ethical responsibility on the part of the company qua basic attitude.
In the midfield are the trends Sharing and XNUMXnd Life business models (relevance: XNUMX%), increasing luxury casualization, democratization to Public Luxury (relevance: XNUMX%). These will find their way and their position. To quote Andreas Henke from the INLUX/KEYLENS NEO Luxury Study: "If there are business models for sharing and XNUMXnd-life, they will work - until I realize at some point in the crisis that I have only borrowed. That has no substance; it's ultimately against human evolution."
The seventh trend is that of individualization, customization, co-creation (relevance: 75%). This will continue to have its justification. However, whether it will be in pole position and in the form in which we know it remains questionable. After all, we have seen for ourselves that other needs are currently in the foreground.
Success factors for navigating into a next normal
Specifically, the following three guard rails can set the framework for the next normal:
1. Ecological and social sustainability
More than ever, companies should fulfill their corporate duty. As corporate citizens, they should take responsibility for the community and environment in which they operate. In sum, they should act in a socially responsible manner, treat internal and external stakeholders with respect, and offer services and products that do not fuel narcissistic power, but instead have a positive effect on the ecosystem.
Digitization is an important driver and enabler for the Next Normal. Even before Corona, the elementary function and integration of digital elements was becoming apparent. Whether for consumers or companies in the sense of products, communication, distribution or processes. Here, the question should be asked: Which analog formats, parts of the value chain exist and which can be digitized and how? How can a personalized marketing experience be created? How can consumers be reached and excited through e-commerce options? Investments should thus be shifted to the digital.
Many companies are discovering a new customer. The end customer. For a long time, this was left to the trade. CRM is often a foreign word, as is systematic lead management. So it's no wonder that luxury brands know so little about their customers. But precisely this knowledge is essential and direct access to end customers is now becoming a key factor. Young target groups such as millennials in particular are looking for direct contact with the brand online. To inform, to inspire, to interact with the brand. Based on the fact that, according to Bain & Company, XNUMX% of global luxury consumers will be younger generations, the opportunity fields should be pulsating for luxury brands.
Losers and winners of the luxury industry
In general, XNUMX will be a bad year for the economy, and the luxury industry is not spared. The players have it in their own hands to reshape the industry. To use the crisis as an opportunity, to throw the old overboard and to go new ways that would have been (almost) unthinkable a few months ago. More than ever, the sense as well as innovation momentum of NEO Luxury is in the foreground. Who emerges as a winner or loser from the crisis could largely depend on the following factors.
- Was the company healthy and authentic before the crisis - corporate values become visible and it becomes apparent which ones are lived and which ones are just empty words.
- How agile, digital, autonomous is the business model set up - in terms of agile response, digital readiness, collaboration with suppliers and sovereignty over the supply chain.
- The general response to the crisis.
Four out of 18 management implications emerged from the INLUX/KEYLENS NEO Luxus study as top actions that should not be missing from any CEO agenda: expand digital competence, make Customer Centricity a core strategic issue, change management towards a multi-generational/nation team character and change current business model. Even in times of Corona, these are shown to retain their validity and even become more important. This, in combination with the key factors mentioned above, can provide guidance at a time when almost anything seems possible.
You can download the NEO Luxury study right here .