How to thrive on the experiential luxury trend
In business, no one is immune to disruption. For the very wealthy, however, this isn’t always a bad thing. In the January 2019 issue of Harvard Business Review, Roger Martin, the director of the Martin Prosperity Institute, makes a remarkable analysis of how digital disruption and globalization make the wealthiest individuals and companies even stronger.
There’s opportunity here, then, for the luxury industry. The stocks of LVMH and Kering have performed better than average over the past six months. However, the S&P Global Luxury Index is down 12% over that same time, suggesting business isn’t easy for everyone in this sector. This might suggest that wealthy people with more money to spend are expecting even more from their beloved brands – and not all brands are keeping up.
So how can luxury goods firms ride the wave of disruption and keep up with their wealthy clients? According to the management consultancy Bain, luxury hospitality, fine wines and fine food have been growing faster than personal luxury goods for a while. This indicates that luxury experiences are stealing a march on luxury products. So, the question for luxury goods companies is in fact: what does experiential luxury mean in our context?
Here at IMD we recently ran a Reinventing Luxury: Strategic Conversations program. It was a great opportunity to gather insights from luxury senior executives, and in doing so I found a few trends and ideas for luxury brands looking to increase their experiential offerings.
The main thing to note is that experience is better thought of as a portfolio where digital can play a role – albeit not exclusively – and the luxury product itself still matters. It’s also important to remember that there’s a difference between experiences and transformational experiences. The latter are growing in importance since luxury consumers increasingly expect to learn, make meaningful connections, and see their lives and themselves differently.
Here are a few steps to follow when thinking about what experiences your luxury brand can offer:
Research Information & Knowledge Hub for additional information on IMD publications