Umberto Angeloni, ancien CEO de Brioni, CEO de Caruso & créateur de Uman, a accepté de partager sur BrandWatch ses réflexions sur l'avenir des marques de luxe et du retail. Il m'a semblé essentiel, dans cette période où tous célèbrent le retour du "business as usual" et suivent des yeux le redémarrage rapide des ventes des marques de luxe, de revenir à des interrogations importantes - tout particulièrement sur les évolutions fondamentales des attentes des consommateurs dont nous sommes témoins aujourd'hui. Encore faut-il que les marques de luxe s'y intéressent...
“We love questioning. Questioning conventions. Questioning design. Questioning value for money.”
This statement is not by a fashion or luxury brand, it is by Hyundai motor company, in a recent double-page advertisement in the Economist (April 2nd), with no product being shown, just a big white question mark on a blue background [part of the “New Thinking – New Possibilities” campaign].
One quick look at the advertisements currently featured by luxury brands shows quite an opposite perspective – lots of showy product and a flat message of glamour, glitter and gold.
But how can we tell which of the two approaches is the right one, i.e. the one which better resonates with the sentiment of today’s affluent consumers?
I believe that any meaningful discussion about tactics and strategies in an industry, all industries, should begin with a clear vision of the environment we live in – society, culture, science, ethics, beliefs, economics, technology – and how its evolution impacts customers’ behavior. This is especially true today, when so many of said variables are changing, and to such an extent that any practice based on past experience or abstract theory runs the serious risk of being totally irrelevant. Naturally, there is more than one reality co-existing at the same time and in different geographic markets, but there is no denying the fact that we are now collectively living into what has been defined a “Reset World” (1), and that the affluent consumer is much more global than we may suspect.
If one accepts such a scenario, the next step is to start questioning.
The necessity of assuming this radical perspective has already become evident to the more visionary observers and bolder entrepreneurs. Tyler Brulè just published the “Global Rethink Issue” of Monocle, which he opens by saying that: “Sometimes you just know it’s time to go back to the drawing board, to take a fresh look at everything you do. That’s especially true for retailers with tired concepts… and those with the confidence to burst out of the recession with a new look and direction are sure to be on top.” Uman was likewise launched in 2009 with a mission: “to review, re-evaluate or revolutionize, as needed, all the assumptions, rules, rituals, and processes that have been at the basis of the fashion and clothing industry up to now” (2).
I am not an expert in retailing, nor a retailer by profession, and therefore it would be presumptuous of me to provide advice or comment on the mechanics of this industry. However, I do believe that an industry such as fashion and luxury retailing, which deals directly with the most sophisticated consumers, cannot afford to overlook the need to question and evolve. Therefore, what I plan to do with this essay is primarily to raise some questions, and to share my personal sense of energy and urgency towards evolution in our business.
Fashion is supposed to inspire consumers and luxury is expected to enrich their lifestyle, but how can they do so if the companies that create, promote and distribute luxuries do not themselves understand the evolution of consumers’ beliefs, needs, priorities, values? It is ironic that while fashion brands have been on an endless hunt for a “new” customer, it eludes them that he/she is finally here…. clearly, they were just looking for the “next” customer. Whom they now believe to have found in China, and perhaps online.
In terms of distribution, the Brands have definitely stated that they now put all their faith in the DOS model, especially in the mature markets (Europe, Japan, the USA); which means that they will showcase their best and newest products only in their own flagships and official e-commerce sites. Second-tier preferred distribution channels will be the franchises or the joint ventures (still the mono-brand format), especially in the newer markets, which they see as powerful generators of future demand. Outlets and other direct means of distribution (duty-free, catalogs) will complete the company-controlled retail network.
Where does all this leave the so-called “independents”? Having borne more than their share of the downturn, with no help from the brands, some can remain as distributors. Provided they do what they are told – in terms of layouts, minimums, styles, prices, sales. The luckier ones will also be offered construction money, so that they can surrender the best part of their retail space to the control of some brand.
So here comes the first big question. Should the truly independent multi-brand retailers take control of their own destiny and charter a new path? Should they be content to participate in a recovery or should they also attempt to become leaders in a renaissance?
Reading the trade literature and listening to what is being declared at retail summits, it seems that there is little appetite (or courage) for the bolder approach. Actually, typical reactions by retailers so far have been:
- Staying “loyal” to the brands, offering them more space, hoping for their magnanimous support
- Buying “lesser” goods (cheaper and with less quality) as the consumer is deemed wanting to trade down
- Trying overly fancy and sporty items as the classic ones are considered “dead” for the moment
All of this is defensive action, not proactive; driven by anxiety, not by intelligence; contrary to sound wisdom (“always trade up your customer” once taught me Harry Rosen) or past experience (when were brands ever loyal to retailers?). But the main flaw of this “strategy” is the fact that it goes in the wrong direction, i.e. contrary to consumers’ real benefit and inner desire: the consumer wants better prices and better quality. In other words, he wants to trade-up in value. And he is not changing his tastes or sense of style, merely containing his purchases both in a spirit of shijuku (3) as well as to make better decisions.
But let’s assume for argument’s sake that the answer was yes! Then the challenge becomes to defining the “formula” for a seriously evolved multi-brand retail model.
A lot of statistics and advice is made available by the many research firms and consultancies that operate around the retail industry, too often presented as lists of “zeitgeist retail trends” or “global retail insights”, that can be found simply browsing the web. In my experience, they often range from either truisms of the “La Palice” kind, such as: "…hire nice, smart, talented people " (Dionco Inc.), enigmatic statements like … “a store environment needs to be real” (World Retail Congress 2010), or formulaic suggestions, like "… focus on behavioral targeting as a way to drive increased engagement…" (Forrester Research).
Let me clarify that I obviously do recognize the value of investing in superior assets, whether of the technological or human kind, either material or immaterial, and the benefit of constantly improving the quality of a “technique”. Mitchells is a prime example of this in the field of CRM. I am also a believer in analyzing data as the basis for better decision-making and ultimately better performance (4). However, it is my opinion that the current market circumstances require a more holistic and evolutionary approach.
I keep purposely using the word “evolution” and not the more abused, vague and potentially dangerous notions of “change”, “innovation” or “revolution”.
Evolution is “a process of advance from a lower, simpler or worse to a higher, more complex, or better state” (Webster); therefore not change per se or always a total break with the past. Evolution means adapting to a different environment, in our case to a different consumer’s sentiment, which in itself reflects a permanent change in society. While nothing escapes evolution and certain adjustments could be profound, not everything should necessarily be modified at the same time and the process does not need be a violent one.
Thus everything should begin with the determination of such evolved consumer sentiment. Sounds obvious, and easy too, but it can be quite difficult, especially in a situation where:
- We are interested in long-term, permanent changes, not reactions that are typical of a recessionary period. Thus “it is necessary to look beyond the surface data occurring with the consumer and begin to focus on underlying structural shifts in behaviors” correctly notes analyst Richard Hastings (Global Hunter Securities)
- The consumer strongly wants something new, but he often does not know what it is, or to what extent it should be different; thus inspiration on the part of the retailer is much more relevant than interrogation of the client (“crowdsourcing” being an odd exercise when it comes to fashion anyways).
Since this is still an on-going process, can we discern anything yet? I believe there are already several solid clues, among which the most relevant to luxury players are the following:
- The paramount importance of value, probably number one. By this term I mean the “benefit/price” ratio, where the first term includes tangible factors such as both quality and service.
Selling “dreams” is no longer sufficient, lack of attention to the value-proposition can result into resistance for prices that are deemed inflated and/or quality and service that are considered inadequate. This is especially true for the affluent consumer, who today feels a sense of empowerment, solidarity with his peers (5) and an almost ethical imperative to be prudent and wise about his investments in luxury. “Consumers will not abandon the resourceful purchasing model that has been a hard-won benefit of the Recession years: the affluent and wealthy market, will insist on extraordinary quality, service and craftsmanship at a discounted price (6)”. Thus I find very unfair the stance taken by some retailers to demonize the consumer for wanting better terms of trade, or even for waiting for legitimate markdowns, almost threatening to deprive him of merchandise (7). Brands should also realize that certain opulent and ostentatious ways of promoting luxury are today counter-productive, since the consumer knows that he must ultimately pay for them (8).
- The relevance of general values in the act of acquisition and consumption. Of the four fundamental drives that guide human action – the drive to learn, to bond, to believe and to acquire (9)– the latter has become less important than the others. Intelligent consumers now feel a sense of responsibility and understand that their consumption has social, environmental and moral impacts. I believe this to be a long-term evolutionary process, that has just been accelerated by the Recession (10).
On this level, luxury brands have been quite insensitive and are now perceived as hopelessly irrelevant; other industries have been much more proactive and effective, and wealthy individuals have shown immensely bigger generosity. It is not by patronizing clients that they can now pretend to gain the moral high ground and their petty charity sometimes appear rather hollow, if not disturbing (11).
Until now retailers have invested significant resources and showed great ingenuity in “entertaining” their customers; perhaps there is a now a better opportunity to engage them on a more existential level.
- The eagerness to enquire and the willingness to experiment. There is a sense of fatigue and suspicion with the Brands’ bombastic claims for excellence, infallibility and uniqueness. Consumers are capable of looking beyond the label, in search of meaningful heritage, authentic provenance, transparent process, true exclusivity, relevant modernity. This provides a great opportunity for luxury retailers “to earn their curatorial stripes once more”, says Milton Pedraza, by getting rid of marginal brands, discovering new and niche manufacturers, filtering only what is valuable from the luxury brands and what is relevant from the designer ones (12). Retailers have been very good in educating consumers on brands, fashion and luxury, now they need to lead them on a new path to awareness, discovery, growth, relevance, value.
I believe that the emergence of serious competition in the form of multi-brand e-commerce is also the result of such consumer desire to expand its horizons. These new powerful online retailers have added editorial content to the offering, which is good but inevitably smells of house-organ journalism; they are also very smart at profiling their customers by utilizing advanced technology, although without much empathy; and on the merchandising side they have merely multiplied the number of brands and products they feature, as opposed to making the coherent and directional selection that men want. Hence there is still a great opportunity for the brick-and-mortar retailers to fulfill the need for evolution in choice, but with a consistency and a direction, and most importantly with the added-value of the one-to-one approach.
“The worst is over, and from now on it’s going to be business as usual”.
This view is understandably popular among luxury retailers. In reality, it is change that is gaining momentum, it’s becoming permanent, and I believe it is good. Thus the greatest risk is not change itself, but being perceived as insensitive to such shifts. And although the consequences may not appear immediately evident, we should never forget that “the consumer’s revenge, in the capitalist model, is to take his business elsewhere.” (13)
1) This definition of a “Reset World” was proposed by Prof. Vijay Govindarajan of the Tuck School of Business, who claims that the recession has triggered structural changes in economic and social mechanisms; this transformation seems to occur approximately every fifty years and, in particular, calls for “radical innovation” by companies.
2) Uman – The Lexicon (page 8), by Umberto Angeloni, 2010.
3) A new word coined to describe the sentiment of voluntary self-restraint prevalent among Japanese consumers following the tsunami.
4) According to still unpublished research, companies that adopted decisions based on “data and analysis” have achieved 5-6% higher productivity than those which used merely “experience and intuition”, among a sample of 179 U.S. companies. According to author Eric Brynjolfsson of the Sloan School of Management: “In a modern economy, information should be the prime asset – the raw material of new products and services, smarter decisions, competitive advantage for companies, and greater growth and productivity” (“Finding gold by mining the explosion in data”, IHT, April 25, 2011).
5) Words-of-mouth among affluent consumers is now becoming very efficient through online networks, such as FamilyBhive and other communities for the rich.
6) “Survey of Affluence and Wealth in America”, research by Dr. Jim Taylor, presented at the American Express Luxury Summit 2011.
7) This for example was the attitude of Saks’ CEO Steve Sadove (“Saks Chief Cuts Orders to Avoid Discounts” , Bloomberg, June 2009), who talked about introducing an artificial notion of “scarcity” by carrying less inventory; forgetting that a significant portion of Saks’ business comes from its 54 outlets (vs. 57 regular stores), whose official mission is to make sure: ...you get the style you want at the price you love (“Off Fifth” website).
8) “One should brutally focus on the added value, on those things that the customer wants to pay. Everything else is waste”, says Eberhard Weiblen, CEO of Porsche Consulting (Financial Times, April 5th 2011, page 14).
9) “Driven: how human nature shapes our choices”, by Paul R. Lawrence and Nitin Nohria of the Harvard Business School, 2002.
10) According to Prof. Jeremy Rifkin, for example, the progressive increase in empathy that is discernible throughout the history of mankind is the basis of what he defines a shift “from belongings to belonging“ (“The Empathic Civilization”, 2010).
11) They apply the same method of creating a “halo” effect by borrowing emotions or engaging celebrities. Moreover, the “charity” is almost invariably linked to a sale. It is significant that despite having earned billions in the Japanese market, no luxury brand felt the urge to make a simple donation to the victims of the tsunami; the only exceptions in the fashion world were UNIQLO, which donated € 13 million and Mr. Diego Della Valle, who personally donated € 900.000.
12) In a remarkable display of independence, Barneys has recently refused to grant Prada total control over its shop-in-shop, even if it meant forfeiting the brand’s clothing and bags.
13) Comment by a member of the AAAC clothing forum (dport 86), on a discussion about value.