Opinion: Why Asia’s luxury pole position is shaking up brands all over the world

I am writing this week’s column while flying at 35,000 feet above Japan on my way back to the US from Hong Kong. Over the last two weeks, I delivered several luxury keynote presentations, conducted workshops, and participated in countless meetings across the region, including stops in Singapore, Malaysia, and Hong Kong. I presented to more than a thousand people and interacted directly with dozens of ultra-high-net-worth individuals (UHNWI), luxury executives, and brands. Additionally, I had the chance to audit the experiences of several luxury brands across different categories. In all these conversations, training sessions, and experience evaluations, there was one clear takeaway for me: Asia is the new center for luxury. The numbers back this up. According to Équité Research and consistent with data from Bain, Asia has surpassed Europe and North America, becoming the leading region for personal luxury purchases for the past three years. There are a few reasons for this shift. Firstly, travel restrictions related to Covid-19 have redirected luxury purchases within the region, resulting in significantly reduced Chinese consumption outside of China. Across the Asia Pacific, and notably in mainland China, there is an unprecedented surge in the opening of new luxury malls, many featuring spectacular designs and offering impeccable client service, with a focus on top-tier clients. Secondly, the accumulation of wealth is a significant driver of the region's growth. In locations such as Singapore, Malaysia, and Taiwan, the number of high-net-worth individuals (HNWI) and UHNWIs with assets surpassing 50 million USD is growing disproportionately. During a keynote presentation in Singapore, I addressed an audience of over 500 HNWI in a single room, reflecting the immense wealth generated over the last two or three decades. Moreover, in Asia, expectations for service are the highest globally. As a result, whether in hospitality or retail, the delivery of client experiences in Asia is among the highest worldwide. The quality of service delivery that I experienced over the last two weeks in Asia has been dramatically higher than practically anything I witnessed in the US or Europe over the last two years. For example, my 37-minute flight in Singapore Airlines' business class from Singapore to Kuala Lumpur was mind-blowing, including an exceptional meal. Despite the short flight time, the experience never felt rushed. It was service perfection with almost theatrical precision and the utmost care and empathy. Now, let's contrast this with my 17-hour business class flight on one of the leading US airlines from San Francisco to Singapore, where the service was just “fine” (remember, the “f-word” in luxury), but at no point was it exceptional or even memorable. While some airlines use 37 minutes on a flight to create life-changing and unforgettable experiences, others provide 17 hours of mediocrity, offering nothing more than a larger seat and robotic service at high price points. This stark contrast illustrates the difference between Asia and the rest of the world. While some airlines use 37 minutes on a flight to create life-changing and unforgettable experiences, others provide 17 hours of mediocrity, offering nothing more than a larger seat and robotic service at high price points. I had the chance to experience five exceptional hotels within the two weeks, and the level of service, dedication to the guest experience, and genuine care were dramatically more pronounced compared to most of my hotel stays in Europe or the Americas. While training some of the teams, I can also attest that the focus on providing exceptional delights is much more pronounced than what I witnessed in other regions. This aligns with the high expectations and expertise of Asian luxury clients. The concentration of Birkin bags I observed over the last two weeks was truly impressive. At the airports, a significant number of travelers paid utmost attention to the style of their carry-ons (the latest Rimowa collection everywhere!), and I noticed countless people already showcasing the latest Louis Vuitton capsule by Pharrell Williams. Asian clients pay close attention to the latest trends and are increasingly opting for brands that prioritize substance over effect, making it the quiet luxury mega-region. Whether it's Zegna or Brunello Cucinelli, Dior or Hermès, Patek or AP, consumers seek the best without being too flashy, quietly replacing brands that favor hype over extreme value creation. Whether it's Zegna or Brunello Cucinelli, Dior or Hermès, consumers seek the best without being too flashy, quietly replacing brands that favor hype over extreme value creation. Especially in China, luxury clients are much younger than in the rest of the world; the average age for Chinese luxury consumers is 29, representing the highest Gen Z share worldwide. And the implications for global brands could not be more dramatic. As Asia is now in the pole position for luxury consumption with a young and demanding clientele that is exposed to the highest service standards, many brands need to step up their game. This doesn't imply making slight adjustments; rather, it requires a dramatic reinvention to stay relevant. If hotels, restaurants, and airlines in Europe and the US aim to continue attracting Asian clients, a significant recalibration of customer journeys, service deliveries, culture, and training will be essential. The pressure on many Western brands increases as wealthy Asians steer their money towards brands they believe in the most and divest from those that don’t provide sufficient perceived value. What they experience is what they invest in. The luxury industry is at a pivotal moment. In addition to the regional shift, there is mounting pressure from a young generation that many brands struggle to connect with, amplified by higher overall expectations and technological disruption in all aspects of the client journey. The expectation of luxury clients is shifting from sheer products to the creation of cultural capital, overwhelming many brands. I predicted at the beginning of this decade that half of luxury brands will disappear or significantly decline by 2030 — the actual number may be even higher. This is evident when observing the strongly negative market shares of some legacy premium car makers, fashion and jewelry brands, and retailers. The competition is heating up, and those not at the top of their game are gambling their future. But for those brands embracing the change, the future is bright. It is not surprising that the distance between the best-managed luxury brands in the world and the rest is increasing rather than decreasing. It's a new game of luxury, and brands need to prepare now for the shift. This involves reassessing how well brand values are defined and differentiated, how well culture is defined and lived within the organization, and how well the customer journey is developed to provide perpetual surprise and delight instead of merely being “fine.” A refocus on extreme value creation is needed. The sense of urgency could not be higher. This is an opinion piece by Daniel Langer, CEO of Équité, recognized as one of the “Global Top Five Luxury Key Opinion Leaders to Watch.” Executive professor of luxury strategy and pricing at Pepperdine University in Malibu and professor of luxury at NYU, New York, he’s authored best-selling books on luxury management, and is a respected global keynote speaker and sought-after luxury expert, appearing on platforms like Bloomberg TV, Forbes and The Economist. Holding an MBA and a PhD in luxury management, Langer has received education from Harvard Business School. All opinions expressed in the column are his own and do not reflect the official position of Jing Daily. Follow him: LinkedIn: www.linkedin.com/in/drlanger Instagram: @drdaniellanger

Opinion: Why Asia’s luxury pole position is shaking up brands all over the world

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Published January 22, 2024

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Opinion: Why Asia’s luxury pole position is shaking up brands all over the world