Opinion: Why only the bold and fast survive

Today's luxury market is increasingly volatile with decelerating growth rates. Brands face a perfect storm of challenges, necessitating a strategic overhaul in brand strategy, storytelling, client experience, and a more sophisticated sales approach. Gen Z's heightened expectations, increased demand for sustainability, hyper-competition, and rapidly changing client preferences—particularly in China—have rendered outdated strategies ineffective. Sharpening the art of selling luxury has never been more critical. LVMH and Kering's struggles Several luxury brands underperformed in Q1 2024. LVMH, despite its significant market presence, reported a 2% decline in nominal revenue (+3% organic at fixed exchange rates), missing analyst expectations. The wines and spirits division, notably Hennessy Cognac, saw a significant 12% drop due to cautious restocking in the US and soft demand in China during the Chinese New Year. Kering faced even more dramatic difficulties, issuing a rare profit warning due to weakening demand for Gucci in China, where sales declined by 10% year-over-year. Yet, many luxury brands still follow the typical playbook and pay a high price: the revolving door of creative directors is turning faster than ever. Instead of building strong and lasting brand platforms with well-thought products fitting the brand’s storytelling, many new creative directors simply inject their own style into the brand, whether it fits or not. A new logo and creative campaign will not save a brand if the fundamentals are not tackled or the brand equity is not respected. The first stylistic preview of Alessandro Michele for Valentino feels like a copy-paste of his work for Gucci, leading many to call the brand “Vucci.” Similarly, Sabato de Sarno, who came to Gucci from Valentino, created a radical brand reset where nothing resembles the brand's previous expression. Tanking sales indicate the disastrous brand confusion at Gucci. Many commentators lament that the brand pivoted from being exciting, energetic, rule-breaking, and inclusive to now being predictable, undifferentiated, and boring. If a brand known for inspiration and provocation becomes boring, how can client excitement be expected? Gen Z: Demanding authenticity, sustainability Gen Z is reshaping the luxury market with their digital-first approach, especially in China, and their distinct values and expectations. This generation demands authenticity, sustainability, and inspiring experiences. Most brands today fail to create meaningful and memorable client interactions at scale, alienating Gen Z and losing relevance. Exchanging a creative director does not solve the need for a client-centric and holistic approach. Many luxury brands are too slow to make decisions and too detached from key markets like China. Chinese clients expect products made for them and with them in mind. This requires a shift from centrally imagined one-size-fits-all products to a high-speed, highly proactive client-centric and localized approach. Speed matters in China. By the time some brands make decisions, trends and expectations have already shifted, and their offerings miss the mark. Sustainability: Non-negotiable for luxury clients Sustainability is no longer a buzzword but a fundamental expectation. Luxury clients today are informed and concerned about the environmental and social impact of their purchases. Brands that do not prioritize sustainability will face backlash and diminished loyalty, especially with younger and top-tier clients. The luxury market is more competitive than ever. New entrants, disruptive technologies, and shifting consumer behaviors intensify the competitive landscape. China presents unique challenges and opportunities. The rapid pace of change and sophisticated, discerning clientele demand a nuanced approach. Western brands often falter by relying on outdated strategies and failing to understand local preferences and cultural nuances. Western luxury car brands are seeing their market shares erode. In my view, this is not temporary but only the beginning. Multi-dimensional strategy: Client-centricity and storytelling All these challenges require a multi-dimensional approach, from reviewing the organizational setup to replacing product-centricity with client-centricity, speeding up decision-making, generating real-time client insights, optimizing and differentiating brand storytelling and experience, and creating strategies to wow clients. Luxury is about the extraordinary, and too many brands package the ordinary as something more. These now pay a significant price. Just hiring a new creative director or creating a new communication campaign will not solve the real issues. Missing the mark with clients leads to pricing mistakes, lost profitability, and even worse, brand equity destruction due to increasing promotions. In this complex challenge, luxury management training is critical for creating the internal urgency to tackle these challenges. Most organizations work in silos, and cross-divisional masterclasses and thought-provocations have proven powerful in instilling the urgency needed to strengthen brands across all client touchpoints. This must be followed by business remodeling, starting with an audit of the brand story in a competitive benchmarking exercise, followed by strengthening and differentiating the storytelling. Once this is done, all other internal and external gaps must be addressed so that the brand story becomes tangible for clients consistently. Luxury brands face a perfect storm of challenges. It’s a new game of luxury. With the right strategies and training, these challenges can become opportunities. Understanding and adapting to the rapidly changing reality is critical. Sadly, many brands will be slow to act and will face challenging years ahead. Many will only react when it is too late. The proactive, fast, and decisive ones will lead the change and emerge as the leaders of the future. It’s game time. 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.” He serves as an executive professor of luxury strategy and pricing at Pepperdine University in Malibu and as a professor of luxury at NYU, New York. Daniel has authored best-selling books on luxury management in English and Chinese, and is a respected global keynote speaker. Daniel conducts masterclasses on various luxury topics across the world. As a luxury expert featured on Bloomberg TV, Forbes, The Economist, and others; Daniel holds an MBA and a Ph.D. in luxury management, and has received education from Harvard Business School. Sign up for his masterclasses at the Jing Academy. Follow him: LinkedIn and Instagram. All opinions expressed in the column are his own and do not reflect the official position of Jing Daily.

Opinion: Why only the bold and fast survive

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Published July 08, 2024

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Opinion: Why only the bold and fast survive