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The global “brand value” of luxury is in decline, and China is in large part to blame, according to Millward Brown’s annual BrandZ study released this week. But a main reason for this trouble isn’t just China’s luxury slowdown: rather, it’s due to a re-definition of what “luxury” means—especially in the minds of millennials.
The report, which analyzes and ranks the “value” of the world’s top 100 brands based on both financial information and survey results, found that the luxury category as a whole saw a 6 percent drop this year, compared to a 16 percent increase a year ago. The main reasons cited were economic slowdown in China, Brazil, and Russia, China’s anti-corruption campaign, and changing values regarding consumption.
Most of the brands on the luxury list included “mega-brands” and watchmakers, with Louis Vuitton, Hermès, and Gucci making the top three. Out of the top 10 luxury brands listed by Millward Brown, only Louis Vuitton and Chanel saw increases in value this year, while brands that were hit hard in China saw especially sharp decreases. For example, the report notes that Prada saw a 35 percent brand value decrease as a result of being affected by the slowdown.
The report notes that it wasn’t just the slowdown that had a negative impact on luxury, however. Consumers’ changing attitudes about luxury across the globe have created a view of “luxury products as expensive indulgences inconsistent with their desire to live in a modest and sustainable way,” particularly when it comes to millennials. Young consumers have “expectations of authenticity, individuality, creativity, and a higher purpose beyond consumption,” says the report. “The new status is having something that speaks to you as an individual, not something that exhibits wealth.”
China is certainly not exempt from these trends as a growing contingent of consumers become interested in discreet luxury, individual style, and a smaller, more varied contingent of brands. While the country’s older nouveau riche consumers remain interested in more traditional concepts of luxury, more experienced shoppers and fashionable Chinese millennials are looking beyond mega-brands toward smaller labels and a wider range of trendy new brands such as 3.1 Phillip Lim, Band of Outsiders, or Comme des Garçons, pursuing a growing mindset focused on self-expression and originality.
The report recommends that brands “need to adjust for millennial consumers” and must “focus on developing a unique and niche perspective” in order to thrive in the future. This strategy should involve a combination of new product development, innovative ways of communication, and a focus on CSR. As China’s luxury consumption tastes align with global trends and millennials become an important purchasing force, this advice is just as important for the Chinese market as it is across the rest of the world.