The luxury industry has

been hesitant to admit the world

is changing. That’s because

it was long a market governed

by tradition and firmly

based in Europe’s old world aura.

But the rapid pace of innovation

and demographic upheaval

has made even the most staid

luxury company take note.

And this is only the beginning.

Shifts in demographics, money flows and values mean luxury consumers are becoming more digital and more interested in sustainability. They are also more Asian, with cultural backgrounds that are often alien to traditional makers of luxury products and services in Europe. Today’s luxury consumer still longs for purchases that are steeped in European tradition and craftsmanship, but there are signs that this is changing.

The future of superlative products remains based in tradition, but non-traditional things such as smartphones, the Internet and social media are influencing it. Companies can now embrace the power of digital technology to lure the most high-paying customers and increase customer loyalty with carefully crafted offers of exclusivity. To do this, they enlist the help of carefully tended databases that include sales histories and clues about what the customer finds interesting on the company’s website. Today, a blogger can be more important to a luxury brand than any of the traditional “gatekeepers”. For companies such as Burberry, communicating digitally with their customers is at least as important as opening a shiny new flagship store in London.

At the same time, sustainability is becoming more and more important because a new breed of customer is asking questions about ethics and the environment. Some Gucci handbags already come with a “passport” detailing the history of the leather it was made from – Gucci only sources leather for its bags from approved ranches in Brazil. The company says it is acknowledging that its customers are changing, and that they now want to know the origin of materials and how products are made.

In addition to the digital revolution and concerns about sustainability, the rise of China and other Asian economies is changing the way luxury brands and their marketers operate. The United States remains the biggest luxury market, but influences are increasingly Asian. Pop culture can now come from Gangnam, Seoul, as well as from the streets of Brooklyn. China is the fastest-growing market for luxury products, and it is only a matter of time before it becomes the nation with the largest number of purchasers of upmarket goods. And in India, the number of millionaires jumped by 22 per cent in 2012.

Asia, values and digital technology are all parts of the future of the luxury industry. But what does this mean for managers and marketers? What’s the best way to do business in China? How do you make sure customers talk about your sustainable products? Should you invite bloggers rather than magazine journalists to your next runway show? Do you need more retail locations, or should you focus on e-commerce? How do you engage the next generation of critical, informed and digital-savvy customers, and turn them into loyal customers?

To find answers, we looked at the latest studies and analysed broad industry trends as well as specific micro trends. We also conducted in-depth interviews with company heads and opinion leaders in the luxury industry itself. They told us their views on the changing landscape of their business, and which strategies they plan to implement. The exclusive interviews also revealed which trends inspire these executives and which ones frighten them. Rethinking Luxury will help retailers cope with the rise of digital technology. It will provide luxury hotels with information to update the services they provide to guests, and it will show everyone how big data can be harnessed to improve service and sales.

First, we define the market and what we mean by “luxury”. In the second chapter, “The Evolving Face of Luxury”, we deal with the new and established demands of luxury customers. Here, we show why old stereotypes of target groups no longer hold today, and how new types of consumers can be identified and reached. Then we introduce trends that we feel are driving the future of this particular business. In the third chapter, “East is the New West”, we analyse a tectonic shift that is moving the luxury industry’s core market to Asia, and identify successful strategies to deal with it. The fourth chapter, “Is Bling No Longer King?”, deals with the rise of values and the need for sophisticated storytelling in developed luxury markets as well as qualified responses to this trend. In the fifth chapter, “The New Age of Access”, we talk about the astonishing rise of digital communication platforms and online retail. Again, we identify key takeaways for successfully managing this transition. In “What’s in Store for Stationary Retail?”, chapter six, we show how the world of bricks and mortar can remain sexy in an increasingly digital world, and how it can even become more relevant.

Chapter seven, “The Luxury Experience”, is a wake-up call for anyone who believes that luxury can exist as a physical entity only. We discuss services and non-physical products as well as how to create new ecosystems of experience around existing products. Chapter eight is all about considered consumption as the new indulgence. We show how it is possible to enjoy products while supporting sustainability. We encourage brands to embrace sustainability not just as a stylish way of greenwashing but also as a serious rethinking of all processes in the supply chain. Because we envision an end to pure hedonism and the rise of the critical consumer, we strongly believe in the ability of luxury brands to position themselves as the first providers of authentic sustainability.

Finally, in chapter nine, we tie it all together. This culminates in the one question that should concern every CEO and marketer of luxury brands today: How can we make customers choose us over our competitors time and time again, even as digital communication gives customers total transparency in prices, trends, quality and production? How can marketers maintain loyalty when people have multiple options?

It’s time to rethink what luxury means today, and will mean in the future.

We have combined market research with probing interviews with people at the heart of the luxury business. We’ve included our own analysis and prognoses. Still, we see Rethinking Luxury as a starting place and a resource. We would like to continue this debate with you. To engage, just visit our website, www.rolandberger.com/rethinking-luxury, or follow us on Twitter (@rethinkluxury, @BergerNews).

Thank you.

Martin C. Wittig
Fabian Sommerrock
Philip Beil
Markus Albers