Luxury: The Revolution That Many Brands Will Not Survive

The world is on the brink of permanent change and here is how I recommend brands evolve to thrive. 

by Harrison Yu

In my last article (see here), we spoke about the foundations of luxury and the minimum costs of entry. Keeping those basic definitions in mind—provenance, innovation, and desire—I want to explore what it will take for luxury houses to grow in the future and how they will remain vanguards of future culture. We are in the midst of social and behavioral revolution; the out-of-touch are not going to survive. 

As demonstrated before, successful luxury brands are centered around the pursuit of “the best.” We previously focused on values and technical skills to be “the best.” Today, I want us to explore how brands need to push beyond this foundational definition of “the best” and further evolve to be the best in social leadership. 

2020 has been a transformative year that we may look back as the definitive turning point of Pax Americana as we know it today. A few of these major events and themes will be woven into the upcoming argument: the generational dominance of Millennials and Gen Z; the pervasiveness of TikTok; and the overarching egalitarianism that has centered and expanded from the Black Lives Matter movement. Structurally, what does this mean for brands? More than ever, standing out, rather than blending in, is a key attitude of consumers, whether it be socially, commercially, or stylistically. Cementing this shift is a sense of humility and authenticity that further strengthens the idea of the individual. And finally, we see the influence of cultural and social awareness as the defining tribunal for a brand’s longevity. Yesterday’s luxury was about exclusivity, whereas today’s luxury is about inclusivity; brands that can adapt to the shifting realities of individualism, authenticity, and social justice will continue to stand within the now-shifting tectonic landscape. 

Individualism: How Standing Out Is How Millennials and Gen Z’s Are Fitting In

Undoubtedly, we go through ebbs and flows of minimalism (times post-recession or war) and maximalism (when times are good). But, one trend holds common: there is a march towards increasingly more individuality and a breakaway from conformity. This key theme plays strongly in our prior discussion that a successful brand always focuses on innovation and desire. As trends shift even faster and cross-brand collaborations (something that I have always supported at work and as Ana Andjelic cleverly called this, The DJ Model) become the norm, understanding the most discerning and important future customers will be paramount for a brand’s ability to stay relevant.  

Some Background

A quick rundown on the generations, and why I am going to focus on Millennials and Gen Zers. The “OK Boomer” meme may have started out as a quip against a seemingly out-of-touch generation, but in reality, the Baby Boomers maintain a strong US purchasing power at $5.0 trillion (according to research firm, Kantar), while also steering global economic and public policy to their advantage—since the economic deregulation of the 1970s. This group was shaped by the Golden Age of Corporate America and the high point of Pax Americana. And such, they view brands as badges of their success. 

Gen Xers are the modern-day equivalent of the “Lost Generation” in which the generation is quite short and has been shaped by war and economic adversity. Of course, this is a generalization, but Gen Xers tend to be more cynical while striving for a balanced/steady life. Though a disproportionally small part of the US population at 18%, they account for $5.11 trillion in purchasing power—the most of any generation. Yet, even at their peak earning potential, they only slightly trail behind Boomers. Their relationship with brands are less personal and merely a means to an end (Kantar 2020).

Now we enter today’s most interesting consumer: Millennials. They are 25% of the population and account for $4.6 trillion in purchasing power. This group has shaken up what it means to be a brand. They are expecting to discover something new and to have a dialog with a brand. Their expectation is to belong to a community. 

You often hear the blasé assertion, “people prefer to spend money on experiences rather than material things.”Is there any truth this? According to a McKinsey article, a bit misleading. Yes, Millennials spend 16% more on everyday experiences versus Baby Boomers (36% more compared to Gen X), but they also spend a whopping 45% more on everyday material goods versus Baby Boomers (11% more compared to Gen X). Where Millennials get the aforesaid reputation is that they also are willing to splurge on experiences like dining and vacations. Definitely the most informed of shoppers, Millennials research a product and or brand before they make any purchase—which strongly attributes to the fact that ~40% of Millennials chase the newest or “hidden gem” brands. Why are their purchasing habits as such? Simply because they are the seeking individualism—the beginning of our new social paradigm.     

With limited spending power, it is tough to gauge Gen Z. However, they are definitely the most outspoken and have an outsized impact on the consumer landscape. The most egalitarian and inclusive of all the generations, this generation demands brands to be responsible and to be purpose-driven (Kantar 2020). They take the concept of individualism from Millennials and augment that to a defining characteristic. Standing out is the way to fit in. Experience and discourse are all part of their customer journey. As such, it is interesting to note that the brick-and-mortar experience is more important to them than it is to Millennials even though they were born into a fully digital world (according to McKinsey). Though, not to lose focus, social media over-indexes in influence on Gen Zer’s purchasing habits compared to any generation. This new omnichannel approach in combination with high brand-expectations is changing the current landscape. In many ways, they are the leaders in driving Millennials’ consumer habits. In our hyper-capitalist society, it is ironic that the least financially powerful generation actually has the largest impact on consumerism. 

An Example: Gucci

By the end of 2019, according to consultancy Interbrand, Gucci was the fastest growing luxury brand worth ~$16 Billion (nearly double the value at the start of Gucci’s turnaround in 2015) with a growth rate of +23% YoY. This success was not because of flashy ads for green and red striped sneakers or interlocking GG belts. This success was the product of understanding Millennial and Gen Zers’ new attitude towards luxury. At the end of 2019, Millennials and Gen Zers’ share of Gucci’s sales was over 60%. Some may argue that this is risky because “young people are only interested in trends.” I argue that based on the above overview of the generations, “young people are only interested in socially relevant brands that also make really high-quality things.” The blend of CEO, Marco Bizzarri’s, transparently creative leadership coupled with Creative Director, Alessandro Michele’s, creative genius has laid out the foundation for Gucci’s meteoric rise. An example of the innovative leadership was the creation of a Millennial Shadow Committee to give new perspectives to senior leadership. By reading the zeitgeist and genuinely assimilating those values within Gucci’s DNA and messaging, Bizzarri, Michele, and the Gucci team were able to build an aspirational luxury brand that embodied cultural sentiments coupled with amazing design. Gucci has enhanced its reputation beyond that of a brand that makes high quality items, but also one that now symbolizes progress and is a crystal ball into cultural shifts as seen below: 

• May 2020: Gucci goes seasonless and reduces fashion shows from five to two to address: 1) cultural and consumer shift of instant gratification 2) environmental impact of building fashion shows. 

• May 2019: During the Met Gala, Jared Leto is dressed in a Gucci gown and Harry Styles is sporting pearl earrings embodying Millennials & Gen Z’s strong emphasis on destroying “toxic masculinity.”

• 2017 – 2018: Gucci resurrects designs from the archives and embraces logo mania. Whereas in old luxury, logos represented badges, Millennials and Gen Zers’ embrace of logos is a symbol of what the brand stands for and is committed to achieving. Gucci begins to lead the explosive rise of “retro” while rebuilding its reputation as a cultural and social leader. 

• October 2017: Gucci bans the use of fur as it is misaligned with modern day’s ethical and sustainable attitudes. CEO Marco Bizzarri had said: “Fashion has always been about trends and emotions and anticipating the wishes and desires of consumers.” The best creative directors “are able to anticipate, to smell something outside before anybody else. Fashion and modernity go together.” (source: BoF)

• April 2016: Women’s and Men’s fashion shows are combined, just before the turning point of gender fluidity and the egalitarian gender norm.

• 2015: Gucci’s decisive shift away from sexy elegance to maximalist fantasy, beginning to reflect the casualization of the world and the longing for a dream.

Authenticity: Life Is Stressful Enough, Let’s Be Real

We know that Millennials & Gen Zers are going to be driving the big picture from now on. What does this mean? The old duck metaphor is a thing of the past (calm above water, but beneath the surface, paddling like mad to stay afloat). We are in a world that is more complicated and competitive than ever seen by any prior generation. Some may bemoan the demise of decorum, but Millennials & Gen Zers seem to deem expending energy to maintain a curated and polished lifestyle as frivolous. As Marie Kondo has said, if it doesn’t spark joy, toss it out. Millennials & Gen Zers are prioritizing authenticity, and brands need to understand that.

An Example: The rise of TikTok

In 2019, anyone older than the age of 25 dismissed TikTok—the platform that was said to be devoted to lighthearted dances and viral trends. Fast forward to 2020. TikTok is the fastest growing social media platform. TikTok has hit 1 billion users, faster than any social media platform ever. TikTok is embroiled in a US-Sino political battle. TikTok is now beloved by many generations. The mechanisms and the way this happened is for another discussion, but the impacts and implications are crucial to understand. 

The fundamentals of the TikTok platform are a reflection of today’s new society: democratic content discovery; ease and flexibility in creating content (25% of users on TikTok create original content versus 0.1% users on YouTube); content creation centered around the emotional premise of music; overarching themes of egalitarianism and social responsibility. Engagement rates on large creators can range from double to quadruple than those of Instagram creators of similar follower sizes. I think this speaks to the community and approachability of the platform and its content versus the other social media juggernauts.  

These precise factors of community and approachability have fueled the explosive popularity of TikTok. At the same time, the ubiquity of TikTok and its content-style has marked a decisive shift toward authenticity. People enjoy seeing the silliness and realness of others. Beautiful pictures are nice and may gather “likes,” but people care more about “realness.” This is not to say that Instagram will die, as it still will have its place for displaying that perfectly curated image (think of the Dolly Parton Challenge back in January 2020). Instagram maintains huge commercial and economic value for brands, but it is no longer the trendiest destination for content. It is interesting to note that TikTok’s algorithm assigns higher values to “views” rather than “likes” when pushing content to the For You Page. 

Content discovery is organic, easy, and quintessential to TikTok’s platform—reflective of Millennials’ & Gen Zers’ shopping habits. Instagram on the other hand is focused on pushing content based on the people you follow, with non-following discovery difficult. TikTok manages to create a sense of a personalized community and mobilizes trends with speed and scale. 

Some widespread trends that were fueled by TikTok:

Consumer Trends:

• The yeast shortage as everyone decided to become home bakers 

• The coffee grinder backorder as everyone decided to become home baristas

• CELINE’s Spring/Summer 2021 collection inspired by TikTok fashion trends (think e-Boy, skater, chains, streetwear mashup)

• Chanel’s +20 Day backorder for Le Coton cotton pads due to the TikTok trend of buying the cheapest item just for the unboxing experience 

Social Trends:

• Millennials’ & Gen Zers’ discipline of mask-wearing and social distancing to stamp out Covid-19 (and apparent public shaming of those who do not comply)

• The huge surge and support for the Black Lives Matter movement

• TikTokkers and K-Pop fans disruption of a June Presidential campaign rally  

So, what is the value of TikTok to brands? Right now, traditional key performance indicators of advertising, marketing, and sales are still unproven. Instead, TikTok so far has an intangible value: it offers a window into the future mores of society and a rapidly changing sea of trends (that may or may not affect consumer behavior). It is the place of discourse of Millennials’ & Gen Zers’ thought processes. It is democratic fame and discovery for everyone. The lesson for all brands here is that the rise of authenticity is not a trend and the voices of Millennials & Gen Zers are not to be ignored. Brands must adapt and genuinely believe in this mode of thought in order to survive.

Woke: Either You Are or You’re Cancelled 

With the understanding of the generations and shift towards authenticity, it is no surprise that the Black Live Matter movement and consequential standards of social equality has been at the forefront of today’s conversation. Some may say that this is a controversial topic to discuss, but as Millennials & Gen Zers have 100% demonstrated, there is no room for discussion. There is no room for prejudice or racism. For them, equality is not open for negotiation. 

Of course, all brands have realized this seismic shift and have acknowledged it. However, in the age of authenticity, “acknowledgement” needs to be transformed into action. Millennials & Gen Zers can see through corporate lip-service and gravitate towards brands that actually back up their words with change and action. This rising population of Millennials & Gen Zers in the US is the most socially-conscious consumers we have ever seen. 81% of Gen Zers expect brands to have a positive impact on society and culture. 74% of Millennials choose brands based on the forward-thinking and exploration of new ideas (Kantar 2020). 

An example: the George Floyd reaction

Starting from the last week of May through early June 2020, brands released statements and posted on social media condemning racial inequality, calling for a need to change. This Brand Activism should be a given. Millennials & Gen Zers and a growing majority of society see that a brand staying silent is complicit with the status quo—in elementary school we were all taught to never be a bystander. 

The salient bit came next. Only a handful of brands followed through and actually donated and began releasing plans about how they would enact change. A few examples of actual change amongst luxury stalwarts: Kering’s portfolio brands, LVMH’s portfolio brands, and Mercedes-Benz all donated to the NAACP as well other relevant organizations. Mercedes-Benz raised their engagement on social media and lambasted commenters who were anti-equality. There are, of course, several brands (I will not call them out here, but you can easily discover who on a quick google search) only paid lip service and moved on. I know the old statistics adage “correlation is not causation,” but these particular brands happen to be suffering the most in recent years and have been on a downward trend in terms of brand equity—precisely for the reason that they are out of touch with the modern consumer.     

Though, I will bring to attention that there has been criticism of the big luxury brands for not acting quickly enough. Big American brands like Nike reacted in only four days after the George Floyd atrocity with their post of solidarity; and then five days later, a $40 million commitment over four years to support Black communities; and then an additional combined $100 million donation over 10 years from Michael Jordan and their portfolio Jordon Brand. This is a strong commitment to change. 

European luxury houses on the other hand were just a touch slower and not as public about their exact financial contribution. Extreme cynics have claimed that luxury houses fear alienating clients and preferred to stay silent. I believe that these critics are on the other end of the spectrum and unbalanced in their accusation. 

Yes, luxury can be seen as conservative because it stands on tradition and history. But remember, luxury only survives and is where it is because of innovation. And today, innovation in product and design is not enough. It is the innovation in thinking and adaptation of ever-changing mores that appears first in luxury and then trickles down (think of Miranda Priestly’s famous quip about the origins of Andy’s lumpy cerulean sweater in The Devil Wears Prada). 

All levity aside, luxury usually is the lever that helps take ideas into the mainstream. In the case of Black Lives Matter and racial equality, luxury brands were a bit slower to react, but now are pushing the idea of inclusivity harder than ever. Luxury is at its tipping point of shifting the perspective from exclusivity to inclusivity as the defining factor.     

A point of caution that luxury brands must acknowledge: cultural awareness. Systemic racism exists all over the world, but is most extreme and detrimental in the United States of America. The racial division in this country has been built into historic economic and public policy, and only recently have there been efforts to dismantle these. Luxury houses, being for the most part European, may not have recognized these issues at the onset of the Black Lives Matter movement in 2020 and some have even had gaffes in recent memory, but the message and issue is now loud and clear. Change is necessary. Change is inevitable.

What is the next move for these brands? It is time for all these powerful brands to come together and collectively support positive change. This is a defining moment in history and to be on the wrong side of history will spell the rightful end of a brand. To be silent during this time in history is equally as repugnant. The best brands will use their influence and declare that by entering a brand’s world, the customer in essence is entering a “social contract” and acceptance of the validity of all of the brand’s values. Brands now have an added duty as stewards of cultural change and behavior.      

Conclusion

Luxury brands and emotional brands are truly the vanguards of our culture. The best brands celebrate uniqueness. The best brands adapt and predict culture. The best brands stand up in the face of adversity and legitimize new conventions. We live in an interconnected world with more knowledge at our finger tips, yet more unequal than before. Pax Americana as we know it is fading away at a time when people are demanding more and more. Capitalism has had a strong run for decades, but the face, foundation, and execution of it need to change. As capitalism evolved after the Industrial Revolution into a kinder face, 2020+ will too see the evolution of a more responsible capitalism. In whatever Pax Mundus we will eventually enter, I predict that the role of the best brands to be sculptors, shaping a happier and kinder world.    

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Want to discuss this more? Feel free to shoot me an email: harrison.j.yu@gmail.com
Harrison is an innovative product marketer & brand leader at Maserati. He spent his recent career relaunching the Maserati & Alfa Romeo brands by creating exciting products, telling a compelling brand story, and folding in a customer-focused lens. He also is the co-founder of the kitchen knife startup, Alexandrine & Cass. He graduated from the University of Chicago with a degree in Political Science and a concentration in business from the Booth School.