While luxury is often more resilient to economic uncertainties, it is not immune. In the first half of 2024, 42% of publicly listed luxury companies reported negative growth, with revenue declining by 0.4% according to Accenture research. This category slowdown follows a period of double-digit annual growth since 2020.
But amid these trials, an elite group of luxury maisons are not just weathering the storm—they’re thriving and achieving double-digit growth. How? By combining brand desirability with operational excellence. A newly published Accenture report, Luxe Eternal: How Luxury Brands Are Reinventing For Success, does a great job of explaining what this means in practice.
Reinventing for a new era of growth
Luxury companies are facing a perfect storm of evolving market dynamics, tough economic headwinds and shopper behaviors changing so rapidly. Consumers are more demanding than ever, seeking true desirability, hyper-personalization, sustainability and seamless omnichannel experiences. According to Accenture’s research, 83% of luxury executives agree that customers are changing faster than their businesses can adapt. This gap highlights the urgency for reinvention to drive a new era of growth.
It’s not easy to stay on top. The key to success lies in embracing continuous change. Luxury leaders are redefining brand desirability and streamlining their operations to meet the evolving needs of their customers. They understand that brand desirability is no longer just about quality and exclusivity; it’s about delivering fluid, consistent experiences both in-store and online, supported by digitized operations and a renewed commitment to brand DNA with sustainability by design.
Rethinking brand desirability
Brand desirability in the luxury sector has traditionally been about quality and exclusivity. However, today’s customers demand more. They seek authenticity, sustainability and personalized experiences. Luxury leaders are responding by focusing on the right levers of brand desirability, embracing the constantly evolving nature of desirability and seeking genuine relevance while keeping the brand fresh with experiential and social values.
Andrea Guerra, Prada Group’s chief executive officer, sums it up perfectly: “We continue to progress in our journey towards retail excellence, enriching our product range and driving customer engagement to nurture our brands’ desirability.” This approach creates a self-reinforcing cycle of improved operational performance, improved business performance, and improved brand desirability.
Prada Group has been transforming its systems in ways that aren’t always obvious to the customer but deliver an improved shopping experience. Examples include support for new ‘checkout-free’ shopping in Prada stores, where customers can complete their transactions by tapping on a sales assistant’s mobile device. It’s the brainchild of Chief Innovation Officer Cristiano Agostini and his team, who have been exploring a range of ways to use new technologies to deliver ever more tailored and seamless shopping experiences.
Other luxury fashion brands are also finding innovative ways to use advanced technology to improve customer shopping experiences. Examples include Chanel’s radio frequency identification-powered ‘smart’ mirrors, Gucci’s virtual try-ons and Burberry’s conversational AI that allows customers to go ‘behind the scenes’ of collections.
Resetting strategic priorities
Achieving brand desirability is only part of the picture. To truly move the needle, drive efficiency and free up capital for investment in the brand, luxury leaders recognize that operational effectiveness across the value chain—including the use of AI technologies—is now a fundamental requirement. These brands, when compared to their peers, are far more likely to highly prioritize operational efficiency and strengthening production capacity (by 20% and 50% more, respectively) according to Accenture’s report. This ambition is also backed by solid investment, with luxury leaders nearly twice as likely to be planning significant increases in their investments in operational excellence over the next 12 months.
Luxury with digital at the core
A strong digital core—the critical technology capability that can create and empower an organization’s unique reinvention ambition—is essential for luxury brands to succeed.
It enables the organization to accelerate ahead of the competition using the right mix of cloud infrastructure and practices for agility and innovation, data and AI for differentiation, applications and platforms for accelerating growth, as well as enhanced experiences and optimized operations—with security by design at every level.
Empowering people
People are at the heart of any successful reinvention. Luxury leaders are creating workplaces that empower their employees and elevate them to be brand ambassadors. Crucially, they’re investing in continuous learning to retain and attract the brightest talent.
Better still, these empowered employees, who live and breathe the brand’s DNA are equipped to deliver exceptional customer experiences that keep them coming back.
Time to act
The luxury market is entering an era where balancing “art and science” will be fundamental for its rebound. In this new era, the “art” is the power of desirability and intuition of what customers are looking for. The “science” is the diligent analysis of the value chain operations and a healthy bottom line.
Luxury brands that invest holistically and continuously in both brand desirability and operational excellence will likely outperform financially. They create a self-reinforcing cycle of improved operational performance, improved business performance and improved brand desirability.
That means being willing to challenge the status quo, embrace change and invest in the right areas. By doing so, they can navigate the challenges of the modern luxury market and emerge stronger than ever.
The luxury market is at a critical juncture. Now’s the time to act boldly and seize the opportunity for double-digit growth.
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