Nowhere is the clash between old and new felt more than in the luxury sector. In an industry where history and heritage is everything, entrepreneurs with new brands typically face an uphill struggle.
Louis Vuitton, the most valuable luxury brand in the world, was founded 150 years ago. The 179 year-old Hermès is valued at $19 billion; 95 year-old Gucci at $13.8 billion.
Yet the times they are a changin'.
“The big brands are not as secure as they used to be,” says Esin Akan, an EMBA graduate from London Business School, who launched her eponymous luxury label selling fully-customizable handbags. “Contemporary brands are getting more market share every day,” she says.
Despite competition from century-old brands like Prada and Burberry, Esin Akan has enjoyed constant growth since it launched in 2012.
“People don’t want to identify themselves with big brand names or logos anymore,” Esin says. “They want to be more unique, more contemporary.”
Behind the consumer shift is “a new wave of ‘new rich’”, according to Nyachia Knight, an MBA graduate from France’s EMLYON Business School who started up her own luxury events company.
“They are younger, more international and they want to be seen as first movers. So they spend more money to keep up this appearance,” she says.
This trend is especially visible among Chinese consumers who, according to a 2015 Bain & Co report, account for 31% of global luxury sales.
“There’s a growing upper-middle class with an interest in new designers,” says Esin, “so there’s definitely an opportunity for the future.”
With this in mind, Lily Wang, an MBA graduate from Italy’s MIP Politecnico di Milano, started up her own business connecting luxury start-up companies and investors in Asia to Europe.
For Lily, pictured left, the dawning digital era is fuelling the transformation of the luxury sector and opening up more opportunities for aspiring entrepreneurs. “Consumer behavior is changing in line with the digital world,” she says.
According to a 2014 McKinsey report, 40% of luxury purchases are in some way influenced by consumers’ digital experience.
Online marketplaces, which sell luxury products for commission, are now focusing more on contemporary rather than established brands. Esin’s main focus is online sales. “For me, that’s the future,” she says.
While many leading luxury brands have been slow to adapt to the digital era, Burberry was amongst the first to expand into new markets through its use of mobile-based social media platforms like Instagram and Snapchat.
While he accepts that digitization brings huge marketing benefits, Sebastian Kumeth, an MBA graduate from Grenoble École de Management, thinks that new online channels have their limitations.
“The internet is a nice platform to promote your brand but it doesn’t necessarily bring you the sales in the end,” says the Bavaria-born entrepreneur, pictured right, who set up his own high-end coat brand, KUMETH, in October 2014.
“If you charge a lot of money for something, at some point it has to be justified,” he continues. “It’s very hard to justify it online with a photo rather than showing it to a customer.”
On one hand, the internet is fuelling a trend towards affordable luxury. Glam Squad is a New York-based, on-demand beauty provider, which delivers professional in-home beauty services for a fraction of the normal cost.
Sharing economy ventures, too, are allowing people to enjoy luxury experiences for less. One Fine Stay is like a high-end Airbnb giving holidaymakers access to luxury penthouses in exclusive areas in London, Paris and New York, while Social Flights lets users book on to unused seats in private jets.
Yet the demand for high-end products remains.
“There’s a trend of people going back to quality rather than paying premium for a brand,” says Sebastian. “People look at our collection and say that the quality we offer is something that they haven’t seen for a long time.”
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