The luxury industry means big business. Addressing the issues faced by luxury businesses has become ever-more important in a rapidly changing world, and the ninth annual Financial Times Business of Luxury Summit was held to help explore the ideas of power, politics and profits, with discussions by leading luxury luminaries. The Summit was attended by over 400 luxury industry executives at Palais Lichtenstein in Vienna, one of the homes owned by the princely family of Lichtenstein – a very fitting venue for discussions about high-end luxury to take place!
Spend on luxury products globally has increased significantly (according to Walpole Ledbury Research, the UK luxury sector is set to grow by 12% in 2013 to £7.4 billion). It’s a trend that’s expected to increase over the years, especially in Asia, as shoppers become more discerning about the relationship between price and quality. Alexis Babeau, Managing Director of Luxury at Kering, agreed with this. “The luxury industry promotes values like trust, creativity, craftsmanship, and inventiveness,” he said. “We need to acknowledge the vital importance [of] the luxury industry….It’s an industry that will keep growing nicely in the coming years.”
The trend for luxury purchases has always been on the up, however, and remains healthy despite the tribulations caused by the recession, even though the global market for luxury goods is, in many ways, still in its infancy. “Luxury became an industry,” said Fung Brands CEO Jean-Marc Loubier. “It was not an industry, but it became [one] in the last thirty years.”
The appetite for luxury goods is spreading globally and consumers, such as those in China, are increasingly seeing luxury purchases as a lifestyle, rather than an aspiration. According to Jingdaily.com, “accessible luxury brands (and traditional luxury brands that have expanded into the accessible luxury sector) have seen significant growth by rapid and profitable retail expansion, increased e-commerce sales, a loyal following of new middle-class customers, and renewed interest from older, wealthier [consumers],” the website writes. “A large new group of middle-class consumers – some 300 million of them – have emerged to seek luxury and accessible luxury products.” Back in Vienna, Christophe Navarre, CEO of Möet Hennessy, affirmed this. “China is simply becoming a normal market,” he revealed. Massimo Ferragamo, Chairman of Ferragamo USA, is optimistic about this. “From a business point of view, I think it is fantastic that new markets have opened up because they always fuel the business in one way or another, like Brazil, China, Russia and India,” he said. “I actually think that is the most positive aspect of our business….but the thing that is incredible is that the eye of the consumer – for some reason – must develop around the world at the same time, because the products that are successful are successful in every country.”
It’s not just consumers who are turning to the luxury industry. According to the Financial Times, “[the industry’s] profile as a success story, employer, and fiscal contributor is becoming ever-greater, not just in the economic world, but in the political world as well.” As Financial Times Fashion Editor Vanessa Friedman pointed out, “the luxury industry is a really major source of revenue, not just for private households, but for central governments.”
Despite it’s buoyancy, the luxury business is having to adapt. As consumers become more discerning by buying luxury goods, they are also developing an increased awareness of the sustainable and philanthropic practices adopted by the brands they buy from. Patrizio di Marco, CEO at Gucci (who won this year’s Commitment To Corporate Social Responsibility Award at the recent Luxury Briefing Awards), was in Vienna to discuss the concept of philanthropic power. Philanthropy “is a marketing goal ultimately,” he admitted. “Definitely, the long-term goal, given our continuous and consistent commitment to responsibility, will enhance the brand reputation and as such, the brand will have more meaning of craftsmanship. Consumers will buy more into the brand besides the tangible values.” That said, Gucci is “doing what we are doing because it is the right thing to do.”
Gucci’s commitment to philanthropy and corporate social responsibility has seen them establish a seven year relationship with UNICEF, and more recently, with Chime For Change, a charitable initiative set up by Gucci’s Creative Director Frida Giannini. The charity aims to raise awareness and funds for three essential elements of a woman’s life – education, justice and health – in order to give vulnerable women a voice. The reason for this, as Giannini commented, is so “that we can help the voices calling for change to become so loud that they cannot be ignored.”
The Business of Luxury Summit was concluded by Financial Times editor Lionel Barber, who praised the work of the FT’s How To Spend It founders, Julia Carrick and Sir David Bell, and congratulated Gillian de Bono for her tremendous contribution as editor over the last few years. He then went on to outline his predictions for the future – namely that emerging countries will soon start to have their own luxury brands to compete with the big names from the west, that younger generations will be more ethically-aware (meaning that corporate ethical and social responsibility will become important marketing tools), and that finally, retail will become much more experiential, as the global trend shifts towards online and digital purchases. Exciting times are clearly ahead for the luxury industry as it competes amidst the chaos and technology of the 21st century….watch this space!