Despite the apparent positive sentiment injected by the feeble recovery of the U.S. economy., the global luxury industry is poised to navigate yet another challenging year in 2015. For the first time in over a decade, major luxury players have been coming to terms that their modest performance might not only be caused by the specific economic conditions but also by two other critical factors – the loss of creative direction and, implicitly, the loss of relevance, and, secondly, by the disconnect between luxury and lifestyle across all target consumers.
From China to Russia, Brazil, India or the U.S., predictable product development and a decline in the quality of services have been the major negative growth factors for all luxury sectors, mostly dominated by a reactive approach instead of a proactive one. Fashion has been probably the most affected luxury sector, followed by hospitality and cars. By contrast, the watches and jewelry sectors have maintained course by staying relevant and highlighting the investment motivating factor in purchasing.
The increase in shopping abroad by most of the major luxury emerging market consumers has also been posing additional challenges, especially from the point of view of communications, especially advertising and branding. Some luxury fashion brands have also remained trapped in their over-expansion retail which is no longer a driver of growth and the worst such performer has been Prada. At the very opposite end, Italian luxury lingerie brand La Perla has been successfully implementing its new positioning and product expansion through a most unique retail expansion strategy.
Louis Vuitton has been reaping the fruits of a ”paused” retail development strategy in 2014, instead, sensibly focusing on re-inventing the relevance and regaining the strength of its brand DNA. At the same time, the ”conspiracy duo” which were ousted at the helm of Gucci has brought the brand to a critical point in its history, the replacement of the two still being an unknown for owner, Kering Group.
As for the major independent players, Italian luxury family-owned brands such as Canali and Max Mara have been successfully implementing a silent revolution in terms of redefining their creative identity and brand DNA, delivering surprising collections and relevant advertising campaigns.
Other major players such as Coach and Burberry have successfully reinforced their affordable luxury positioning, especially through an aspirational approach in all their strategic undertakings. In sharp contrast, Ralph Lauren‘s return to the ”affordable luxury” arena has been lacking substance, with a confusing POLO mono-brand retail concept conflicting with an apparent short-term feasible launch of ladies’ POLO branded collections.
As he celebrates 40 years in fashion, Armani has been subtly pursuing its overall brand luxury repositioning, concentrating retail development almost exclusively on mono-brand stores of the flagship label of the house, Giorgio Armani. The recent flagship store opening in Miami marks a symbolic move towards the U.S. market where the brand still has very few Giorgio Armani labelled stores.
2014’s solid performers, Hermes, Fendi, Dior, Moncler, Saint Laurent and Givenchy are likely to stay on course in 2015, too, however, with no more double-digit growth performances. Versace, which has shined through as the revival of the past two year, is likely to continue its upward journey, with a series of strategic new store locations to open in 2015 and with the continuation of its successful brand repositioning.
Unless an immediate overhaul of creative direction is implemented, Bottega Veneta, Ermenegildo Zegna and Brioni are among the luxury fashion brands which may see in 2015 a worsening of their already modest financial performance in 2014.
2015 will be the year of the major hand-over of Creative Direction at CHANEL, however, despite the intense rumors, none of the apparent candidates has come out as a definite favorite. According to our observations, Tom Ford and Alber Elbaz remain the front-runners in the race to replace Kaiser Karl.
In 2014, the hospitality sector has been more resilient than in the previous 2 years, with Four Seasons and Park Hyatt leading the reinvention of the sector, with spectacular new openings and with a long-awaited embrace of luxury lifestyle through strategic partnerships and collaborations. Four Seasons and Sofitel have been the most dynamic luxury hotel chains in 2014, not only in terms of development but also in their firm luxury repositioning strategy.
Marriott’s EDITION has successfully launched in 2014 its third project in Miami, after London and Istanbul. Mandarin Oriental opened in Bodrum Turkey one of the world’s finest luxury resort hotels. Taipei and Pudong (Shanghai) were the other key openings for the Mandarin Oriental Hotel Group in 2014, in anticipation of the 2015 opening of the Mandarin Oriental Milan, Italy. Raffles‘ opening in Istanbul in 2014 reaffirmed the ambitious plans of the iconic luxury brand of the FRHI group.
Further details on hospitality and a luxury development GEO-mapping in Part 2, to be published January 4th, 2015
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