Act Or Die! Luxury Brands Should Always Have A Sense Of Urgency
This week I was invited to present a keynote speech at an important luxury investor conference in Japan. We were discussing the current luxury industry situation in many parts of the world with a particular focus on China, Japan, the US, and Europe. My verdict was that many luxury brands aren’t prepared for the future — or even for the present! Companies like Neiman Marcus had massive shortcomings before the COVID-19 crisis but got away with it until now.
A sense of urgency was needed five years ago when digital commerce began disrupting luxury. But most brands looked the other way. Instead of acting, they chose to talk. Buzzwords like “digital transformation,” “agility,” “empowerment,” and “sustainability” were used to ease internal and external stakeholders. They kicked off initiatives where they pretended to be frontrunners, but the truth was different: empty words and no action.
Any action that doesn’t lead to a competitive advantage isn’t simply inaction — it’s a negative action. It lulls employees into believing that activity has been done, while a company simply hibernates. Two years ago, I suggested to the luxury industry in my Future of Luxury white paper for The Economist that it was time for its players to go through brutally honest assessments and actions. I considered it a wake-up call. Some of the world’s best brands reacted immediately, and they are performing relatively well today.
But the gap between the best brands and the rest of the pack is widening, and the rapidly-changing preferences of Gen Zers and young Millennials are making many former luxury leaders obsolete. Brands that may have seemed vibrant were already dead to the youngest consumers. In my keynote, I urged investors to act now to not accept inaction and poor management anymore. This means tough decisions like changing CEOs and management teams when needed. It means demanding less talk and more action.
It’s a pity that it takes a crisis to wake up brands. Why aren’t luxury cars sold online? Why do most jewelry stores have shortcomings in e-commerce? Why haven’t watchmakers redefined their business models? Many brands have huge shortcomings in their digital journeys, but their physical journeys also lack differentiation. Over the last two years, we saw very few convincing physical experiences during our brand audits. As a case in point, I asked my luxury MBA students to evaluate physical expressions of luxury brands in the fields of hospitality, fine dining, fashion, beauty, jewelry, and more. The results were eye-opening. Out of nearly thirty physical in-store experiences, only a few were convincing. For luxury brands, it was a disaster.