INDEPENDENT LUXURY: SURVIVAL IN THE CONSOLIDATION JUNGLE

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This month marks the release of the tome ‘Independent Luxury’, examining the expansion of conglomerates and extinction of independent companies. Here, its joint authors exclusively reveal a first look their four innovation strategies to endure in the consolidation jungle.

The world of luxury is harboring an endangered species: that of the independent companies! In an increasingly challenging and globalized luxury environment, companies are fighting to escape from the ever-growing clout of luxury “conglomerates” – Swatch Group, LVMH, Kering and Richemont.

As of 2015, these “big four” own more than 100 brands and are maintaining a constant pace of acquisitions, relying on vertical integration to secure supplies (and deprive competitors of them), which has particularly damaging consequences for independents. Most independents are struggling to survive and end up being acquired or going out of business.

Interestingly, this same movement toward consolidation is rendering brands more and more uniform, thus creating opportunities for players able to craft unique offerings for niche luxury clientele.

We have toured the world in the past decade to uncover the strategies followed by groundbreakers in fashion, watchmaking, leather goods, accessories, cars, gastronomy, design and retail. The results are presented in the book “Independent Luxury: The Four Innovation Strategies To Endure In The Consolidation Jungle” (Palgrave-Macmillan, 2015).

Innovation is the path to follow in this challenging journey and the companies studied have chosen one of the four innovation strategies below in their development.

Game changers are building breakthrough innovations at the product and business model levels.

Innovation Strategies For Luxury Independents

“Back to the roots” includes independent companies innovating in the essence of luxury: extreme quality and extraordinary craftsmanship to create the ultimate sensorial and emotional experience. For companies such as Vignes, Sheme, Thomas Mercer, Mirazur by Mauro Colagreco, Norlha and Brunello Cucinelli, luxury is rooted in a terroir and a sense of purpose permeates this endeavor. These are companies symbolized by the horse, a classical symbol of elegance and nobility.

“Code breakers” are playing with product and societal codes to culturally innovate and build the icons of today and tomorrow. Examples include Isabel Marant and Miuccia Prada in fashion, Fernando and Humberto Campana in furniture design, and HYT in watchmaking. The tiger – with its strength – symbolizes these luxury iconoclasts.

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“Eagle in the aquarium” companies are disrupting the way that luxury companies create, deliver and capture value. Globalization and digitization are powerful enablers to reconfigure resources at the levels of funding (e.g. crowdfunding), design (e.g. Dassault Systèmes Fashion Lab), manufacturing (e.g. 3D printing), distribution (e.g. Yoox – Net-à-Porter), marketing and communication (e.g. Holition and Digital Luxury Group). The eagle in the aquarium symbolizes these invaders in the luxury ecosystem.

“Game changers” are building breakthrough innovations at the product and business model levels. Comme des Garçons, Études Studio, Iris van Herpen, MB&F, and W Motors are independents taking bold initiatives in a fascinating and inspiring journey. The complex and powerful dragon symbolizes this group.

Disregarding the rather hostile economic landscape, a new brand decided to enter the automotive sector.

CASE STUDY: A “Hypercar” Game Changer From Dubai: W Motors

In 2012, disregarding the rather hostile economic landscape, a new brand decided to enter the automotive sector. A high-end brand that started with a dream and the unshakeable conviction that there is always room in the market – even a saturated market – for an ultra-exclusive and totally incomparable product: a product for which innovation is not a concept, but an essential element.

This brand is W Motors (W standing for “WOLF”), which manufactures “hypercars” selling at US$ 3.4 million each. Its creator and CEO, Ralph R. Debbas, brought together the most specialist engineers (such as Magna Steyr), the most experienced consultants (Studio Torino), the most advanced mechanics (RUFAutomobile) and lend their skills to the most daring, or, as some say, the most foolish, project.

The first W Motors HyperSport is the Lykan, taking its name from the werewolf, this half man, half wolf creature that is exceptionally strong and practically uncontrollable.

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W Motors Lykan HyperSport car (courtesy of W Motors)

Like a hand-made watch movement, the Lykan HyperSport, limited to seven units for the first model, receives the same painstaking attention. The carbon-fiber body is hand-built, layer-by-layer, in Italy. Its hand-built engine is assembled piece by piece in Germany. With its 770HP twin-turbo flat six-cylinder engine, the W Motor HyperSport offers a stunning performance – 0 to 100 km/h in less than 2.8 seconds and can reach top speeds of 385 km/h with maximum torque of 980nm, making this beast one of the fastest and most powerful in the world. It is also the most technologically advanced hypercar in its category.

In 2016 two new models are scheduled to be launched:

– The Sedan model with a production of 100 vehicles per year retailing at around US$200,000.
– The SuperSport model with a production of 25 vehicles per year retailing at a price half-way between that of the Sedan and the Lykan: US$1.4 million.

Its next project is to develop a world-class automotive research and development platform in Dubai. In the spirit of the impressive investments being undertaken for the Expo 2020, W Motors aims to play a pivotal role in the emergence of R&D and innovation Made in Dubai.

This would take the form of a start-up accelerator to bring together talents in the automotive business where W Motors, alongside a group of public and private investors, would take a role of innovation facilitator, potential client and investor. If this project takes off, it would represent real business model innovation in a highly concentrated and mature sector like the automotive industry. Hard to believe, maybe, but no harder than the creation of W Motors in the first place…

How to innovate? A thorough analysis of these four innovation strategies uncovers a common pattern composed of five stages: the BA2RE® luxury strategy approach.

This is a world where storytelling, distribution choices and experience take centre stage.

The BA2RE® Luxury Strategy Approach

It all starts with the creator/ entrepreneur worldview and purpose. Believing refers to the vision, the identity, the DNA of the company, its guiding values and aesthetics. This belief can evolve in the same way that living organisms evolve, but it has a certain stability. It is what enables energy and resources to be focused. 
Innovative creators and entrepreneurs are constantly anticipating to grasp changes and act on them. They sense l’air du temps and are often the “right person, in the right place at the right time.”

They combine analysis and feelings to draw forth intuition on what is next, often reaching out to a certain number of stakeholders such as artists, designers, cultural organizations and media experts that can nourish them and later on help to legitimize a breakthrough proposal.

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Acting refers to crafting the offer for a certain group of clients. It is a world of strategic choices: What is the offer? Who are the clients? What are the resources, capabilities and processes necessary to construct, deliver and capture value?

Then comes the central moment of the encounter with the client. Reaching refers not only to winning clients, but transforming them into fans and advocates for the brand. How to reach first the hearts and then the minds of clients? The goal is to have a core of top influencers and clients to espouse the offer (and the message). This is a world where storytelling, distribution choices and experience take centre stage.

Enduring is the capacity to be more than a one-time hit or fad company. It is a process to develop the company in its growth stages demanding a long-term view and solid financial backing. At the personal level it demands stamina, resilience and the capacity to generate luck.

We present in the book final chapter how this strategic approach has been applied to the development of Encelade 1789, a Swiss brand dedicated to exclusive accessories.

*Main Image Credit: Hermes SS14 Campaign. Hermes is in no way mentioned in the book ‘Independent Luxury’.

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Joint authors Jonas Hoffmann and Laurent Lecamp.

Independent Luxury launched worldwide in August 2015. To further investigate the book visit:www.theindependentluxury.com

Dr Jonas Hoffmann is Professor of Luxury Strategy atSKEMA Business School and co-founder of TILAssociates. An expert in innovation and emerging markets, he consults and gives executive training in Europe, the United States, China, and the Middle East. He is a regular keynote speaker at international luxury summits and Independent Luxury is his sixth book.

Laurent Lecamp is currently Executive Vice President Sales at Carl F. Bucherer. He has co-founded successful luxury companies in the watchmaking/accessories industry which have received awards for creativity, design and innovation. He was one of the very youngest CEOs in the Swiss watchmaking industry with the Cyrus brand. He is an influential advocate for independent luxury players and a speaker at international conferences.

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THE FUTURE OF LUXURY HOTELS

  
The luxury hotel space is competitive but players are stepping up to the plate to keep up with rapidly evolving consumer demands. Here we investigate some on the cutting edge and what’s ahead.

Last month, in conversation with Robert Cheng, Group VP Marketing of the prestigious Peninsula Hotels Group, despite the plethora of exciting initiatives in the pipeline for the company, we found ourselves continuously drawn back to a particularly prevalent discussion on technology, innovation and their place in the luxury hotel space.

Keeping the balance between innovation, customisation and still maintaining that personal touch – which so often sets high-end hotels apart from the rest – is always top of mind, according to Cheng, and the risk of taking technology too far is always present.

Nevertheless, the increasing use of technology across the board in the luxury hotel space is a trend which is impossible to ignore – and the appetite for futuristic additions to the luxury hotel experience is palpable, particularly from the lucrative millennial set.

As Jérôme Destors, Director of Hotel IT at technology firm Amadeus, stated in its report ‘Hotels 2020 – Beyond Segmentation’: “Unique, connected, informed are just three watchwords that define the hotel guest, both today and in the future.”

Hence, understanding a customer is a strategic imperative for hotels in today’s world. We are operating in an era of unprecedented change. Brands that don’t recognise and respond to this run the risk of falling behind the competition permanently.”

So the question today is two-fold – how are luxury hotel providers currently innovating and what can be learnt from their pioneering advances and; what does the future hold for the hospitality space?

“Brands that don’t recognise and respond run the risk of falling behind the competition permanently.”

Two Heads Are Better Than One

First and foremost, when we hear ‘future’, often we think digital, smartphones, space travel. But innovation can also be more than just technology on its own.
Cutting-edge concepts that challenge the norm and offer new, exciting and exclusive options for the luxury consumer are often borne from forging inventive partnerships with like-minded entities and breaking new ground.
The Peninsula Hotels Group, for its part, has “never been afraid of technology” says Cheng, and has employed a dedicated research & development team for 30 over years to constantly scan innovations occurring across the globe and trial and adapt viable technology and concepts to suit the group’s properties.
But a perfect example of the aforementioned balance between technology and a personal touch materialised when the group established an innovative and exclusive partnership with online luxury fashion retailer and publisher NET-A-PORTER.com earlier this year.

  
 
The tie-up saw the two collaborate to create a series of stylish mini guides to the world’s most dynamic gateway cities.

The exclusive style savvy bite-sized guides were published on the respective hotel’s section of The Peninsula website (peninsula.com), and featured in the travel section of NET-A-PORTER.com’s fashionable The Edit magazine (net-a-porter.com/peninsula) during the week of launch.

According to Cheng, the duo will reunite again shortly to publish the next five in the series during New York Fashion Week in the Fall. But, as he hinted last month: “There’s more to come there, so stay tuned!”

“These meetings of innovative minds have since resulted in a range of out-of-the-box tie-ups.”

The Marriott Group is also pushing ahead, with research emanating from its 10,000-square-foot Innovation Lab and an Innovation Team, which is continuously brainstorming about what the hotel of the future will entail.

These meetings of innovative minds have since resulted in a range of out-of-the-box tie-ups such as a recent expansion of its partnership with TripAdvisor to add Marriott’s global hotel portfolio to the TripAdvisor Instant Booking platform from this summer, capitalising on the increasing shift in consumer behavior to trust recommendations from fellow guests over straight advertising.

Marriott and Netflix also officially announced a deal last month, which will allow guests to log in or subscribe to the streaming service via Internet-connected guest room TVs across several Marriott properties.

“Our collaboration with Netflix responds to changing consumer preferences in the way our guests access and watch content, while recognizing the leading role Netflix is playing in driving this transformation,” Matthew Carroll, Marriott’s VP of brand management, said in a statement.

Back To The Future

Starwood Hotels & Resorts Worldwide has, similarly, joined the ranks with the launch of its own high-tech design lab – Starlab – at its headquarters in Stamford, CT earlier this year.

The company has gone on to become the first to offer keyless hotel room entry, allowing guests to check in via their iPhones (or Apple Watch), and the group began trialing a robotic bellhop , dubbed Botlr, across its Aloft hotels in Cupertino and Silicon Valley in August last year.

Botlr, a three-foot high robot in the vein of R2-D2, allows guests to send request items – ranging from toothbrushes, smartphone chargers, magazines, newspapers and even snacks – from their smartphones, which can then be delivered by Botlr within two to three minutes.

When the robot reaches the guest’s door, the system calls the room, alerting the guest to the delivery.

  
Starwood’s robot butler, Botlr

Starwood is also in the midst of a roll-out for its smart-mirror concept, which offers guests immediate access to the weather, news and sports scores with a touch of the mirror’s surface.

A Bluetooth connection can also be accessed to link the guest’s phone so they can see their Twitter feed and other alerts directly on the mirror, which is powered by Panasonic technology.

No doubt the Starlab innovation team has also had plenty to do with Starwood’s recent interest in the Oculus Rift virtual-reality headset – bought last year by Facebook for $2bn – which Starwood reportedly aims to roll out to its Element gyms progressively in the near future.

“Gesture interfaces and 3D mobile phone displays could be common by 2020.”

The Amadeus report confirms that while technologies such as augmented reality and mind control headsets are already with us and are set to spread, “developments such as gesture interfaces and 3D mobile phone displays could also be common by 2020”.

Gesture interfaces for one, have the potential to drastically change how we view and interact with information and although the technology does exist – gestural interfaces have been developed by firms including Microsoft’s Kinect and Oblong Industries – this is still largely undiscovered territory for the hospitality industry.

Facial recognition though, is in the early stages of roll-out across the hospitality industry, with Universal Studios Japan one of the first hotels to make use of the technology in partnership with NEC via its NeoFace® Watch solution.
  
NEC NeoFace® Watch

NeoFace Watch uses cameras installed in and around the hotel to recognize the faces of guests, check registered guest information, identify VIPs and undesirable guests, and alert the hotel staff.

Alerting staff to the arrival of a VIP (via mobile or otherwise), before they check in allows the hotel staff to implement smoother and more appropriate check-in procedures, according to the firm.

The recognition takes less than a second and it can be integrated with the hotel’s loyalty and customer relationship management system so that customers can begin to be catered to in a tailored fashion as soon as they step through the door.

However, it is essentially an opt-in program and guests decide whether if they want to be part of the hotel’s database.

“Some 500,000 guests have been enrolled in the Universal program since June 2014.”

“Ultimately, we’re not selling facial recognition, we’re selling enhanced customer experience that’s enable by face recognition,” explained Allen Ganz, senior account development for the biometric division at NEC North America when queried.

Indeed, according to reports, the customer response has been positive to date and some 500,000 guests have been enrolled in the Universal program since June 2014 with the numbers growing steadily.

Mobile Aspirations

While there are many opportunities available for further evolution, mobile is one area where luxury hotels have excelled of late.

Marriott International introduced a new feature to their mobile app this month with Mobile Request, which operates by offering guests a chat function to make real-time requests at individual hotels and to have immediate responses and interaction.

Additionally, a drop-down menu also allows guests to request services and amenities, such as extra towels and pillows.

Inititally available to 46 hotels worldwide, the new feature will eventually be rolled out to all Marriott hotels this summer and will be available to the 50 million members of Marriott Rewards, the company’s loyalty program.

Dubai Marriott Harbour Hotel & Suites in the UAE, Amman Marriott Hotel in Jordan and Cairo Marriott Hotel & Omar Khayyam Casino in Egypt were some of the first hotels to get the app.

Following in the footsteps of Ritz-Carlton, Starwood, and Marriott, The Four Seasons also just released a new mobile app, a multi-functional global app which acts as a ‘do-everything concierge’, catering to guests’ every whim – from checking in and out, to ordering room service, housekeeping and laundry, to requesting a car from the valet.

Guests can also book luggage pickup and airport transfers or use the content-rich application to peruse local recommendations on individual destinations, curated to their ‘moods’.

Unlike other hotels, The Four Seasons has also set itself apart by not only offering the app across its 94 properties across 39 countries, but also making it available to all users, not just those in the loyalty program.

The luxury chain also plans to release a Simplified Chinese version of the application next month (August 2015), and a special version tailored to the preferences of Chinese travellers will reportedly be issued by the end of the year.

Four Seasons also has plans to provide the app in additional languages down the road, starting with Arabic.
However, it’s interesting to note that Cheng reveals that the Peninsula Hotels Group opted out of the app race – on purpose – to cater to its niche customers’ preferences.

“On purpose – we did not do a native app,” he says. “Because we felt that we wanted to make sure that we were at the guests’ disposal in terms of them being able to get access from their mobile device, but our guests didn’t want extra real estate on their phones dedicated to a Peninsula App, so we did the next best thing and gave them a mobile-optimised site.”

“On purpose – we did not do a native app.”

Switching Off
On this note, it’s clear that while looking to the future is essential – listening to the customer is paramount. Not all customers check into a luxury hotel to be catered to by technology and stimulated by curated content and box-breaking collaborations. Some of them may just want to switch off.

As Jonathan Ford, Founding Creative Partner at Pearlfisher recently pointed out – a survey by BCG claims that 51 per cent of US luxury consumers are now looking for ‘these enriched experiences’ over product, and a new and growing experiential luxury movement is tapping into this.

“Consumers are seeking new ways to take time out, slow down, contemplate and appreciate,” he says.

So, while some hotels are speeding ahead into the future, other luxury operators are experimenting with the opposite and leaning towards a more traditional, yet inspired, offering by allowing guests to truly power off and enjoy the serenity.
  
Villa Stéphanie (Above & Main Image)

German luxury resort Villa Stephanie is one such operator which offers its guests the option to activate an an Internet kill switch in each guest room – marking one of the first times a hotel has offered such a ‘digital detox’.
Check into the Villa and the flick of a switch activates a Wi-Fi grid blocker, which will actively block approximately 96 percent of Wi-Fi signals, and limit texts and tweets.

Eco-hotel, The Adrère Amellal, near Siwa in Egypt has gone a step further and actually banned mobiles from public areas of its premises to ensure that its up-market hotel guests – which have included Prince Charles and the Duchess of Cornwall – are not bothered by ringers, texts or loud phone conversations while on vacation.

The resort – which also has no electricity – only allows mobiles inside the bedrooms, and is made entirely from traditional materials such as salt-rock and palm leaves, relying entirely on torches, beeswax candles and stars to illuminate its 40-rooms, which reportedly start at £460-a-night.
  
  The Adrère Amellal in Egypt

While these customisations may not be the initial images that spring to mind at the sound of the word ‘future’ – it’s far from a long shot to imagine that in years to come, luxury hotels may choose to go down one of two paths – one, leveraging innovative partnerships and technology to trail-blaze modernity, or the other – to offer their guests an opulent and organic respite from a world which is increasingly connected and buzzing around the clock.

One thing, however, is for certain. Wherever luxury hotels choose to innovate next – it will be exciting, because a segmentation is in process – and, as the Amadeus report suggests – it’s all based on personalisation, where the guest is given choice over almost every aspect of their hotel experience.

(C) Luxury Society, by Daniela Aroche, 08 July 2015.

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THE MIXED PERFORMANCE OF LUXURY IN 2011

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James Lawson, director of Ledbury Research, shares the key market insights that characterised the luxury industry in 2011.

The Story So Far

Following strong performance in 2010, luxury momentum was sustained throughout the first half of 2011. Growth forecasts remain in double digits going into 2012 – Ledbury forecasts growth at 16% for 2011 and a 11% for next year. That said, greater caution is advised in the short-term, as certain segments still have some way to go, before demand fully recovers from the effects of the economic crisis.

Using the year-on-year quarterly figures of the key segments of the luxury industry, we can see that luxury has been in positive terrain since the start of 2010. Particularly strong results in 2010 made for more challenging comparables, however, performance has held up relatively well, with double-digit growth for the first two quarters of 2011.

Asia has been central to this growth, however other regions – such as South America – have also emerged this year as promising markets for luxury. Europe and the US, while still not fully recovered, are expanding again and the Middle East also showed positive movement over the period. Notably, Japan withstood the effects of the March earthquake better than expected and posted growth, following several consecutive years of contraction.


“ Going forward, luxury executives are upbeat about performance and it is anticipated that China will continue to drive this ”


Looking to the Future

Going forward, luxury executives are upbeat about performance and it is anticipated that China will continue to drive this. Separately , research undertaken by Bain & Co and Altagamma, suggests that the global luxury market will expand to €191 bn in 2011 – up from €173 bn in 2010 – and mark the second consecutive year of double-digit growth for the luxury industry.

Regionally, Europe currently accounts for the largest share overall (37%), however this will shrink due to rapid growth in Asia-Pacific, which currently holds 17% of the market. China (€9.6 bn) is now bigger than that in the UK (€9.0 bn) and is being driven by demand for luxury cars, hotels and, personal luxury. China will grow to €12.9 bn by the end of the year. Brazil meanwhile, is a small (€1.9 bn) market, and is forecast to increase to €2.3 bn by the end of the year. Luxury demand there will be characterised by demand for fine wines.

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A Star Performer: Swiss Timepieces

Demand for Swiss watches recorded strong growth (22%) in 2010, following significant declines in 2009 (-22%). The resurgence in watch consumption was driven by Asia, where luxury watches are frequently bought as gifts. In total, the region accounted for more than half (53%) of global demand, and registered a 35% uptick on demand in 2009 (FHS). In addition, the average Asian consumer purchased more expensive watches than their counterparts in Europe and the US (FHS).

Growth in Europe (10%) and America (15%) was positive, however, sales in Europe have not yet returned to pre-crisis levels. Further, 2009 saw a 36% contraction in American sales, thereby making for a relatively easier base for comparison in 2010. That said, luxury watches are expected to sustain this momentum in the near future and indeed pegged to be one of the star performers of 2011. Many luxury brands are expanding into this segment as a result.


“ The average Asian consumer purchased more expensive watches than their counterparts in Europe and the US ”


Challenges Ahead: Yachts

Sadly, the same levels of performance optimism cannot be seen in the case of Yachts, with sales expected to fall again this year – albeit to a much lesser extent than in 2010.

The declines of the past 2 years are largely attributable to a fall-off in demand from the US, which has historically been the biggest market in regional terms, and also Europe where there has long been a tradition of yachting. Demand is not expected to pick up in either market again until there is more economic certainty.

Another compounding factor in the yachting industry is that, unlike many other luxury segments, where Chinese demand has cushioned the fall in demand from the West, yachting in China is still in its infancy. Currently, there is no culture of yachting in China, and it is mainly the Hong Kong Chinese who enjoy the past time. This is expected to change, and the past two years has seen several Chinese yachting brands launch to cater to domestic demand.


The above is a collection of insights taken from Ledbury Research’s flagship publication High Net Worth. For more information please visit this link.

© Luxury Society, The Mixed Performance of Luxury in 2011 by James Lawson.


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