Luxury 3.0 White Paper In Collaboration with BCG x Highsnobiety
Charting the Future of Fashion & Luxury and Quantifying What Matters Most to the New Luxury Consumer
To read the full Luxury 3.0 report, please download the PDF here.
CONTEXT
Following our second think tank project, a research paper on the Gen-Z influencer economy in China, the Office of Applied Strategy has continued its research partnership with Highsnobiety – this time joining forces with Boston Consulting Group to publish a white paper charting the future of the industry
Titled Luxury 3.0, this study is the sophomoric entry in the Highsnobiety xBCG New Luxury report series, an annual report series that explores, tracks and analyzes global luxury consumer attitudes and behaviours. The methodology incorporates an expansive, original luxury consumer survey with around 4,500 consumers globally and a dozen interviews with experts across luxury and tech.
RESEARCH OVERVIEW
The implications of the past two years will have an outsized global impact across culture. But rather than ushering in a paradigmatic shift in values, we’ve observed that the pandemic has largely been an accelerator for the nascent trends we began tracking with our first paper.
For this second installment, co-authored by Tony Wan of the Office of Applied Strategy, we continue our exploration on the future of luxury — quantifying the shifting values, behaviors, and desires of the luxury consumer across geography, age, and time.
Central to our analysis are the behaviors and attitudes of Cultural Pioneers, which we track as a distinct cohort of consumers with a considerable importance. This is the group whose values play a significant role in indicating future trends and whose influence isn’t necessarily defined by their reach but by their authority. Cultural Pioneers are the first to adopt new products, brands, and ideas in the new luxury landscape, and they are an important litmus test for future trends. Prior luxury paradigms focused on gatekeeping consumers from the brand narrative, creating aspiration through a top-down brand approach that was exclusionary by design. But this approach is outdated. At a time when a Reddit group can game the stock market, meaningful friendships are being formed throughout the metaverse in video games, and new media platforms such as Substack and OnlyFans are mone- tized through fans instead of advertisers, the definition of luxury is also shifting to be as much about belonging, knowledge, and identity as it is about owning product. Luxury 3.0 is the natural evolution of the key principles we explored in “Culture Culture Culture,” a luxury paradigm where the intangible aspects of luxury are growing in importance. But this time, those principles are taking place in a consumer landscape which is increasingly decentralized.
The New Luxury (which Highsnobiety originally coined in 2018) described a landscape where traditional definitions and notions of luxury were eroding; where brands like Nike and Stone Island were being considered in the same breath as Balenciaga, LV, and Gucci. But today, luxury – what it is and how it works – is more intangible than ever.
Cultural credibility for the new luxury consumer is driven by stories, lore, belonging, and community. We’re calling this new approach Luxury 3.0, mirroring the internet’s evolution into Web 3.0. And much like Web 3.0, which is characterized by decentralization away from traditional sources of authority, Luxury 3.0 similarly represents a profound shift where individuals and communities have more control over the narrative than ever before.
Luxury 3.0 is a framework for brands to understand how to build credibility by investing in communities for their consumers to buy into. Stories over product; knowledge over possession; community over crowds; participation and experiences over observation.
KEY TAKEAWAYS
Luxury 3.0 is characterized by increasing de- centralization in the consumer landscape and journey. Instead of a top-down driven brand narrative for a singular consumer archetype, luxury is increasingly being fragmented across many cultural sub-groups. As part of this evolution, the intangible aspects of the luxury experience such as knowledge and community become a core part of the value proposition. More than ever, luxury is about belonging, identity and stories.
Luxury 3.0 customers want a longer-term sense of brand purpose and a deeper narrative of what a brand is all about. At the same time, they want this purpose to be more relevant and applicable to their cultural contexts and affiliations. In parallel, audiences increasingly want to immerse themselves in narrative worlds – whether it’s through an entertainment franchise like the Marvel Cinematic Universe, a new crypto token, a video game like Roblox, or a streetwear brand. These narrative worlds are essentially stories that fans can consume, discuss, and participate in.
Luxury brands cannot be too democratic or else they will risk their aspirational positioning. But accessibility does not preclude exclusivity. Take for example Prada’s Spring/Summer 2021 runway show entitled Prada Dialogues, which featured an “Ask Me Anything” style post-show question and answer session that the public was invited to participate in. Or Matchesfashion’s 2021 Korea campaign entitled (or Matchesfashion Auditions) which invites the public to audition to become part of the campaign itself.
Brands are increasingly questioning the traditional fashion campaign model, using them less as an exercise in top-down communication and more as an invitation for public participation.
The brands that will win tomorrow are those who invite their audience in to contribute and play an active role. In some instances, communities can overtake their brands, especially when they feel the brand has veered off-mission or betrayed the community in some way. In this sense, communities are accountability drivers, calling brands out when the gap between their rhetoric and action is too wide.
It is worth noting that most online communities are primarily driven by volunteers – Reddit, Wikipedia, and Discord build the tool, but staying for the network requires the community itself to put work into creating the content and managing the group. Savvy brands will understand that meta-communities, even if brand-controlled, will rely on the fans to also help run and manage the group. Even savvier brands will also offer meaningful, material incentives and rewards to such users.
“Community building is more gardening than it is architecture. It's about creating this general framework that allows our community members to come together and to find their own language. How do you create the conditions for these things to happen? You may not have anticipated a specific project emerging, but you know projects like this will emerge because of the way that you're framing and building the community.”
— Alex Zhang, CEO at Friends with Benefits
Luxury 3.0 refers not just to the communities surrounding luxury, but to the digitization of the luxury experience itself. In prior phases of luxury’s evolution, this digitization might refer to the growth of e-commerce platforms and online sales. However, at the end of the day, e-commerce is about scaling sales and distribution of a physical good. Luxury 3.0 has digital products and stories at the end, not the means.
With Luxury 3.0, digital-native goods and services are becoming increasingly relevant to the luxury experience. While still nascent, digital communities that currently surround physical fashion are setting the table for this shift.
Luxury 3.0 In A Nutshell:
— Luxury 3.0 is characterized by increasing decentralization in the consumer landscape and journey. Instead of a top-down driven brand narrative for a singular consumer archetype, luxury is increasingly being fragmented across many cultural sub-groups.
— Luxury 3.0 consumers expect their brands to stand for something and to be able to speak to them authentically through pro- duct, marketing, collaborations and experiences in a more hyper-specific cultural content.
— Luxury more than ever is more about belonging and identity. Brand communities allow like-minded fans to share knowledge, exchange ideas, and network with each other. The brand exists as more than just a distributor of physical goods, but a meeting point for different fan groups to meet and interact. Conclusion: What is Luxury 3.0?
— Consuming, contributing, and sharing knowledge are key movers of cultural currency in Luxury 3.0. The lore and stories underlying the product are becoming almost as crucial as the physical goods themselves. In order to succeed, fashion houses will need to create more opportunities to make their brand world more open and participatory.
— Luxury 3.0 also refers to the increasing digitization of the luxury experience. Digital goods will become an increasingly relevant aspect of luxury fashion: with online avatars, limited edition skins, NFTs, sticker packs, AR clothing, digital trophies/vanities and other digital products becoming a growing part of a luxury consumer's annual spend as well as how they are influenced to develop brand affinities.
METHODOLOGY
To continue our exploration, we pull insights from two overarching sources.
First, we conduct a global consumer survey to generate quantitative insights on a macro-scale. In 2019, we conducted the first survey in the series — polling luxury consumers across geographies, backgrounds, and ages to generate deep insights around the consumer journey, levers of credibility, and brand desirability.
Our new survey contained the responses from ~3,000 general luxury consumers and 1,350 Cultural Pioneers. As a proxy for the Cultural Pioneer demographic, we polled a sub-segment of Highsnobiety’s audience. This cohort of consumers not only skew younger, but also buy 38% more luxury goods than the general public, and therefore give a glimpse of where the market is heading.
Secondly, we conduct a series of in-depth interviews with industry experts across luxury, fashion, culture, and technology segments. These interviews were pivotal in helping us both shape and validate hypotheses that emerged from the consumer survey.
EXPERT INTERVIEWS
Amber Atherton: Head of Strategic Communities at Discord
Mike Ferris: VP Brand Marketing at The North Face
Chris Paik: General Partner at Pace Capital
Remo Ruffini: CEO at Moncler
Celine Semaan: Founder of Slow Factory
Neda Whitney: VP Brand Marketing at Christie’s
Erika Wykes-Sneyd: Global Vice President, Marketing Comms at Adidas
Alex Zhang: CEO at Friends With Benefits (FWB)
Lucas Zwirner: Head of Content at David Zwirner
Bettina Fetzer: Vice President Communications & Marketing at Mercedes-Benz AG
Dexter Darbouze: WW Head of Integrated Media at Bottega Veneta
