We recently sat down with Milton Pedraza, CEO of luxury and premium goods and services consulting firm, the Luxury Institute to talk industry-wide changes and what they mean for brands competing in today’s digital-driven world.
What significant shifts do you see as having the most impact on the US luxury goods industry?
While baby boomers still care deeply about their aesthetics and dressing well, they are slowly bowing out to focus on areas like philanthropic endeavours. They’re either consuming less luxury goods in general, or they’re selling their goods on The RealReal because they’re not as important to them anymore. Meanwhile, although millennials are taking over consumption of luxury goods, everyone, including the millennials, is going more experiential. Goods are becoming less important to luxury consumers compared to travel, technology, food and wine, and other luxury experiences.
Tell us about the influence of Gen Z on the industry as a whole
Although Gen Z doesn’t have all the money yet, they are definitely influencing their next generations in terms of consumption and what they think is important. Teens these days follow brands and influencers from around the world, so they are aware of what’s going on, not just in the US, but globally. They are aware of global luxury brands, global influencers, and all of their collaborations, and they’re ready and willing to express their knowledge. This includes boys and girls, I might add. Boys are as much into fashion as the girls these days, and maybe even more so.
Millennials and Gen Z have a profound influence on what everyone is consuming - not only in clothing and accessories, but also in media and culture. Streetwear, for example, driven by the younger, urban population, has influenced the way we all dress for work.
How have these demographic shifts impacted the performance of different product categories?
Watches have been especially challenged. If millennials are embracing anything, they’re embracing the Apple watch, much more so than they’re embracing collectibles, or stodgy brands with 150 years of history that promote nothing but their history. There’s nothing new about those brands. There’s no innovation.
On the other hand, jewellery has learned a lesson, and there’s been a lot of innovation in that space. One of the great examples is Cartier’s Juste un Clou collection. Unlike watches, jewellery has been able to adapt to the changing tastes of consumers. The brands have learned how to be relevant, how to not just sell their heritage or history, but to sell what’s happening now.
Meanwhile, apparel has been mixed. Brands are adopting sustainability, and they’re becoming more open to new materials and processes that don’t hurt the environment as much. As a result of its low quality and unacceptable environmental footprint, fast fashion is going out of fashion. Even luxury brands are revaluating their materials and processes in order to minimise their negative impact on the environment.
So, how can brands compete?
The fact that people don’t want to consume as much apparel, and are beginning to rent or buy resale, including for handbags, is putting the entire industry under siege. To compete, brands really have to deliver on the values that they espouse, and they have to deliver across the entire brand spectrum: supply chain, relationship building, technology, and social media. Brands today have a lot more moving parts than they’ve ever had, and their fates are determined by their ability to be creative and adapt.
About Interviewee: Milton Pedraza is the CEO of the Luxury Institute and EIX (Emotionally Intelligent Xpert). He advises and coaches luxury CEOs and advises and serves on the boards of top-tier luxury and premium brands, as well as luxury and premium startups. He is a sought-after speaker worldwide for his practical, innovative and humanistic insights and recommendations on luxury and high performance and is the most quoted global luxury industry expert in leading media and publications.
Milton is also an authority on Customer Relationship Management and Artificial Intelligence technologies, Analytics, and Big Data. Prior to founding the Luxury Institute, his successful career at Fortune 100 companies included executive roles at Altria, PepsiCo, Colgate, Citigroup and Wyndham Worldwide.