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New Luxury Players Use Data and Hype to Their Advantage

The luxury sector has been undergoing a swift evolution, and it’s not just product trends that are shifting quickly.

A new group of luxury brands and shopping platforms has emerged as the leaders in the space, giving a once untouchable class of haute couture designers a run for their money, according to a new report from email marketing platform Klaviyo.

While there is still a place for traditional luxury houses, Klaviyo performance marketing director Joe McCarthy told Sourcing Journal that newer brands have homed in on specific trends in both style and services—and are intent on giving shoppers what they want.

“The big difference that we see is that new brands have more awareness on how to use consumer data to build better experiences in marketing and communications,” McCarthy said, adding that historic luxury brands weren’t built on the same foundation.

Millennials who have grown up on the web are responsible for fueling the category’s movement in a new direction, Klaviyo found. As they age into peak purchasing power, the expectations of this ultra-connected group of shoppers are shaping brand strategies.

“Fifteen years ago, if you saw a Burberry ad in a magazine, you couldn’t comment on that ad,” McCarthy said. “Now, on social media, you can share your feedback—both positive and negative.”

Brands have had to learn to be hyper-responsive to consumers online, because one unflattering Instagram comment or tweet could spell disaster. “It’s that much more challenging now for brands to stay in that prime spot, because it’s so easy for customers to share negative reactions,” McCarthy said.

New Luxury, according to Klaviyo, is as much about being connected to community and culture as it is about products. Brands must be value-driven, offer high-quality merchandise, deliver fool-proof logistics and act as “the frontline of human ingenuity and our experience as consumers,” Klaviyo said.

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Based on those criteria, it’s not surprising that luxury fashion marketplace Farfetch and sneaker and streetwear resaler StockX took the No. 1 and No. 2 spots on Klaviyo’s list of New Luxury players.

Both platforms have had an “outsized impact” on providing “global access to luxury and making once-unknown brands household names,” Klaviyo reported.

Over the past two years, Farfetch has acquired online sneaker marketplace Stadium Goods, developed a strategic partnership with new-media platform Complex, and acquired New Guards Group, the holding company for Virgil Abloh’s Off-White. “Virgil’s impact on New Luxury cannot be understated, as we owe a good deal of the modern luxury sneaker movement to him,” Klaviyo said.

In fact, the New Luxury sector’s approach to reaching shoppers has been pulled directly from streetwear’s strategy. The personalized, white-glove service that was once the hallmark of a luxury shopping experience has been replaced with exclusive, highly-hyped product drops that take place mostly online.

“If you think about Supreme and the drop method they’ve employed, there’s so much excitement and products sell out immediately,” McCarthy said. New Luxury players are now tasked with finding ways to continue to heighten desire and inspire these intense emotional reactions in shoppers.

The new class of brands isn’t just dealing in apparel and accessories, Klaviyo reported. At the height of the pandemic, experts conjectured that shoppers would forgo spending on luxury goods and specialty products as long as the crisis continued, directing all of their spending power to essentials like food and household goods.

But in fast-forwarding just a few short months, McCarthy said almost online retail categories have grown exponentially.

Brands like Aesop and Le Labo, the gender-neutral fragrance and personal care company owned by Estee Lauder, took the No. 3 and No. 5 spots on the list. Wellness brand Sakara took the No. 7 spot, while CBD personal care label Lord Jones came in No. 8 and Haus, a low alcohol-by-volume spirits company, took the No. 9 spot.

Ultra-trendy New York men’s wear brand Aime Leon Dore came in No. 4 on while Swedish stalwart Acne Studios took the No. 6 spot.

The high-fashion studio, founded in 1996 at the intersection of the grunge and supermodel era, relies heavily on its brick-and-mortar footprint to drive sales and awareness. “I don’t think there will ever be a time when window shopping will be totally replaced,” McCarthy said, adding that in-store experiences will continue to drive consumers.

But as retail technology continues to improve, so too will shopper experiences, he said. Luxury retailers could bring in-person showrooming online, and conducting consultations through tech platforms will likely become a norm.

McCarthy also said shoppers will see local luxury boutiques accelerating their rise to prominence and expanding their reach by developing an e-commerce business. “If you think of your Main Street shops, many of them are moving online as a result of the pandemic,” he said.

While the move online has been long underway for the retail sector, the Luxury Institute’s Global Luxury Expert Network (GLEN) sees the shift as a long-term strategy that could benefit luxury brands in particular.

“Luxury consumers are particularly intent on controlling their environment and safeguarding their wellbeing,” according to GLEN’s recent report about how the pandemic could impact luxury spending. As uncertainty continues to plague retail, consumers of all kinds are likely to remain cautious about venturing out to the stores, especially in search of non-essential items.

“The brick and mortar store concept, which was once at the core of luxury consumerism, is no longer the most critical channel, and will remain subdued for a while,” the report said. “As such, online consumerism is becoming a habit that even baby boomers are growing accustomed to.”

Despite their reluctance to resume a pre-pandemic way of life, luxury shoppers are more eager than ever to support local businesses, GLEN said. This newfound penchant for “risk-averse consumerism” could see shoppers staying closer to home in an attempt to insulate themselves from undue exposure. A similar attitude is also taking shape within the operations of luxury labels, which are beginning to prioritize local and in-house manufacturing, reducing their reliance on foreign production.

The guarded attitude being seen among consumers will likely impact their willingness to travel for some time, GLEN said. This has the potential to change the ways in which luxury brands—which historically target shoppers with travel-focused collections made up of garb designed for pristine resort beaches and mountaintop ski getaways—reach shoppers, who are now more interested in staying close to home.

“With the reprioritization of spending from discretionary to essential products and services, conscious consumerism has heightened—luxury consumers are paying greater attention to the brands they choose to support and endorse,” GLEN said. “In addition, safety concerns are placing newfound emphasis on environmental impact and community wellbeing.”