High-end brands will use cryptocurrency to engender deeper trust, and offset the e-luxe boom by diversifying their portfolio of offline experiences.
Luxury brands used to define themselves by remaining of offline, and therefore as a rare entity that you had to make an effort to find in-store, but now e-commerce is on track to become the world’s third-largest luxury market by 2025, according to McKinsey. This means that in 2018 technologies will make new interactions possible with luxury goods, both online and offline.
This is particularly true of blockchain technology, which is well suited to an industry obsessed with authentication. This technology will increasingly be used to provide immutable, traceable records of potentially contentious luxury goods such as diamonds. In addition, cryptocurrencies will bring a new level of attainment for aspirational luxury consumers, who will be able to buy a share of luxury items such as artworks using the digital currency.
In the world of offline luxury, brands and consumers will form more intimate relationships and brands will move into unexplored spaces such as in-home concierge services and property.
As our relationships with brands become increasingly intimate, future-facing businesses will expand their luxury services by offering branded homes and apartments.
Luxury department store Harrods has announced it will start offering a residential concierge service to manage 10 newly built gated mansions on Hamilton Drive in St John’s Wood in northwest London. The service will enable residents to access helicopter and private jet charters, as well as maids, butlers and cleaning services.
In Miami, Aston Martin and Porsche are working with property developers to offer branded apartment towers. Set for completion in 2021, the Aston Martin Residence will offer amenities such as spa, cinemas and art gallery as well as direct access to yacht marina.
Airbnb is also venturing into branded accommodation with high-standard apartments in Kissimmee, Florida. The brand is streamlining the process of renting out its apartments for the residents, promising to coordinate the letting process. A master host will be on-site to assist guests, and cleaning services will be mandatory to ensure a high standard of accommodation.
Industry Innovator: Polestar
Big idea: Creating a luxury car brand sold only online. It is paid for through a monthly subscription fee that changes based on services required.
Why it matters in 2018: The luxury market is not immune from changing consumer mindsets around ownership. Polestar combines subscription with additional pay-as-you-use concierge services that add new value to its ownership model, and is something that could easily be translated into different luxury verticals in the next year.
The rise of blockchain will reshape the industry as decentralised authentication offers new levels of traceability for luxury buyers.
The jewellery industry, and in particular the diamond trade, will be at the forefront of this shift. At present, transparency is difficult to achieve because a single stone can go from mine to aggregation to market, and then to lapidary to market again, to manufacturing, wholesale and retail, before finally reaching the customer. To counteract this, London-based company Everledger is complementing traditional handshake deals with technology-enhanced traceability, using IBM blockchain technology to track a diamond at each stage of the supply chain. This enables the buyer to trace a diamond’s provenance and verify its authenticity.
Blockchain technology will also become increasingly popular among art dealers and collectors, for whom the privacy and the transparency of the transaction process will be a big draw. For instance, gallerist Eleesa Dadiani started accepting cryptocurrency payments earlier this year.
Similarly Maecenas is a decentralised art gallery that offers investors a share in works of art, which are traded using cryptocurrency. ‘Investment in art is attractive because it is stable and appreciates in the long term. But you have to be rich to buy a major artwork – until now,’ says Marcelo García Casil, CEO and co-founder of Maecenas. ‘With Maecenas you can own a fragment of an artwork even though you could never afford the whole painting or sculpture.’
Mexico is bucking the luxury sector trend of slow market growth. But with the devaluation of the peso against the dollar and an upcoming election in 2018 dampening consumer confidence, the promise will be focused more on local luxury.
In response to Trumpian politics, a new-found sense of patriotism is sweeping the country, especially among local luxury consumers who are buying products that celebrate their home country.
‘The luxury market in Mexico is growing very fast,’ says Juan Pablo Heredia, operating director of Tulum-based hospitality group Slow Hospitality. ‘Innovative local luxury brands are opening up a huge opportunity for Mexico to be a player in the sector, as both a consumer and a creator of luxury internationally.’
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