SPENDER

Despite most economies and their retail sectors taking a hit in the past few years, the iuxury sector has remained buoyant, Madeleine Ross finds out what makes this seotor so resilient, and how it has had to adapt
uplifts across champagne businesses Dom Perignon, Moet Chandon and Krug, its fashion brands Louis Vuitton, Fendi. Donna Karan and Celine, as well as watches and jewellry brands Bulgari, Tag Heuer and De Beers. Global car sales also advanced 5% in the first half of 2011 driven by growth in China, according to Scotiabank's July Global Auto Report. Interbrand's recent 2011 Best Global Brands Report also reported a buoyant luxury sector. Louis Vuitton ranked as 18th best global brand, while Gucci, Hermes, Cartier. Tiffany, Moet & Chandon and Armani all saw their respective brand values increase. Most notably. Burberry increased its brand value by 20% this year, making the British luxury retailer one of the fastest rising brands worldwide. Miu Miu and Versace, as well as the first Australian stores for Christian Louboutin and Bottega Vneta. Louis Vuitton, Chanel, Prada, Gucci and Burberry have all also considerably expanded their local retail floor space. "Just look around the city and you can see how massive these brands are becoming," says Nicki Singh, national group sales manager at ACP Magazines. "The success of this field is evident by the opening of these stores. They are investing in this market hugely." It's the same story with luxury retail online. Australians are the third biggest users of luxury shopping site Net-A-Porter and spend an average of S712 more than their average international counterparts, according to MO Luxury. This trend is followed through in the luxury travel sector: "Outbound travel particularly is very healthy at the top end of the market. Certainly there's no drop at the luxury end." says Sujata Ramen. managing director of high-end travel company Abercrombie & Kent, Australia and NZ. While luxury travel turned to promotional deals to get it through the GFC. the market has recovered fast. "In Australia it picked up much faster than anywhere else in the world. 2010 was actually a very good year for us," adds Ramen. In terms of advertising, media owners have no cause for concern when it comes to luxury brands. "It's amazing how active the luxury brands have been in a relatively challenging and unpredictable economic climate!' says Max Eburne. general manager, JCDecaux. "By the end of 2011 we are anticipating a 25% YoY increase in spend from the

roud bastions of prestige, luxury houses have long been synonymous with seductive arrogance and unattainability. Top-tier brands have traditionally talked at and teased consumers with visions of beauty and grandeur presented on billboards or within the pages of glossy magazines. But for these once-detached guardians of style, engagement has become the new black. As global markets shift, consumers grow younger and technology reigns, luxury brands are overhauling their marketing mixes, trading push tactics for dialogue, and forging intimate bonds and emotional connections with consumers. Despite continued reports of economic gloom, the global luxury sector is booming across fashion, jewellry, accessories, automotive and travel. Bain Company's Spring 2011 Update: Luxury Goods Worldwide Market Study projects global luxury sales will reach S254bn in 2011. up 8% from S235bn in 2010, buoyed by momentum in the US, Europe, continuing growth in China and other fast growing luxury markets, including Russia, Brazil and the Middle East. While the global sector declined overall through the global financial crisis in 2008 and 2009, a strong 2010 closed with a 14% increase in sales, with sales of leather products, watches, jewellry and clothes, particularly, driving the luxury goods market to a new all-time high. Profits for multinational luxury goods conglomerate, Louis Vuitton Moet Hennessy (LVMH) jumped 22% in the first half of the year, boosted by

Australian growth
Luxury in Australia weathered the recession in style. Consulting services MO Luxury's Evaluation of the Australian Luxury Mar/cef report, released in July, valued the Australian luxury market at a whopping $820m. Compared to mid-tier retailers, which have suffered, luxury has done well. Profits at Premier Investment's Just Group - the owners of Peter Alexander, Jay Jays, Portmans, Dotti and Just Jeans - dived 50% in September, and a bevy of commercial brands like Bettina Liano, Belinda International and Satch are battling voluntary administration, while the luxury offering is spreading like wildfire across almost every sector. Westf ield Sydney's luxury offering has skyrocketed over the last year, welcoming Prada,

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News Magazines. "We all know that consumer confidence is low... but I think the great thing about luxury goods is that they can be seen as a treat"

Reaching a new consumer

MO Luxury's research revealed that whereas luxury was once a privilege of a wealthy elite, there has been a dmocratisation of the concept. Luxury is driven by a wider middle class with a growing disposable income, and approximately 40% of Australian households are now potential customers. While the Aussie market has traditionally been afflicted by Tall Poppy syndrome' - a disdain for conspicuous displays of wealth - brands are now reporting far more knowledgeable, broader customer bases than ten years ago. "It's a global mindset. They're definitely digitally savvy, they're more educated, they're style and fashion aware," says John Batistich, general manager marketing at Westfield Group. News' Kelly says: "There's a lot of talk about the dmocratisation. Whilst everyone can't afford a Chanel handbag, they can buy a Chanel lipstick. The flight to quality means that people also trade up. They don't buy as much stuff but they certainly save up and buy special things." The luxury consumer is aiso getting younger with data also showing Gen-Y consumers increased their luxury spend by 100% during the first half of 2011. According to the MO Luxury report, 30 to 55 year olds are buying less, whilst the number of customers under 29 is increasing. The iatter category now accounts for up to 35% of clientele. "I think we're seeing a younger audience," says News' Kelly. "The young affluent consumer, even if they may not be able to afford their products now, will in the near future."

luxury goods category. This has predominantiy been driven by cosmetics, fragrances and high-end retail." Fashion mag Vogue is seeing the strongest support from luxury advertisers ever, with its 2011 September and October issues the biggest on record, according to News Magazines. "WeVe had some of the largest issues weVe published in this space, from Vogue to the latest Wish Magazine, and even across other titles like Donna Hay. We're seeing massive revenues being spent in this category," says Zara Curtis, commercial director. News Magazines.

Transcending fiscal chaos

While not aiways 'immune' from economic downturn, iuxury brands have certainly proved their resilience in times of uncertainty. But why, when luxury almost always demands deeper pockets, do top-tier brands prosper at times when more commercially available brands struggle? "If you're operating in a niche sector, whether that's at the very high end or the very low end (you're more likely to survive in hard economic times," says Melinda O'Rourke, director of MO Luxury. "There's so much competition in that mid range; huge choice and a lot of price points that are very similar. It's a confusing space to be in!' But beyond the bolstering effects of its 'niche' status, the appeal of luxury stems from something more psychological. It embodies values that people turn to in times of instability - things like quality, longevity and durability. "In tough times consumers become more selective, stick with brands they love and trust and reduce disposability of purchases," says Anthony Whittle, marketing and publicity manager at Donna fiay. "Premium brands offer a level of quality and individualism not as evident in the mass category. They approach their product as a justifiable investment rather than a disposable commodity." In the same way that individuals substitute risky investments for reliable ones when economies fluctuate, so too do they turn to brands and products that symbolise timelessness and dependability. "When times are tough there's always a flight to quality," says Mark Kelly, group publisher lifestyle at

New era o luxury marketing

This ever-younger, broader consumer base means brands have had to pick up their game in the digital space. The traditionally conservative marketers have long sought the detached authority of magazines and billboards while resisting the move to digital "Luxury brands are very much about control and protection and the web was very much a wild west. No one was sure where it was going, how long it would last, who would be using it," says O'Rourke, of days gone by. "Luxury isn't about 'me-tooism', it's about making sure that whatever that decision is, it's the appropriate decision for the brand." The engagement demanded by online platforms has been especially confronting. "Luxury brands can't come across as wanting your attention and being desperate," says Dean Christie, senior brand consultant strategy, Interbrand - the agency currently developing creative for Australian diamond company, Argyie Pink Diamonds. "There were a iot of brands who didn't want to go online because they can't control the experience. The way you're greeted, the tone of voice, the dcor, the smell - they can't control that online." As the rest of the world jumped on the digital bandwagon, luxury, until recently, saw the space as contrary to its core values. "Luxury brands have been defined in the past by almost not saying anything. They were considered almost too high brow to say anything," says Mike Rigby, creative director, Interbrand. "That era is dead. If you have a brand that is just based around a classic marque and a tone of voice that is very reserved and

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restrained, then you just look outdated and static. You really have to have something interesting to say and that needs to change on a regular basis." Now that all brands have realised it is imperative to get online, luxury marketing departments are wrenching themselves off their high horses. Where these brands once strived for consistency and aloofness, they now must embrace dynamism. "We are entering an era where it's not a monologue but it's a dialogue. It's a conversation," says Interbrand's Rigby. Abercrombie fi Kent's Ramen agrees. "The brands that have... tried to build communities - whether that's done online or through personal relationships - I think those are the companies that have not just survived but have actually thrived in difficult periods," she says.

where celebrities Ruby Rose and Jennifer Hawkins tweeted about the best products and brands on offer. Many of the 100 brands involved reported their highest ever daily sales.

The move to mobile

As consumers spend more time on the move, luxury houses can't ignore the necessity of branded mobile apps. "With the rise of smartphones and iPads. mobile marketing is just becoming more and more important," says Rigby. Almost every luxury house now provides apps for mobile devices, facilitating everything from game-playing to reservations to online shopping. As such, they are becoming key in developing loyal consumer bases and driving retail. The Vogue VIP app, for example, allows individuals to check in at luxury ' l/ogue-approved' retailers around the country, unlock exclusive offers and compete with one's friends for badges and VIP status. While also transactional. hotel chain The Mandarin Oriental's app is first and foremost a tool to drive engagement, enabling consumers to browse photos, send digital postcards from their locations and to research nearby sites of interest. Tina Chilip, marketing communications manager at Usablenet - the developers of mobile sites for a range of luxury hotel brands - recently stressed that the quality of their mobile services must correspond to the premium level of the experiences they are promoting. "It could be advanced features like pre-ordering room service or using loyalty points, but it also pertains to... functions like locating and booking a reservation. Luxury hotel guests are usually savvy travellers and it's important for a mobile site to have the functionalities that consumers expect from the brand," she recently told website Luxurydaily.com.

An Integrated approach
So luxury brands are now investing heavily in cuttingedge, integrated marketing mixes. But the challenge is to ensure that digital formats can match the 'wow' factor synonymous with luxury in-store experiences, 50 foot billboards and glossy gatefolds. "Over the last couple of years digital budgets around luxury clients have absolutely increased significantly year-on-year but they're looking for bespoke opportunities," says ACP's Singh. "They're not just interested in... over-the-top pages or mini skyscrapers. It's actually skinning a page and being really clever about how they own that space." Harper's Bazaar recently partnered with Moet & Chandon to produce a bespoke campaign around Hollywood glamour which spanned print, experiential and digital. It included a unique Hollywood stars cover execution as well as a micro-site featuring red carpet glamour from the awards season. "Innovation in media is an important part of Moet Chandon's marketing," says Katie Jacobs, marketing manager Moet Chandon. "[The brand) has been... continually at the forefront of luxury marketing, adapting to the market and reinventing what luxury and glamour means." Publishers are also using online platforms to drive luxury retail sales. Vogue's 'Online Shopping Night'in June featured an online \/oguemedia hub.

Social media
Luxury brands' uptake of social media has trailed that of mid-tier retailers, with brands ever cautious of the platform's unruly dynamism. "It's a challenging area because by its very nature luxury is rare and the role of social media is about amplifying the message

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and participating in the brands!' says News' Kelly. "Luxury brands, even luxury media brands, are much more used to telling rather than participating in a conversation. Everyone understands that they need to be there... but the question is how do I do it and stay on brand?" Interbrand's Rlgby says: "In an era where branding is about communication, not decoration, the importance of how your brand speaks is as important, if not more important, than the visual. [Don't] just dictate to them, lecture them and speak to them, but actively involve them in a discussion." Here we need look no further than Burberry for an example of a brand getting t right. Widely considered the master of modern luxury marketing, the brand's dedication to digital innovation, particularly in its use of social media, has driven its 20% global brand value this year, making t the fastest growing luxury brand. Burberry has managed to straddle the social media line between engaged and aloof by prominently featuring the feedback and opinions of renowned brand leaders, including celebrity ambassadors and creative heads, across its social media sites. The Facebook page is regularly updated with videos of chief creative officer Christopher Bailey speaking to fans on the state of fashion shoots and events, encouraging them to post questions on the brand's wall and answering those questions 'in person! Actress Emma Watson and model Rosie Huntington-Whitely, both brand mascots, speak 'exclusively' to Facebook fans n regular videos where they thank them for their support, asking their opinions on shows and speak casually about upcoming news. It's all about instilling respect for a brand by proving the top dogs take them seriously. Furthermore, instead of waiting for show gossip to leak back to consumers second hand via traditional media channels, the brand instigated a Twitter 'takeover' by International fashionistas who talked followers through the live catwalk trends in real time. Ironically, the exclusivity associated with luxury translates well Into the social media space, albeit n a different form. Despite wide accessibility, the

process of liking a page - or choosing to follow parallels the uptake of membership to a top tier club. While brands' social media sites ensnare mass audiences - Burberry sits at over 8 million Facebook fans - effective luxury marketing across social media is that which offers fans exclusive and first-run content.

Experlentlal's essential
In the midst of the digital conversation, the centrallty of experiential initiatives and activations has soared, with brands creating ever more luxurious, complete n-store experiences. "The investment that Prada, Gucci, Miu Miu have made in their stores is just amazing in terms of security, service, merchandise, display. We are seeing a lot of visual merchandising as being really critical," says Westfield's Batistich. Last month Louis Vuitton opened its nautical themed 'Island maison' at Singapore's Marina Bay Sands - a waterfront complex featuring a men's 'travel room! a private lounge evocative of a luxe cabin in an ocean liner, an outdoor Loggia reminiscent of a yacht deck, as well as numerous 'cultural spaces' designed for the exhibition of art. "Luxury is in a unique space In the sense that it is so based around the experience and that experience is quite difficult to replicate online," says Rigby. "There's still a sense that people want the full immersive experience when it comes to luxury branding because that's so part of the package. You go somewhere special to be transformed into a different space, a different world, to have all of your senses essentially played with." Sensory communication is key to forging emotional connections with consumers. Hotel chains like the Mandarin Oriental and car dealerships like Lexus now use scent marketing to fuse brand experiences to memory. Similarly, sonic branding looks set to become a key part of the luxury experience, with Burberry releasing its first single and music video for its perfume 'Body! In-store and special events are critical to luxury sales, with glamorous designer previews and nights with fashion icons central to managing high net worth customers. Westfield recently hosted a night

at their Doncaster'style suite'with Vogues Krlstie Clements for Bally, and ACP has teamed with retailers to do the same. "It's all about having Edwina McCann [editor of Harper's Bazaar] in-store. Their VIP customers are invited, our readers are invited - 50 people exclusive in store, French champagne and Edwina talking about this season's trends," says Singh. "It's all about the power of the endorsement." Large, inclusive events are also on the up as luxury brands aim to tap into younger demographics. Initiatives like Vogue's Fashion's Night Out stimulate interest in luxury and introduce Gen Y's to the brands. "Fashion's Night Out drove tens of thousands of people into the city and one of the great benefits of that is that... it introduces a whole new generation of younger consumers and potential customers to those brands," says News' Kelly.

What's in store
Bain Company has predicted luxury will grow at around 6% per year until 2014, with growth in the Chinese market 25% this year alone. Continental China is set to become the third biggest luxury market after Japan and the US within five years. "Asia is a hugely important market in terms of the growth of luxury brands," says Rigby. "A quarter of a century ago there were no millionaires in China and now there are over 250.000 - that's growing at a rate of 70% per year!' Luxury n Australia will no doubt benefit from these ever wealthier tourists visiting our shores, but strong local interest looks set continue too. And as luxury is taken up by younger, digitally savvy conscious consumers, whether local or foreign, we can bet the sector's marketing will evolve even more. "Tech savvy consumers of today are the affluent consumers of tomorrow. It's imperative that [luxury companies] communicate the desirability of their brands in a relevant way." says JC Decaux's Eburne. But as luxury houses fasten their designer belts and hitch up their couture britches for the promising road ahead, it's not quite time to kick up their heels. "There is a cautious optimism about moving forward," says O'Rourke. "It's always very considered scenario planning, but it's onwards and upwards."

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