Luxury Needs the Digital Rich Kids
Young, rich and surrounded by high-end toys.
This isn't Rich Kids of Instagram we are talking about. It’s the new generation of leaders who are taking up roles within their families' luxury businesses. And given the increasing influence of millennials, online and social media on top-range consumption, that's just what storied fashion houses need.
Bloomberg News reported this week that Lorenzo Bertelli, the 30-year-old son of Prada's co-chief executives, has joined the Italian group as head of digital communication. Up to now he’d mainly spent his time as a racing driver.
Four of LVMH Chairman Bernard Arnault's children are already involved in the business. Last week the group tapped his 41-year-old son, Antoine Arnault, to oversee the group’s image and communications, including social media. This is on top of his roles as chief executive of Berluti and chairman of Loro Piana. Meanwhile, Richemont Chairman Johann Rupert last year elevated his 30-year-old son Anton to the board.
The family-controlled conglomerates have always sought to bring in fresh blood. But luxury adviser Mario Ortelli, of Ortelli & Co, says in the old days this would have involved putting younger generations in charge of emerging geographic markets.
Nowadays, the new frontier is digital, and that is exactly what many of the scions are slotting in.
For example, 26-year old Alexandre Arnault is co-chief executive of Rimowa, and has been spearheading streetwear collaborations at the 120-year old luggage label. He was also involved in LVMH’s recent investment in luxury e-commerce platform Lyst.
Luxury internet sales are growing faster than those through traditional channels. Consequently, the houses are accelerating their digital strategies, and looking to take more control of their sales online.
Fortunately, the younger generations share many characteristics with the millennial customers that top-end brands are desperately trying to court.
According to Bain & Co. and Altagamma, the Italian luxury association, younger customers are increasingly shaping the market. The analysts say groups must adopt a “millennial mindset” if they are to survive.
There are some differences in what younger customers want. They may be introduced to a brand through a logo T-shirt rather than a fragrance or pair of sunglasses, as in the past.
But customers of all ages not only want beautiful products, they demand seamless online service, and a relationship with a brand that is more than transactional, often through social media.
Bain forecasts continued strong growth for the luxury industry this year. There are still risks. Shares in Gucci owner Kering SA and LVMH fell on Thursday after Luca Solca, Exane BNP Paribas analyst, said he saw evidence of a possible slowdown in Chinese demand.
As I have argued, there is a risk that the bling party, which has been in full swing for much of the past two years, starts to lose its fizz over the course of 2018.
There will be few hiding places if this happens. But having a strong online presence, and a plentiful supply of new, younger customers, will help.
When the downturn hits, those rich kids of luxury could turn out to be a valuable corporate asset.