The Rise of On-Demand Luxury: Is Everyone In On It?
How often do you hear friends bill a new startup as “the Uber of [insert verb here]”?
While it’s shorthand for a business that offers a convenient, on-demand service likely involving some form of home delivery, we often hear the label being applied to the luxury sector as well.
That sounds bizarre at first blush, but in truth the sharing economy has given rise to a relatively new phenomenon known as luxury on-demand, and it's changing not only our relationship with high-end brands, but our aspirations and lifestyle.
Better to borrow than to own?
BLADE is a company colloquially known as the “Uber of helicopters,” allowing customers to charter helicopter rides through an app within Los Angeles, New York and Miami for around $500 one way. Looking to lease a private jet for a day? There’s an app for that. Can’t afford a Chanel dress for an upcoming gala? Rent one.
These startups offer an itinerant window into the lives of the one percent, when you want it and when you can afford it. They’re a boon to firmly middle-class, experience-hungry Millennials like me and an Instaculture-conscious society that somehow wants to appear well-traveled, cultured and hardworking at the same time.
“Luxury has long been about the brand and the quality of the products, but for new generations it’s more about experiences and emotions,” says Alizée Blanchin, a digital innovation and CX consultant for retail, luxury and consumer goods at Wavestone, based in Paris. “What they want is to live something rather than own something.”
Then there are brands that don’t sell luxury goods, but have the potential to replace them. Clichéd disruptors Uber and Airbnb, for example, vastly reduced appetites for car ownership and five-star hotel stays, two formerly undisputed hallmarks of wealth and luxury. Similarly, fast fashion retailers like H&M allow consumers to shop runway-inspired looks without breaking the bank.
With the proliferation of budget airlines offering cheap international travel, people began to shun material goods in favor of taking more vacations, dining out more often and other intangible thrills.
Personalization and omnichannel - no longer a luxury but a standard
The modern expectation for all brands to provide a personalized service was once exclusive to the luxury sector – you were greeted by name at Bergdorf’s and served your preferred welcome drink at the Ritz-Carlton – but with the rise of predictive analytics, self-service and on-demand services, personalization is the value proposition for many businesses, not a premium add-on.
Sillages Paris, for example, is a French startup that allows customers to design bespoke scents online using a specialty algorithm and have it shipped to their door for a reasonable price.
“Their business model is to be digital-only, so they have less costs, and they don’t have to pay rent to own a shop,” explained Blanchin, who spends her free time assisting with events and meeting founders in the beauty tech startup community. “In that way they are able to provide very good perfume that is the same quality as a collection privée of any high end perfume house.”
The perfume is packaged in a premium steel bottle and shipped with a tiny sample vial which the customer can test before opening the larger bottle, or return the item for free if the scent isn’t to their liking.
Custom perfumes were once the sole purview of the uber-rich, where one would drop 400 euros on a trip to the Guerlain boutique at the Champs-Elysees to meet with a perfume specialist, but not anymore.
In fact, Sillages is part of a raft of direct-to-consumer startups looking to offer coveters of luxury goods an entirely new value proposition: are you willing to trade the prestige of luxury brand names for equally high quality goods at a lower price?
It’s a gamble for these startups, because it means getting customers to boycott luxury labels for philosophical reasons - and not only because US wages have barely budged in 40 years. Perhaps the boldest risk-taker in this respect is Italic, a West Hollywood-based marketplace selling luxury leather goods from manufacturers for Celine, Prada and Gucci.
After paying a $10 monthly membership due, shoppers can buy up to two items each month, such as a leather tote from a Celine manufacturer for a reduced price of $145, compared with $3,300 from the original brand. Same quality, except the cheaper item is missing the fancy logo.
Similarly, a company called Brandless offers a range of 350 home goods and products priced at about $3, all of which have no branding – but they’re far from throwaway, dollar-store junk.
How does luxury on-demand affect legacy luxury brands?
Needless to say, luxury on-demand is a major threat to actual luxury brands, which are also being forced to adapt. While they aren’t lowering prices, Blanchin says they’re trying to reach a broader audience through ecommerce, “because it does not make sense for a luxury brand to open permanent stores in every small town.”
But it’s not easy. Since time immemorial, the very DNA of luxury brands was to offer an exclusive experience on top of the core product, and that hasn’t changed. Therefore, high-end retailers are under even more pressure than mainstream brands to replicate the in-store experience online.
“Recreating the same level of expertise and client care online that you could find in a store – that’s a way for luxury brands to reach a broader audience,” says Blanchin.
Contrary to popular stereotypes, Millennials haven’t shunned legacy luxury brands altogether. In fact, they may value them even more for the “intangible experience” component they bring, but they’ll consume it selectively. Even backpacking travelers on a shoestring budget will seek bursts of itinerant luxury.
“For instance, Millennial travelers might take a budget flight to Thailand but they’ll spend $200 to stay the night in a luxurious hotel,” says Blanchin.
It has changed the way five star hotels approach customer loyalty, for example, where their repeat patrons once belonged to a specific consumer segment earning a certain income level, with a relatively predictable customer lifetime value.
Hotel chains like Accor, which run high-end and low-end properties, offers customer loyalty program, LeClub AccorHotels for guests at its budget IBIS hotels as well as its luxury Sofitel and Raffles properties, where guests can earn points no matter where they’re staying, redeemable for future stays at any of its properties, as well as perks like online check-in, free internet access and exclusive member’s rates.
“It’s a way to target people that are not the classical wealthy client, but the middle class that might mostly go to an IBIS while saving to enjoy a five star every once in a while,” says Blanchin.