Luxury in a State of Flux THE WHITE PAPER 2019

BackgroundAt Bauer we believe in a new era of Luxury. The luxury consumer is being redefined, they’re discriminating, selective, ethical and inconspicuous. They aren’t just buying a brand, they are buying into their future.

There’s this groundswell of change, new ways of believing what a luxury moment or brand could be.

By 2025 there will be a consolidation of power and influence amongst those under 52 years – 85% of luxury spending will be in the hands of gen x, y and z.

Luxury is being challenged to balance the needs and expectations of maturing luxurians with the values and priorities of a new younger generation while navigating the impact of digital, personalisation and a global mindset.

Bauer Media partnered with London’s The Future Laboratory, a trend forecaster, to understand the future of luxury globally and locally – the dynamics of key consumer groups and the trends they drive.

THE WHITE PAPER 2019

ALTERED AFFLUENCE PURPOSE ECONOMY

TRANSFORMATION ECONOMY

UPGRADED SHARING

ELEVATED EXPERIENCES

THE WHITE PAPER 2019

The TrendsThere are five macro trends that are shaping the luxury industry

Trend: Altered AffluenceA collective backlash against ostentatious spending is fuelling new anxiety among luxury consumers.

They’re questioning what it means to have wealth. There’s a responsibility that comes with the ability to spend, to engage, and to indulge.

Society’s wealthiest are feeling increasingly anxious about how their moral worth is linked with their wealth. We are beginning to use the expression ‘altered affluence’, and even ‘uneasy affluence.

A situation that drew global consumer condemnation was the extreme, measures that British luxury label Burberry took by incinerating £28.6m worth of its products, in a bid to stop surplus stock appearing on the grey market.

‘While Burberry would argue that [this] is a sign of just how much it values the long-term future of its brand, consumers may question how much it cares about sourcing the softest cashmere if ultimately some of it will end up in an incinerator,’ says Charlotte Rodgers, senior writer at Marketing Week.

A recent study has found that for millionaires in APAC social responsibility of brands is more important than if they’re recognisable.

Source: Agility

Trend: Purpose EconomyA new generation of Australian Luxurians want their wealth and spending to have a greater purpose and demand that luxury brands take on new social roles and responsibilities.

They increasingly expect luxury brands to step in where governments are failing, acting as forces for good in society.

Ermenegildo Zegna purchased a stake in the historic Farm in Armidale. They worked with the farm on genetics, breeding, taking care of the welfare of the animal and increasing water reserves. They’ve taken account of their supply chain and have a purpose to better animal welfare.

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• 40% OF YOUNG AUSTRALIAN’S BELIEVE THE WORLD IS BECOMING A WORSE PLACE.

• 6 IN 10 AUSTRALIANS BELIEVE BUSINESSES HAVE A RESPONSIBILITY TO ENSURE THEIR SUPPLY CHAIN DOES NOT HARM THE ENVIRONMENT.

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Trend: Transformation EconomyWe’re all used to the expression ‘the experience economy’ and now we’re seeing this trend evolve further to the transformation economy.

Driven by each of us being on a journey of transformation, of self-improvement, or self-optimisation, consumers are increasingly moving towards an engagement of purchase, of brands, over traditional products.

A holistic approach to self, luxurians search out brands that feel can support them on their transformation journey, and recognise the sense of journey.

Consumers are actively looking for businesses, brands, products and services that can proactively make them feel healthier, wealthier, and happier.

blacktomato.com/blink/

Trend: Elevated ExperiencesThere is a greater demand for elevated service from luxury products – combined with a need for belonging to a special 'inner circle' of people who have a real knowledge of the luxury world.

Inspired by that Moment When... life began, Artesian Moments by Artesian, The Langham, London. “When you first rode a bike”.

Blink is a bespoke travel service that enables customers to select any point on the map for their next luxury adventure and to customise high-end temporary lodgings to reflect personal tastes and preferences. A quote from their site, “And most importantly, once you have experienced your Blink camp, it will be taken down and we’ll ensure that nothing is left behind, and no one else will have that same Blink experience. Our aim is to leave no trace and to let the natural environment remain in its perfect state".

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Trend: Upgraded SharingThe sharing economy model was originally created to provide communal access to experiences and services for those on a budget, but it has filtered up to the luxury sector.

Millennials and younger are now becoming more interested in access than ownership.

Airbnb are upgrading their offer with accessible yet high-quality accommodation. Airbnb Plus offers travellers an edited collection of its highest-rated and most aesthetically appealing rentals, while Beyond by Airbnb, due to be launched in 2019, promises custom-designed trips of a lifetime that amalgamate luxury residences with immersive, local experiences.

"The benefits of sharing go beyond saving money. For luxury consumers, [it] can create a sense of community, as well as benefit the environment, and can offer a space to discover unique goods that cannot be bought elsewhere"

Ricardo Dunin, founding partner of Lionheart Capital, the developer behind The Ritz-Carlton

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Local ProsperityInternational luxury brands are continuing to enter this market and established brands are expanding their physical and online presence.

“There’s a commitment to spend on luxury goods (in the Australian market), it’s never just about the high income spenders but about those who choose to invest in luxury because of the commitment and engagement with the idea of wanting to be part of a luxury lifestyle.”

Chris Sanderson

• AUSTRALIAN LUXURY MARKET SALES ARE FORECAST TO GROW 6-8% PER YEAR THROUGH TO 2024**

• THE NUMBER OF AUSTRALIA’S LUXURIANS WITH ASSETS OF $68M OR MORE IS PREDICTED TO RISE BY 37% BY 2022*

*Knight Frank ** Deloitte

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Consumer FuturesFour consumer groups will make up the future of the luxury market in Australia

CHINESE AUSTRALIAN YOUTH

WOMEN MEN

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Chinese LuxurianChinese students, tourists and Chinese Australian residents are responsible for up to two-thirds of luxury retail sales in Sydney and Melbourne and are a complex and quickly evolving consumer category.

• Australia’s close proximity to China has seen significant growth in luxury purchases from tourists visiting and shopping in Australia

• Even though the Chinese government is increasingly introducing punitive taxes on luxury goods bought overseas, making buying at home more attractive, Chinese tourists still spent over $10.3 billion in Australian retail over the year ending September 2017

• They’re also not consuming traditional media. As a result fashion brands in Australia are “grooming” wealthy Chinese micro-influencers within the community who influence their friends’ shopping behaviours. i.e. Van Cleef and Arples and Hermes.

With such power coming from one cultural group authentically valuing them is crucial. Cultural insensitivity is reckless and can be irreversibly damaging when your market is 1.4 billion strong. At the end of last year #BoycottDolce was trending and quickly became the most popular topic on Weibo after their racially insensitive social media campaign, in which a Chinese model was shown being coached in eating Italian food with chopsticks.

Former fans of the brand were soon uploading photos and videos of themselves desecrating their Dolce & Gabbana pieces; one used a sweater to clean a toilet, another held sneakers over a stove flame.

However, many Chinese luxury consumers are now swapping global luxury names for regional nuances, giving brands a new, hyper-local challenge.

"Chinese Millennials don’t want to carry the same luxury labels as their parents. Instead, they want to show their peers that they have time to discover emerging talent."

Nick Cakebread, Founder, The Luxury Conversation

• THE SUCCESS FOR LUXURY BRANDS HAS BEEN BECAUSE ABOUT 60-80% OF THE SPEND IN AUSTRALIA IS FROM CHINESE, NOT JUST TOURISTS, BUT AUSTRALIAN-BASED AND AUSTRALIAN-BORN CHINESE AS WELL

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Young LuxurianCollectively, millennials and Generation Z will represent more than 40 per cent of the overall luxury goods market by 2025, compared with around 30 per cent in 2016*.

They are civically minded consumers who are recognising their role as a world citizen and demanding that luxury brands take on new social roles and responsibilities.

*Global Powers of Luxury Goods 2018, Deloitte

Female LuxurianWomen’s financial clout is growing. As an audience, women are increasing their spending power.

In the media landscape women are reappropriating their representation. Brands are starting to understand their role in making women feel unrepresented or unrecognised and the white space it offers.

As these two trends collide there is white space for brands to talk to and engage women in a new way.

*Accenture, Boston Consulting

• 62% OF AUSTRALIAN MILLENNIALS BELIEVE THAT AS THE TECHNOLOGY DEVELOPS, BRANDS WILL BE ABLE TO ACCURATELY PREDICT WHAT THEY WANT.

• 53% OF YOUNG AUSTRALIANS AGED 18-34 HAVE BOUGHT A PRODUCT BASED ON WHAT THEY HAVE SEEN ON INSTAGRAM.

• 52% OF WOMEN ARE NOW THE MAIN BREAD WINNER, ARE THE MOST EDUCATED SECTOR OF THE MARKET AND THEIR WEALTH IS EXPECTED TO GROW 7%* FASTER THAN MEN’S UNTIL 2020.

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Male LuxurianThe mainstream perception of male identity is under scrutiny, and outdated design cues associated with gender no longer represent the Australian men of today.

A backlash against traditional features of male physicality is emerging, where softness and even blatant femininity are celebrated. Last year the New York Times welcomed the age of the twink – a term used in the gay community to refer to skinny, boyish men – and its new-found allure in mainstream media.

Nicolas Ghesquière looks to the future on Louis Vuitton's Spring 2019 runway

“While beauty was once defined as exclusively young, thin and Caucasian increasingly the runway stars/models of the moment are multi ethnic, young, old, plus sized, cisgender and transgender. Diversity was the buzz word of 2018 but the varied representation on the 2019 ready to wear runways felt for the first time like more than just a token gesture – because it largely went unnoticed.”

Eugenie Kelly, Editor in chief, Harper's BAZAAR

• 76% OF AUSTRALIANS BELIEVE BRANDS NEED TO DO MORE TO ENSURE ADVERTISING REPRESENTATION IS TRUE TO REAL LIFE

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Strategic Implications

With the sharing economy we need to position our brands as exclusive yet open access points for elevated, intuitive services.

We need to show how our brands are building a world for the future and speak to these new audience groups in their language.

As expressions and expectations of and on wealth change we need to bring luxury to the everyday.

The luxury world is now in flux and traditional services leave a gap. We need to reframe and reinvent services to meet these needs.

The Luxury NetworkAt Bauer we believe in this new era of Luxury.

Bauer’s luxury consumer is discriminating, selective, ethical and inconspicuous. They aren’t just buying a brand, they are buying into their future.

They make it loud and clear that new luxury is “a statement on me, for me, about me, but it does not define me. I am fiercely independent from the trappings and constraints of what defined old luxury.”

We’ve listened and understand it’s time to operate in a different way.

At Bauer we’re launching the LUXURY network. The most engaged luxury audience network in Australia with the biggest portfolio of power luxury brands by any one publisher.

We will work with our with our advertisers to connect with this powerful consumer and unlock valuable data, insights and events.

A network that:

• has a purpose, is dedicated to supporting the luxury market and helping our clients navigate the landscape

• is committed to understanding the luxurian consumer and creating brands and executions that reflect them.

For more information contact your Bauer Ad Representative.

THE WHITE PAPER 2019

"If we want future generations of Australians to grow up to the hum of cicadas and be able to paddle alongside dolphins during a morning surf, we need to do something to stop the extinctions affecting every inch of the planet. Now’s the time to reflect on how we can all be agents for positive change…”

Eugenie Kelly, Editor in chief, Harper's BAZAAR

• OUR AUDIENCE IS GROWING, 12% YOY AND THEY’RE ENGAGED WITH OUR BRANDS ACROSS PLATFORM.

• PRINT: THEY’RE SPENDING AN AVERAGE OF 1 HOUR AND 22 MINUTES READING THE MAGAZINE.

• DIGITAL: VISITING ON AVERAGE, OVER TEN DIFFERENT PAGES EACH TIME THEY VISIT US.

• SOCIAL: THESE LUXURIANS ARE ENGAGING WITH US OVER 1,058,000 TIMES PER MONTH.