Influencers' Impact on Business Model Innovation in the Luxury Personal Goods Industry

Rajibul Hasan1 and Malvika В ilia2

'School of Business, Maynooth University, Ireland 2Rennes School of Business, France

Introduction

Since the early 2000s, the luxury goods industry has been rapidly evolving with new personal goods brands entering the market and directly competing with heritage luxury brands for market share. This has caused many established luxury brands, such as Louis Vuitton, Burberry, and Hermes, to change their marketing strategies and adopt digital innovations. However, these longstanding brands have only hesitantly shifted from offline traditional marketing and communication methods to online digital marketing to keep up with the new generation (millennials born between 1980 and 1994), who are digital natives and comfortable in the online world.

As the new luxury goods industry has strengthened, influencers, who primarily market a lifestyle, have emerged and begun to play a dominant role in digital marketing and are even considered celebrities due to their considerable impact on consumers’ buying behaviour. These influencers combine word-of-mouth and celebrity-endorsement marketing methods to become tastemakers on digital platforms, popularising new trends amongst their loyal follower base.

Because of influencers’ significant persuasive power, it is essential to understand who they are and how they perform in the current luxury industry marketing scenario (focussed on personal goods). To investigate this, it is useful to focus on the digitalisation strategies and techniques fashion/cosmetic luxury brands use to influence consumers.

An Overview of the Luxury Industry

Luxury culture is an old concept, but its definition has changed over the years. Originally, luxury lifestyles were mainly enjoyed by the aristocracy and the wealthy, with luxury brands originating in France, Britain, or Italy. In the 1800s, luxury became a full-fledged industry in France and Italy when legitimate luxury brands in all sectors were introduced in the markets.

Luxury industries initially grew in Western Europe, London, and North America. However, a diverse market sprung up, and now, legitimate personal goods luxury brands originate in countries such as the United States (Michael Kors), Japan (Issey Miyake), India (Sabyasachi), and Lebanon (Elie Saab). These newer brands directly compete with heritage luxury brands that have been in the market for over 50 years (Hennigs et al., 2012).

Today, luxury brands are a 260 billion euro global market, and Asia is one of its biggest markets (O’Connell, 2018). Moreover, the luxury personal goods sector—which includes jewellery and accessories, fashion goods, and cosmetics and fragrances—is the biggest sector when combined.

Social Media and Marketing in the Luxury Industry

In the 21st century, business strategies to market luxury brands have significantly changed. Formerly, it had aimed to create the highest brand value and pricing power by leveraging all intangible elements of singularity, such as time, heritage, country of origin, craftsmanship, being handmade, a small series, appealing to prestigious clients, etc. However, even though rarity, exclusivity, high price, and limited access were still associated with luxury, it became increasingly difficult for luxury brands to strictly follow the established industry formula, and the industry had to evolve with the rise of technology and the change in consumer behaviour.

This shift was much stronger and evident in the personal luxury goods market, in which these brands have a higher market share and a strong brand awareness in society. In fact, cosmetic and fragrance brands are a natural extension of fashion and accessory brands, and thus these sectors are highly interrelated.

Consumers are exposed continuously to personal luxury brands (Gide & Shams, 2011), whether it be due to consumer participation in annual public relations events, such as fashion shows and high society galas, or because of luxury items’ dominant presence in magazines and newspapers. Fashion, jewellery, and fragrance and cosmetic products are also prominently featured in the media exposure of the luxury lifestyles of celebrities, which heavily influence consumers.

Almost all established fashion and cosmetics luxury brands have an online presence. High-end luxury brands were initially sceptical about joining the online space, fearing it would endanger their rare and exclusive images (Shams, 2013a, 2013b, Shams & Kaufmann, 2016). However, almost all the big luxury brand names have entered the digital market and created online pages, realising it was an inevitable step to interacting with their newer and younger audience on a personal level.

The shift in consumer behaviour was a driving force for most brands to adopt a digital marketing strategy. Today’s millennials want access to information about the brands they purchase and the brand story at the touch of their fingertips, and they crave updates on these from reliable sources. Convenience has become expected by consumers, and they demand brands to deliver this.

In today’s competitive market, luxury brands have to connect with consumers in more creative ways than ever. Mainstream brands are pushing into the premium category, and traditional luxury fashion and accessories brands are moving into the mass markets. Therefore, real luxury has to cleverly and distinctively distinguish itself to retain its lustre and mystique. As Christian Louboutin observed, “luxury is the possibility to stay close to your customers, and do things that you know they will love”.

 
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