The Importance of Content Strategy to Luxury & the Experience Economy
A publication of It's A Working Title LLC
This weekly publication focuses on how business and economics trends, technology, and the drive for sustainability impact the global luxury and fashion industries. Prepared by the staff of content strategy agency and think tank It’s a Working Title LLC, each week’s issue provides a summary of recent trends across the globe and a leader that conducts a deeper dive into content strategy.
This week’s contents:
Leader: The Importance of Content Strategy to Luxury & the Experience Economy
Luxury goods and services have properties that are different from non-luxury goods. This is intuitively clear, though the reasons why may vary according to the people you ask.
The characteristics that define luxury and make it unique require brands to have a completely different way of articulating their story or, if you like, presenting their value proposition to customers. In an ideal world, this should necessitate defining an authentic digital identity, cultivating a customer-centric online shopping experience, and producing original content to provoke the tastes of consumers who are now overwhelmed by choice.
In short, luxury brands need to get their content strategy right. Or perhaps more accurately, while all brands need to get their content strategy right, luxury brands need a very special type of approach that is aligned with their core and unique value: selling customers a magical and emotive experience.
And experiences are what many consumers are craving. A survey conducted by Forbes found:
· 86% of buyers would pay a premium for a good experience.
· Customer experience has overtaken product and price as the key brand differentiator.
A study by Abhay Gupta found that the experience economy is supposed to grow to reach $8 trillion by 2030. That amount is greater than the size of German, British, and French economies combined.
How does shopping, buying, and wearing luxury make you feel? Does it feel special to engage with a luxury brand versus a non-luxury brand? Does it feel unique? Does it feel personal? Does it justify your time and treasure? In this sense you might say that luxury is not purely about goods or services. It is Experience as a Service (EAAS). As this essay by AppNova points out, the demand for commoditized experiences is rising:
“...[because] our opportunities for real life connection and sensory experiences are decreasing since we’re constantly on demand, checking our phones every five minutes for pop-ups, swipes and timeline scrolls. We’re thirsty for ‘real’ and ‘authentic’ connections, including brand experiences.”
Though content strategy is important for all brands and in all industries that need to marshal internal resources to reach clients across various channels, it is especially important for brands whose biggest offering is providing an experience.
So much is at stake for luxury brands who need to not only connect supply and demand but do so in a particular way. This way needs to communicate the brand story, provenance, quality, and a particular feeling that is unique to that brand and that is, in part, at the heart of what it means to be luxury in the first place.
Luxury brands need to get content strategy right and be able to adapt, revise, and redeploy as demands and tastes and innovations like web3 evolve. A tailored content strategy allows for the creation of an approach that is tailored and easily adaptable to both the brand and the rapidly changing social, technological, and commercial environment.
Business & Economics
World’s largest retail fashion dataset shows that cost of living increases are driving consumers to make less frequent and more mindful purchases. June data from True Fit’s Fashion Genome, the world’s largest connected dataset for fashion, which analyses insights from 17,000 brands, hundreds of leading retailers and preference data for 90 million active members, showed that while web traffic in June fell to the same volumes recorded in 2021, order frequency fell 10% year-on-year in June compared to the same period last year. These trends are consistent with an EY survey showing that inflationary pressures were driving households to lower discretionary spending. In addition, True Fit’s data for the UK shows shoppers are being more considered with their fashion purchases. While they are checking out less frequently compared to last year, they are buying larger basket sizes when they do decide to spend. Average order value is up by 17% in 2022 on average compared to 2021, with the average basket size rising from just over £115 to in excess of £130. True Fit hypothesizes that higher fuel costs may also drive more buying online at the expense of IRL purchases to reduce gasoline consumption.
Fashion United speculates on which independent luxury brands could be near-term M&A targets. Everyone loves to speculate and watch merger and acquisition activity among big names, particularly in luxury retail fashion. Michael Kor’s formation of Capri Holdings in 2018 after a $2.1 billion acquisition of Versace, for example, fueled the public’s imagination given the household name value of both brands. So what independents could be next? Fashion United speculates that there is reason to believe that five names, in particular, could be next in the M&A dock: (1) Salvatore Ferragamo (there are signs that they may be looking for a buyer), (2) Jacquemus (a big name behind the brand could really contribute to its momentum), (3) Burberry (a potentially tough acquisition given that 100% of its shares are publicly traded), (4) Moncler (this is an interesting one because the brand could be a target or a buyer of other brands, they already own Stone Island), and (5) Mulberry (the brand took a hit after the House of Fraser ran into major problems in 2018, but the brand has great potential as a lower cost point luxury bag maker outside the UK).
Luxury brands announce new crypto and NFT projects despite slumping demand for digital assets. Kering’s Gucci and LVMH’s Tiffany & Co. jumped head first into crypto assets this week by launching new NFT projects. The timing may not seem ideal given the decline in asset prices across the entire crypto and digital asset space as investors seek to deleverage portfolio risks amid rising interest rates, inflation, and slower economic growth. Over the course of the summer, about $2 trillion has been wiped off of the entire crypto sector’s value. Yet, for both Gucci and Tiffany & Co., this week’s moves align with their long-term web3 strategies to engage consumers, build communities, and inevitably avoid the FOMO. Tiffany’s latest strategy revolves around the offering of “NFTiff” collectible passes, which can be redeemed by CrytoPunk NFTs for a pendant. Gucci has been a pioneer in the digital space for some time and has a dedicated team for its metaverse strategy. This week’s announcement by Gucci confirm that they will now accept crypto asset ApeCoin at some boutique locations. This adds to the large stock of around a dozen cryptocurrencies that the brand accepts, including: Bitcoin, Ethereum, Dogecoin, Shiba Inu, and USD-pegged stable coins GUSD, USDC, USDP, DAI, and BUSD.
Brands are rolling out efforts to slowly begin a sustainability push and move beyond “greenwashing.” The fashion industry contributes over 2 billion metric tons of GHG per annum, which is about the same quantity of GHGs as the entire economies of France, Germany and the UK combined every year. The industry is also a major water consumer and polluter: fashion uses over 200 trillion liters of water a year (~90 million Olympic-sized swimming pools) and textile drying is the second largest contributor to global water pollution. Though a number of criticisms have been leveled on the effectiveness of the industry’s efforts to hit sustainability targets embodied in the Fashion Pact and this newspaper detailed the validity of many of these criticisms, there is no question that the retail fashion industry has rolled out a number of sustainability initiatives. These efforts include using recycled materials, upcycling, selling items from previous collections, and employing various circularity approaches among others. Logistics and supply chain management remain a key challenge for the industry to make these actions meaningful given the difficulties in tracing back the environmental impact of various stages of the production process for each piece a product line.
Farfetch plans to fund web3 start-ups. Despite slowing demand for digital assets and some uncertain prospects of its own, Farfetch is re-launching its Farfetch Dream Assembly with a new web3 accelerator jointly with European venture capital firm Outlier Ventures. Funding will focus on creators working in digital fashion, tokenized loyalty products, and immersive experiences. The announcement of the program shows that strong demand remains for exploring metaverse strategies in retail fashion. Perhaps there is a case to be made that the declining value of digital assets in recent months points to the end of an excessive euphoria over the short-term ROI possible in this space and opens the door to firms who want to make long-term investments.
Chart of the Week
Eurozone retail sales fell by 3.7%, year-on-year, in June due to rising inflation and declining consumer confidence among households, according to the European Union’s statistics agency Eurostat. This decline was significantly worse than analyst expectations for a 1.7% decline. Sales decreased across the board in June as compared with May: -2.6% for non-food products, -1.1% for automotive fuels, and -0.4% for food, drinks and tobacco. These data were released shortly after Germany's retail sales fell by 9.8% in June (yoy), the steepest decline since 1980, while sales volumes fell 8.8%. With consumer prices at a multi-decade high of 8.5 percent, German consumers are slashing non-essential expenditures. Though major luxury firms reported strong Q2 earnings last week, often beating analyst expectations, how might the continued decline in consumer spending and inflation impact performance for the remainder of the year and into 2023?