Technology is the new luxury
Technology is not how we understood it to be. Luxury is not how we defined it to be. Our definitions of technology and luxury have changed and they are rapidly converging. This is not about the increasing role of technology in the luxury industry, but about how technology in itself has increasingly started wearing the luxury cloak.
In Q4' 2017, HSBC analysts strengthened their ‘Buy’ ratings for Apple shares. They had an interesting reason behind that Buy rating:
“Recently, with an offensive retail strategy and in some cases comparable price points, Apple has competed with the likes of Louis Vuitton, Cartier or Prada which made us raise the question: is Apple actually a luxury stock? Yes.”
One of the surprising (but not unexpected) findings of the 2018 Hurun Report (which surveys HNWIs in China) is Apple topping the ranks of brands given as gifts by HNWIs). Who did it beat to get up there? The likes of Louis Vuitton, Bvlgari and Chanel.
In 2017, for the first time, Tesla sold more units of its premium Model S than the Mercedes Benz S-Class and the BMW 7-series. They had already achieved this feat long back in the US, where the Model S has been the leading car model in the luxury segment for quite a few years now. This is not even a technology brand entering a previously non-technology domains. This is about a new car brand upstaging the leaders in the premium segment.
You can argue as to what the role of technology is in cars, which are by nature one of the greatest technological inventions? Yes there is as Tesla redefined and repositioned luxury car ownership through environmentally-friendly, sustainability focused and efficiency-driven products. There was no heritage or legacy in automobile manufacturing, but a strong intent to redefine the codes of luxury in car ownership.
These are just the bigger and more talked about examples (Apple, Samsung, Tesla etc.). Our definitions of luxury are being changed at the core, and most of the time through small, deliberate and impactful changes. Another interesting aspect is that the evolution of technology into luxury is a gradual shift that moves across the world. A change that has already happened in Europe may take a while before it gains an acceptance in Asia. Take the example of Starbucks — in the UK we don’t skip a beat when we walk into a Starbucks store, while it is still a high form of luxury in Asia.
The world’s largest Starbucks store was opened in Shanghai towards the end of 2017. It is the epitome of luxury shopping (forget coffee drinking) — can cater to around 7000 customers a day, the longest coffee bar in the world also has a ‘Pairing Bar’ (spewing out advice on pairing coffee with food), symphony pipes, more than 1000 traditional Chinese seals (chops) that showcase the Starbucks story etc. At almost the same time, Starbucks opened its biggest store in Bangkok (Thailand) with the usual luxury connotations (two floors, hybrid espresso machines, Starbucks Reserve Experience Bar etc.)
I am sure, although qualitatively, that Starbucks either hasn’t opened in any new stores in London lately, and even if they have, their stores are getting smaller and dirtier. The fact is simple — Londoners do not equate Starbucks with luxury. Will Starbucks ever open a takeaway store in Shanghai? Probably not.
These winds of change are not unbeknownst to the traditional luxury manufacturer. Many of them are willing to risk their equity and hundreds of years of legacy to launch technology products. The Apple Watch didn’t take off but it did rattle cages. In Q1' 2017, the veritable Montblanc entered the smartwatch segment with the launch of the Montblanc Summit. The summary of the reactions and analysis were “nothing in the product to justify the Montblanc name and price tag”.
Traditional luxury depended on exclusivity as the key factor for appeal and for justifying high prices. Coupled with it was craftsmanship, legacy, history and deep tradition. The new definition of ‘luxury’ is slowly shifting away from these codes, and is driven by the need to have a high-quality life, more obsession with the self, new set of hygiene needs, wide and continuous access to knowledge, shrinking of the world in terms of distance and higher levels of cultural intermingling.
The word ‘innovative’ has pushed its way into the luxury lexicon rapidly in the last few years. This single word, which defines the evolution of new luxury, has led luxury houses to start engaging, investing, acquiring and rewarding startups who are building technology-driven products and services for their industries.
Although it may sound overtly simplistic to credit a single word, but it is this very need for innovation that technology satisfies more than anything else. The list of the 30 startups selected for the 2018 LVMH Innovation Awards make an interesting reading. The key points highlight why technology is forever going to continue redefining luxury:
- A mobile and universally connected olfactory sensor that can identify and classify odours
- A new category of materials that combine copper and glass or gold and glass into a single material
- A solution that combines fashion and technology by designing accessories and clothing that can be customised immediately
In sum we have technology that has the potential to create new fragrances, new materials for luxury manufacturing and new lines of customisable clothing and accessories. 5 years ago this would have been unthinkable.
The new definition of luxury has now also moved into subscription channels or on-demand as a business model. In the past, sampling luxury was akin to sniffing perfume strips, getting hold of a sample while attending a launch or simply getting access to limited edition products before they hit stores. But now you can get them via monthly subscription boxes to your home. This again exemplifies the trend of making luxury more convenient and personalised.
How has technology become so synonymous and harmonised with luxury? This is because of quite a few influential factors, and all of them are related to our altered definitions of luxury:
- We don’t view luxury as a mode of celebrating disparate, fragmented, once-in-a-while occasions in our lives (e.g. birthdays, anniversaries, promotions, weddings, arrival of a child) anymore. Luxury is now increasingly a state of being (and in our own unique ways)
- Lack of money does not inhibit us from experiencing the luxurious and the expensive — the availability of cheap credit (aka debt) has made access to luxury much easier
- Exclusivity is a very poor differentiator of luxury now — in the true sense of the word, exclusivity does not matter anymore. Yes we do still queue up overnight to buy the next generation iPhone and add our names to the never moving Birkin bag waitlist, but it is not the end of the world
- Luxury now comes in smaller, ‘mini’ versions for us — In Shanghai, an overpriced Starbucks coffee is a mini luxury, in London it would ordering an Uber Exec to arrive in style at a luxury club or house party, in Delhi it would be hanging out in the latest Mexican restaurant that has opened in the luxury mall next door
- Luxury is increasingly not seen only as a gift anymore. It is for our self consumption. Luxury is increasingly not for collectors or connoisseurs. It can be for anyone who has the money, interest or curiosity (or has the connections to break into super exclusive clubs)
- Luxury is not about owning inanimate objects anymore. It is about buying something that you can continuously use, which in turn enhances the quality of one dimension of your life (for example the iPhone, the AirPods, underfloor heating in your bathrooms, Bose or Blaupunkt speaker systems, an annual multi-brand airline lounge pass etc.)
Technology enables this transformation of the definition of luxury.
It has made luxury ubiquitous, shareable, able to be experienced without ownership, bite-sized, flexible, customised, convenient and more accessible.
All of this traditional luxury was not, but new luxury is.