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Luxury shoppers are in a class of their own, scratch-and-win cards or simple earn-and-burn program strategies cannot win them over. Quality is a key sentiment among luxury shoppers, and it serves as one of the primary driving factors when it comes to the consideration stage.
Most luxury brands struggle to balance hyper trends with style in their offerings. They do one or the other well, but that isn’t going to cut it for the modern-day luxury shopper. Remember this segment has a keen eye for quality, exclusivity, and status! Before we jump into what drives luxury shoppers let us understand who they are.
Luxury shoppers also known as Aspirational Luxury Consumers (ALC) see luxury as an extension of themselves; it forms a part of their identity. You are catering to a segment that is looking for more finesse than your average shopper. It’s crucial for luxury retailers to understand their end customers while keeping up with the fast-paced hyper trends.
Aspirational Luxury Consumers make up 18% of the market, translating to $273.5 billion in annual market value. Even more impressive? They account for half of the total revenue for luxury brands. Let’s dive into what drives these shoppers and what makes them tick.
When it comes to wealth distribution, the picture varies across various economies. Baby boomers are the wealthiest generation having had huge economic growth post World War 2, given ample time to accumulate wealth—sitting on significantly higher net worths, ranging from $970,000 to $1.2 million. In established markets like the U.S. and France, the boomer and silent generations hold substantial wealth. Meanwhile, in emerging economies like China and India, millennials are the dominant force.
For luxury brands, this means tailoring strategies region by region, understanding that a one-size-fits-all approach simply won’t cut it. So what’s driving luxury shoppers?
While many shoppers still prefer brick-and-mortar shopping experiences, blending digital experiences with physical stores—or ‘phygital‘—is becoming the norm. Bain & Co predicts that by 2030, Gen Z and Millennials will account for over 70% of global luxury spending. With Gen Z and Millennials being born into the digital era makes it essential for brands to integrate technologies like Virtual Reality, Augmented Reality, and virtual influencers—bridging the gap between in-store and digital presence with digital enhancements, enhancing the overall shopping experience.
For instance, Lil Miquela a virtual influencer with three times the engagement rate when compared to her human influencer counterparts—has collaborated with giants like Calvin Klein and Dior, to drive brand awareness and draw online traffic into brick-and-mortar stores to make enterprises more discoverable through dynamic content like latest fashion trends, deals or upcoming events.
Hyper-personalization is the new kid in the loyalty block. Luxury shoppers crave experiences tailored to their unique tastes and preferences further fueling the exclusivity fire. With 66% of young luxury shoppers developing loyalty early on in their shopping habits, brands need to leverage AI and data analytics to craft hyper-personalized messages and recommendations at scale, ensuring they meet these digital natives right where they are.
Customers are looking for a seamless and engaging experience, made possible with the power of Generative AI and recommendation systems powered by AI and ML, delivering an immersive and hyper-personalized experience for its elite customers. This can be seen in action with luxury giant Louis Vuitton, offering tailored shopping experiences with LV Virtual Advisor offering personalized product recommendations, catering to each customer’s unique taste.
Gen Z is on track to become the wealthiest generation yet—luxury brands need to connect with them now rather than later, especially considering that two-thirds of young luxury shoppers stick with brands they discover early on. The younger demographic craves authenticity in their luxury purchases, though their aspirational buying habits still significantly influence market value.
Traditional luxury brands, often slow to adapt, risk seeming outdated or inauthentic if they don’t evolve quickly. It’s clear: luxury brands must rethink and realign their marketing strategies to resonate with the shifting aspirations and motivations of Gen Z and the emerging Gen Alpha.
One such strategy is Cause Marketing. This isn’t just about selling a lifestyle anymore; it’s about endorsing a cause. Luxury brands have to look beyond profit margins and embrace cause marketing models that bring tangible societal benefits. Imagine empowering your customers to contribute to a cause with every purchase. This not only enhances the authenticity of the moment but also significantly boosts brand affinity. By giving customers the power to drive change, luxury brands can gain the competitive edge needed in today’s fast-paced, dynamic market.
With the new generation of luxury shoppers laying emphasis on sustainability options, enterprises are needing to adapt. With enterprises aligning their sustainability options with their customers, they serve as brand differentiators setting the stage for brand affinity.
A Snapchat survey revealed that 69% of luxury consumers feel their chosen brands help express their personal values, and 67% believe it’s important for these brands to reflect societal values. This shift towards eco-consciousness is a reflection of the deeper values held by modern consumers. Through the power of supply chain optimization, Louis Vuitton drives sustainability efforts. Having cut product emissions by 12% and on a mission to reduce their carbon footprint by 55% by 2030, aligned with the 1.5°C global warming limit, Louis Vuitton empowered by its teams is well on its way to crushing environmental milestones—driving meaningful change.
Social media platforms are pivotal in influencing luxury purchases, with 64% of luxury shoppers using these channels to aid their decision-making. Platforms like Pinterest are seeing significant growth in luxury segments, with a 31% year-on-year increase in engagement. However, a one-size-fits-all approach won’t cut it in this dynamic market. Brands need to double down on bespoke strategies and utilize advanced tools like Capillary’s Insights+ to understand ALCs who are defined by exclusivity, and exquisite taste who can be targeted by leveraging Capillary’s Loyalty+, ensuring every interaction is as unique as the shoppers themselves.
With this holiday season right around the corner, luxury shoppers are on the hunt for the best deals, often making price comparisons a significant part of their shopping ritual. According to an Accenture report, 32% of luxury shoppers are diving into holiday shopping early to snag those early bird prices. While luxury brands have been nudging prices upwards to combat sluggish yearlong growth, this isn’t a long-term solution. With luxury shoppers taking pleasure in seeking discounts, brands need to nurture the psychological triggers while implementing hyper-personalized elements driving exclusivity while adding hints of affordability.
In today’s dynamic and competitive luxury market, customer expectations evolve rapidly and experiences define brand affinity. Leveraging AI-powered recommendation engines, real-time analytics, and sustainability-driven supply chain insights, luxury brands need to deliver immersive and seamless phygital experiences while staying aligned with the values and lifestyles of their modern clientele.
Whether it’s building meaningful connections with aspirational luxury consumers, embracing GenAI for personalization, or integrating sustainability into core loyalty strategies, Capillary equips luxury brands to not only meet but exceed expectations. In this ever-evolving market, where exclusivity and authenticity reign supreme, Capillary is the perfect partner to transform customer loyalty into lasting brand advocacy.
Aspirational luxury consumers view luxury as an extension of their identity. They make up 18% of the market but contribute to half of the revenue for luxury brands, making them a critical audience to engage.
Luxury brands can blend physical and digital experiences using technologies like AR, VR, and virtual influencers to create immersive, interactive shopping experiences that resonate with Gen Z and Millennials.
Luxury shoppers crave tailored experiences that reflect their unique tastes and preferences. Leveraging AI and data analytics helps brands deliver personalized recommendations, enhancing customer loyalty and engagement.
Modern luxury consumers prioritize brands that reflect their eco-conscious values. Sustainable practices, like optimizing supply chains and reducing carbon footprints, help brands align with these values and build stronger brand affinity.
Social media platforms are essential for engaging luxury shoppers, with 64% using them for decision-making. By creating bespoke strategies and using tools like Capillary’s Insights+, brands can connect with shoppers and drive meaningful interactions.
December 19, 2024 | 6 Min Read
Luxury brands need to deliver immersive and seamless phygita