1. The challenge for the retail population

a.    A global or rather a multi-polar war

The tension of managing talent has risen since the COVID pandemic, and the luxury sector has had difficulties in finding and retaining expertise- as well as other industries that feature “front line” functions such as hospitality and restaurants. As the traditional workspace evolves to accommodate remote work, retail jobs are not as appealing.

The four dimensions of employee satisfaction are flexibility, well-being at work, purpose, and personal development perspective.

•    Flexibility applies to the hours/days/time dedicated to work as well as the spent in the office and visibility on the work schedule to be able to adapt personal constraints to fit.

•    Well-being at work refers to managing the emotional workload that jobs require in ways such as moments for relaxation and confidential listening platforms.

•    The purpose of a job can be reflected in the company’s mission to tackle social causes such as inclusivity, CSR, or environmental impact.

•    The personal development perspective allows the employee to think beyond a particular role and evolve into another position within the company.

b.    Inspiring initiatives in the luxury sector that are committed to a test-and-learn approach.

Inspiring initiatives do not come from the luxury realm. The hospitality sector experienced a scarcity of talent before retail and the companies had to be innovative in their recruiting strategies by offering benefits packages, career development programs, and initiatives focused on employee well-being.

The Hilton group leads the hospitality sector with a caring business and developed its Thrive@Hilton program in which they carry out a series of innovative approaches focused on employee well-being. 87% of Hilton employees feel that their work has more meaning than just a job.

Lululemon has also aimed to curate its employee brand philosophy around the theme of well-being, and the company encourages the sales team to adopt the lifestyle. To back this up, the company developed the “Sweaty Pursuits” programme that offers fitness and wellness classes along with a confidential mental health helpline.

i.    Attractiveness and retention issues

In China, the competition to attract and retain talent is increasing as brands now must compete with mass retailers such as Starbucks or Lululemon that can offer employees a wider range of benefits. An example is Starbucks’ “Coming Home” programme which allows employees to relocate closer to their hometown as the chain expands.

ii.    Commitment and flexibility are the levers on which luxury brands are testing themselves

Luxury houses are actively trying to combat the high turnover rates of approximately 25% by outsourcing consultancy on how to increase employee engagement.

Flexibility in the work environment has also risen to be a priority for employees, particularly over the past two years. Employers have accommodated to this demand by introducing initiatives such as four-day working weeks, nine-day rotations over two weeks, or job-sharing contracts. The impact on turnover has been positive.

The 4 key success conditions in the current market are:

•    Initiatives rooted in the values and mission of the company

•    The concept of personalisation

•    Support by solid digital processes and tools

•    Based on strong managerial values

c.    Employee value proposition is the new black

The luxury industry should serve as a leader in employer branding, as they often harness their brand power to gain customers and build human relationships, yet the companies do not go the extra step to polish their presence on hiring platforms like Glassdoor to attract workers.

2. Distribution: One objective, many roads

Even as the digital age becomes more consuming and e-commerce is growing like never before, luxury brands are opening mega storefronts around the world that are more than just traditional boutiques. These mega flagships include features such as a gallery and hotel suite at Dior Avenue Montaigne in Paris, three bars- coffee, champagne, and cocktails- at Hermès on Madison Avenue in New York, or the winter garden at Cartier rue de la Paix in Paris. These quasi-cultural grandiose stores create cultural capital for the brands and give them a unique competitive advantage.

Despite challenges like reduced tourism and supply chain issues, smaller fashion & jewellery brands are flourishing in the luxury sector by expanding their stores, offering unique experiences, and focusing on exclusivity and community-led styles. Brands are increasingly customising their stores for local authenticity and cultural depth. Significant investments are being made in digital transformation, enhancing online user experiences, integrating social media, and offering omnichannel services. While e-commerce growth surged by +30% during COVID, it's expected to stabilise, with a projected CAGR of around 10% until 2025.

Luxury brands rely fundamentally on the human touch as it creates brand loyalty and lasting client relationships; the companies heavily invest in store CAPEX (Capital Expenditure) and digitalisation. The challenge lies in recruiting and retaining talents who can authentically bring the brand story to life and offer a unique experience beyond just the product. Continuous training is essential, with top brands dedicating one trainer for every 70 to 100 full-time employees. Effective onboarding varies, with some brands offering up to three weeks before new hires start selling, while others start in just two days. To maintain a consistent brand touch globally, training is shifting from a standard checklist method to a more behavioural and transformational approach, emphasising soft skills and allowing for experimentation.

As brands build their omnichannel ecosystem, there are discrepancies in the efficiencies across the value chain, and the perfect execution of the “one-stock one-client” is not very feasible. Staff across multiple locations or working on the floor versus e-commerce often fail to report the unavailability of products to other team members.

The Customer Service Centre (CSC) is evolving from an after-sales to sales channel which brands can utilise to sell during low traffic periods and connect with customers from other cities or countries.

Three approaches providing CSC in a branded environment for distant sales:

•    CSC located within a flagship store

•    CSC centres equipped with a store-like environment

•    CSC operating through a virtual store

The emphasis placed on a customer-centric experience is enhanced in the luxury industry with brands going beyond to help their sales associates ameliorate the customer experience. Brands must improve in three areas to gain the Customer Lifetime Value: placing the customer at the core of business decisions, building an internal client management community, and identifying essential client KPIs (share of e-commerce, click-from-store, remote sales, target lead times…) to follow at every level of the organisation.

3. New challenges & territories

a.    Brand desirability vs. brand elevation

The polarisation of fashion had become even more apparent with mid-level brands struggling to gain market share with fast fashion selling good designs at low prices and luxury houses selling dreams. Luxury brands must turn to brand elevation as consumers are opting to view purchases from the big brands as investments rather than frivolities.

Bernald Arnault attests the success of LVMH brands to their desirability and ongoing evolution. Due to high luxury brands’ brand image that they have curated through mass amounts of communication and their base of Very Important Clients that represent up to 35% of their business, the companies are in a stronger market position than competitors.

The recipe for brand elevation stands at:

•    Clear client knowledge- following clients that purchase more than EUR 10k annually… EUR 50k for leading brands and EUR 100k or EUR 200k for jewellery brands

•    Nourishing the brand image with culture- collaborations with artists and ambassadors, exhibitions, events, and popups

•    Attract the offer with exclusivity- increase the perceived value of products and present products at significantly higher price points to keep the dream-like effect on the brand

•    Create sky-is-the-limit experiences- Tap into brand immersion to nourish the magic; for example, the mega flagships that display the brands’ histories and treasures

•    Push the limits of client treatment

b.    Brand extension- The convergence of the 2 luxuries?

Luxury brands are intertwining across industries to create an even more complete customer experience.

Soho House, for example, has branched out from being only a hospitality group to branching out with its beauty line, Cowshed, and its home and furniture department, Soho Home.

Louis Vuitton is venturing into the hotel industry, building on its existing foray into experiential luxury with restaurants and cafés in various cities. This move aims to offer immersive experiences to clients, combining shopping, storytelling, culture, dining, and accommodation. Benefits include gaining deeper insights into their most loyal clients, enhancing social media presence through visually appealing spaces, fostering brand loyalty, and creating unique, localized spaces that become tourist attractions.

The hospitality sector offers an opportunity for brands to showcase their identity, as seen with Bulgari and Armani hotels, which have successfully promoted their products and brand aesthetics. Luxury brands are recognizing the potential of offering hospitality to top clients, with some flagships even providing suites for an exclusive experience, blending shopping and luxury accommodations.

MAD Luxury fast forward part 1

MAD Luxury fast forward part 2

MAD luxury fast forward part 3