Millennials are unlike anything before them, that much we do know. The digitally born generation now has a buying power of $200 million in the US alone, a number that completely dwarfs that of baby boomers. According to Nielsen, 97% of millennials have a laptop and 96% own smartphones. They’re always connected, always engaged – although this doesn’t stop them from praising tangible know-how. According to BoF report: Generation Next, they set store in craftsmanship and see luxury goods as investments, which doesn’t make them that different to their parents and grandparents. We ask what are brands doing wrong? And what are they doing right?
Luxury watch brands playing catch-up
Until the global dip in sales in 2016 (now picking up), many luxury watch brands seemed stuck in their ways, riding the success of the post-quartz-crisis era and not trying particularly hard to reach out to new consumers. When the dip happened, they were caught unawares, leaving them scrambling to revise strategies and reach the consumer that luxury fashion brands such as Gucci and Dolce and Gabbana had long had in their sights.
Millennials are socially connected in every way. According to Elite Daily, 62% of millennials say that if a brand engages with them on social networks, they are more likely to become a loyal customer. Social media is a key driver of sales for this audience, so why is it that brands such as Rolex and Patek Philippe waited until 2017 and 2018 to get Instagram? Like many of their peers, they probably thought the increasingly popular platform was far too “inclusive” for products meant to represent “exclusivity”.
Retail is another area where brands are playing catch-up. According to Bain & Co’s study of the luxury market, the biggest area of growth in personal luxury goods last year was retail e-commerce, growing by 8% (wholesale was only 3%) in 2017. Retail e-commerce, however, is a notion luxury watch brands are still reluctant to entertain. As luxury fashion brands steadily try to seek control of both the offline and digital experiences they deliver to consumers – such as Burberry’s collaboration with Google, which gave users the chance to send virtual kisses online, culminating in the ‘Burberry Booth’ in the brand’s flagship store in London – luxury watch brands, for the most part, are lagging behind. A look at the share of wholesale in Swiss watch distribution show that it’s considerably higher than in other sub-segments of the luxury goods sector.
Even then, the graph is skewed by brands such as Cartier and Piaget (both at 57%). For giants such as Rolex and Patek Philippe, wholesale accounted for more than 99% of sales. Patek Philippe operates only three own stores, the Patek Philippe Salons in Geneva, London and Paris, while Rolex operates just one, in Geneva. Clearly this can’t be too much of an obstacle as both brands are still selling well, but what if they could sell better? As mentioned, by controlling e-commerce brands can control and deliver the experience they want to consumers – knowing that experience is a big part of why people buy luxury, and creates a true connection with a brand they grow to love. Fine Watch brands are trying to close the gap, the question being, how?
Tapping Asia, the world’s largest luxury market
Within Asia, the under-35 demographic accounts for 65% of consumption growth in China, and BCG anticipates that China’s millennials’ consumption will continue to grow at an annual rate of 11% until 2021 – twice the rate of consumers over 35. This tells us the importance of millennials within China, but what about the rest of the region? Over half (58%) of the world’s millennials live in Asia, which makes it by far the largest and fastest-growing luxury market in the world.
How do brands market to Asian millennials? Using WeChat. Earlier this year, the Chinese social media platform reached one billion monthly users, and luxury watch brands are jumping on the WeChat bandwagon as a way to market and sell to a huge Asian audience. One of the most forward-thinking brands in the category, Cartier created the first e-commerce-enabled websites belonging to a Western luxury jeweller on the platform.
Brands are also using WeChat as a way of controlling and delivering offline experience from digital touchpoints. According to a 2015 survey conducted by the Harris Group, 78% of millennials prefer to spend money on experiences rather than possessions. However, the survey took a “one or other” approach when, in luxury in particular, this needn’t be the case. This has been proven by recent market surveys which show the popularity of brands like Cartier, Tiffany & Co and De Beers among youth. The latter, for example, has noticed a huge surge in diamonds’ popularity (demand exceeded $40bn for the first time in the US). Luxury goods are competing with experiences when the two should go hand-in-hand. One of the reasons people shop luxury is for the experience they receive, a sentiment that isn’t limited to Asia.
Last year, for Valentine’s Day, Cartier used its WeChat boutique to sell 150 pink gold Love bracelets. The first 88 orders were personally delivered, along with a bouquet of freshly-cut flowers, by Cartier grooms across 18 cities in China. The bracelets sold out in a couple of days. Another great example of experience-driven digital purchases is Vacheron Constantin’s limited-edition reservation service. In 2017 the brand posted a link to an HTML5 page where readers could reserve a timepiece. The customer was invited to choose a time slot for the following month, when they would be picked up in a luxury car and driven to a Vacheron Constantin store in one of three cities where they could touch and try the watch. These are two examples of how Fine Watch brands can create an online purchase without undermining the experience that people want and expect when buying a luxury watch.