What does the future of luxury look like? If anyone is equipped to answer that question, it’s Milton Pedraza, CEO of the Luxury Institute. Over the past decade, the Luxury Institute has served as a trusted independent luxury research company and consulting firm for just about every notable affluent brand in the world. Burberry, Bottega Veneta, the Ritz-Carlton, Tiffany & Co., Viking and Coldwell Banker Previews International® are among the many names on his A-list client roster list. And Pedraza has seen it all—the effect of 9/11 and the Great Recession on luxury spending, the rise of China as a luxury powerhouse and even the rise of high-end space tourism. Previews® Inside Out recently asked him to look into his crystal ball and tell us what he sees on the horizon for luxury.
Previews Inside Out During an interview in 2009, you said luxury was about to reinvent itself. Has there been a shift?
Milton Pedraza Yes, there have been a few shifts. The most notable recent one is that people are no longer as interested in logos. And they are interested in the personal experience the brand delivers–not just the product. That even came up in the recent survey we conducted on behalf of Previews®. Today’s ultra-affluent consumers want to see expertise, trust and generosity in their luxury brands. In the past, they were willing to tolerate mediocre service—as long as the product was good. Not now. Because there are so many choices in the marketplace, the experience of that brand—that personal and emotional connection—matters much more. There is also a tremendous amount of research that luxury consumers conduct online in advance of the purchase–so by the time they get to your website, store or place of business, they are willing to transact quickly if they trust you. A luxury brand’s reputation is made by all of the individual experiences they deliver. And today, the affluent are again looking for more uniqueness and exclusivity.
Previews Inside Out Where do millennials fit into this shift?
Milton Pedraza Millennials have a different view of luxury. They engage with technology far more than Baby Boomers. They will easily enter into a mobile transaction, and they are willing to receive emails and give you their data—but they want to know what value is added from a brand collecting that data. They still care about one-to-one service, and they are less brand loyal. Nielsen recently put out a data point noting that millennials will be 75% of the consumer population by 2025, so they will be key players in the future luxury marketplace.
Previews Inside Out How do you think luxury will be defined in the future?
Milton Pedraza The market has split into two groups: accessible luxury and exclusive luxury. This bifurcation is going to continue. Accessible luxury brands need to be careful to not be too mass market. Millennials will abandon brands that lose their cachet quickly and mercilessly. Millennials are now the driving force of luxury. They can make you or break you in a millisecond.
Previews Inside Out Who do you see as innovators in the luxury space? What sets them apart?
Milton Pedraza Burberry is one innovator. They have mastered digital technology. They are creating digital tools and assets that bring their brand message to people. They have wired their stores for technology. They have improved the way their salespeople are selected and educated, so they can deliver a personal experience to their customers. Bottega Veneta is the brand that has done probably the best job of creating a consistently great client experience, optimizing with great products and a great culture that make clients feel special. Their associates build true customer relationships.
Previews Inside Out On Twitter, you talk a lot about brands missing the mark when it comes to service. What is the biggest challenge in satisfying today’s luxury consumer?
Milton Pedraza Brands don’t recognize how important it is to select the right brand ambassadors with good values. They don’t educate them properly. They don’t compensate them properly. They don’t measure customer metrics. They don’t have a high-performance, humanistic process that is an inspiration to those who work for them and represent them. They have not elevated selling into relationship building.
Previews Inside Out An interesting trend that emerged from the Previews Wealthy Consumer Survey is that luxury consumers today are less concerned with status. Why do you think that is? Do you see that trend gaining momentum in real estate and beyond?
Milton Pedraza Yes. I think that people will continue to value “the best of luxury goods and services,” but far more—for instance, in real estate, for a home’s intrinsic quality—i.e., the design, the quality, the details, the location of a home. They are not choosing a home because their friends will think they are cool because they live in that space. It’s more about self-fulfillment and actualization. You want to live well and share your home with the people you love. It’s best not to go after status; it’s best to go after building a reputation on a humanistic scale. It’s less about the money you have and more about the generous human being you are.
Previews Inside Out Which emerging global luxury markets today do you see becoming more influential down the road?
Milton Pedraza Right now, it’s China and parts of Asia. But down the road, I think India will be a major player. It’s a younger market—and it will take decades to evolve. But there are pockets of India that are very high tech with high education rates and affluence that are ready now. If India continues to evolve, it will be the powerhouse.
We’re seeing all-electric supercars, high-end space travel and smart mansions—what’s next on the horizon for luxury technology? Bentleys chauffeured by robots? Homes with robotic butlers?
Paradoxically, at some point, it will be a luxury just to have a human being working for you [laughing]! In all seriousness, though, it’s true that computers will continue to create efficiencies for us. But they don’t have that human touch. For true expertise and true service, you’re still going to need the human element. The hotel concierge will use data and technology to find an optimum solution—but he or she will still use common sense and judgment to come up with something right on the spot that is special and unique to the customer that makes him or her feel special.
Previews Inside Out What do you personally look for as a customer?
Milton Pedraza Expertise, not just experience. Someone can have a lot of experience, but not necessarily up-to-date expertise. I also look for people with integrity, who are trustworthy and serve their client’s interests. These are the people who listen very well and are kind. They will develop creative solutions that not only solve my problem, but also do it in a way that makes me feel nurtured and pampered. Human generosity is an absolute requirement. I look for that whenever I engage with a luxury brand. Never miss an opportunity to make someone feel special—it generates so much good will for the future.
Previews Inside Out Thank you. This has been enlightening.
Milton Pedraza My pleasure.