Trends, threats and opportunities in the film industry

“In the 1950s… 80 per cent of the audience was lost. Studios tried many ways to win back this audience, including new technologies such as Cinerama, but none of these worked. What did work was to view the entire business as basically an intellectual properties business where they optimised on as many platforms as possible. That’s the business today.”

– Ed Epstein

Strategy is something that this blog has in the past accused the film industry of lacking, particularly when it comes to issues of development (over-leveraging risk with expensive tentpoles) and distribution (a lack of progressive thinking when it comes to day-and-date openings across platforms). This piece takes a look at how, in some areas, there are kernels of hope for the industry, as well as some specific areas that are ripe for improvement.

Given our initial contention, It was refreshing to discover this gem of an illustration (see top image) from none other than Walt Disney himself that was recently recovered from the archives, according to Harvard Business Review, showing “a central film asset that in very precise ways infuses value into and is in turn supported by an array of related entertainment assets”; all that’s missing is the strategic goal. Such forethought, of complementary assets combining to drive value, is arguably a symptom of the much-ballyhoed “synergy” and convergence the industry has undergone over the past ten to fifteen years; here was Walt writing about in 1957. The HBR article contends that it is not just synergy that is important, but in identifying those areas where you possess “unique synergy”. Disney’s current state, with Pixar, Marvel and Lucasfilm as content production houses, is an impressive pursuit of such a unique synergy, helped in no small part by having the impressive Bob Iger at the helm. The recent announcement of a Han Solo origin story, with the pair behind 21 Jump Street attached to direct, would have been to music to many a filmgoer’s ears. Unfortunately, the danger of undue risk from arranging a surfeit of tentpole releases remains, and is unlikely to be challenged while films such as Tomorrowland tank and Jurassic World soar. A brilliant piece on the evolution of the summer blockbuster, featured in the Financial Times recently, can be found here.

The film industry in China is a subject we last wrote about around a year ago. It’s a booming scene out there (last year China added as many screens as there are in all of France), which despite a quota on foreign film has proved enormously profitable to Hollywood. And while some films have had to seek opaque deals that ensure the inclusion of Chinese settings and talent in order to get the thumbs up for exhibition in China – e.g. the latest iteration of Transformers – others pay scant attention to such cultural pandering, and meet with similar success. In June, the Financial Times wrote that Furious 7 had no Chinese elements, but still managed to break “all-time box-office records since its release in China in April, taking in almost $390m”. Importantly, the figure beat the US’s taking of $348m. China is due to be the largest movie market in the world in less than three years. As we have written before, part of this is due to the cultural interest in moviegoing; people will see pretty much anything in China while the experience is still new and tantalising. While good for revenues, it does imply that content produced will be increasingly skewed – at least for a while – to lowest common denominator viewing that titillates rather than stimulates. The sheer volume of takings for such fare is ominous; of the fastest films ever to reach $1bn globally at the box office, three are from this year. China has played no small role in this development.

However, all is not as rosy as it could be. Traditional players in the industry are wary of new entrants. Domestic companies Baidu, Alibaba and Tencent, YoukuTudou and Leshi have either partnered with studios for exclusive distribution deals over online platforms – irking the exhibitors – or simply investing in developing their own studios and content production. The FT writes, “[c]ollectively, these internet firms co-produced or directly invested in 15 films in 2014, which earned more than Rmb6bn ($965m) at the box office last year – a fifth of total receipts… Industry participants worry that these internet giants may soon seek to cut them out of the equation altogether“.

How to respond to such disruption? Well, they might for a start take a step up in their customer engagement management, from developing more complex segmentation to encouraging retention, whether it be to a particular studio or a particular cinema. At a simple level, this might mean things like not revealing the twists of films in the trailer. At a more complex level, it might involve working with social networks, perhaps even some of the very ones otherwise considered as competitors, listed above, to gain Big Data insights that can better inform messaging, targeting and identification of high-value users. Earlier this year, Deloitte worked with Facebook to produce a piece of thought leadership that looked to do just that, helping telcos with what was defined as “moment-based”, dynamic segmentation, with initial work and hypothesis from Deloitte and their Mobile Consumer Survey correlated against Facebook’s data trove. Using different messages over innovative channels, for example on WeChat, would also likely prove fruitful. Luxury brands, long the laggards in digital strategy, have recently been making headway in customer engagement via such methods. Looking further ahead, they might also consider how their “unique synergy” will be positioned for future consumer trends. The Internet of Things is set to fundamentally change the way we go about our lives, including the relationship businesses have with their customers. How will it impact movie-going and people’s relationship with the cinema? For all the global talk on the impact of such devices, the film industry has yet to develop any coherent thinking on it. One bright area is the subject we mentioned at the beginning of our article; collapsing release windows. Paramount announced earlier this month they have reached an agreement with two prominent US exhibitor chains, Cineplex and AMC, to “reduce the period of time that movies play exclusively in theaters” to just 17 days for two specific films, according to The Wrap. It’s not clear what financial (or otherwise) incentives the theater chains received for such a deal.

So while the threat of disruption is ever-present – as it is for so many industries around the world right now – there are ample opportunities for studios and exhibitors to up their game, through better targeting, better communication, better distribution deals, and, just maybe, better product.

The Business of Fashion – Regulation, acquisition and the slowdown

When the global financial meltdown struck in 2008, many of those with a vested interest in the luxury market watched nervously; high net worth individuals had surely seen many investments wiped out as the recession struck and would thus be more inclined to austerity. While there was a brief moment of humility and caution over indulgence in life’s finer things, it was brief. The luxury market proved surprisingly resilient. Global spend has increased since the recession by around a third, helped in no small part by the explosion of growth in developing regions, China in particular. Orson Welles once said “If you want a happy ending, that depends of course on where you end your story”. Our story, sadly, does not end here.

It was not a good omen when fashion curator and director of the Musée Galliera in Paris Olivier Saillard said during New York Fashion Week last month, “We are in a moment that’s very bizarre in fashion: there are too many clothes”. Business of Fashion lamented both a lack of quality and vision in contemporary collections,

“Fashion seems stuck between the need to surprise using a new array of communications tools and the urge to deliver novelty at the fastest possible pace. Slowing down might be a solution, but that would be a hard route, which will hardly find followers.”

And it is followers that fashion, and the luxury market as a whole, are in need of. Earlier this month the Financial Times reported on the global slowdown of luxury spending. Behind this slowdown lie two factors. On the one hand, there is what are hopefully short-term influences; geopolitical turmoil is rife. Hong Kong continues to see protests that refuse to simmer down, causing disruption to myriad businesses. The city accounts for perhaps 20% of global luxury spending. The Middle East, whose consumer origin or nationality according to Bain & Co. has the biggest average per capita spend, is similarly in chaos, with Syria, Iraq, Afghanistan, Egypt, Libya all in various stages of unrest. Regions like Saudi Arabia and Qatar are caught between a rock and a hard place. In Russia, sanctions have hit oligarchs and their ilk hard. As a result, shares in luxury good companies have been hit hard. Prada has seen profits slide 20% in the first half of the year. Everyone’s darling of fashion innovation, Burberry, has warned of a “cautious outlook”. Mulberry has issued a string of profit warnings and recently ejected its CEO.

McKinsey illustrate the drift of luxury growth from developed to emerging markets

So we can reason that these companies are seeing fewer customers. But they are also attracting new ones, albeit with very different expectations of the service they expect from the companies they have relationships with. This is the longer-term challenge. Millennials may have been treated as a distinct niche group with quirky demands from brands, but next year they will outnumber Gen Xers, according to McKinsey. These utterly digitally savvy citizens have embraced and contributed to a digital fragmentation in the consumer decision journey, the production process and the fundamental nature of buyer / seller value exchange.

“[A] confluence of digital, the rising power of street fashion and changing consumer attitudes… are radically altering the industry. [It is a] consumer-led shift away from ostentatious and mainstream mega-brands towards understated originality”

One of the most obvious ramifications of this has been the trend of ‘logo fatigue’. It is likely to hit those like Gucci particularly hard, while benefiting those like The Row, and little-known retailers like L’Art du Basic. For larger brands there are some examples for inspiration though. Yoox, whom we have profiled in detail before, have gone from strength to strength in embracing effective digital strategy. The fashion ecommerce site reportedly sees 42% of its global traffic coming from mobile devices, and has recently made a significant push into experimenting with instant messaging app WeChat. As elaborated by Fashion and Mash, the account allows users to “shop via an interactive look book, and to instant message customer service teams and personal stylists. Content also invites users to exclusive events and provides early access to specific products”. In the physical world, Ralph Lauren’s hosting of a cafe in its Fifth Avenue store in New York may be less immediately strategic but seeks to leverage the same burgeoning trends. Brands will need to do more of this, more often, if they are to find what works best for them in terms of engaging and converting future prospects.

Also this month, Zeitgeist found itself at an event at London’s Four Seasons hotel off Park Lane, hosted by law firm Baker & McKenzie. Threats, tech trends and M&A were the main subjects of discussion. Zeitgeist scribbled down some bons mots which were thought worth recounting here. Last month, McKinsey produced an insightful piece on the future of luxury growth, indicating growth would come for the most part from what they termed global megacities, a large proportion of which were located in emerging economies. But China is facing a slowdown; no doubt one of the reasons it was recommended in the conference that businesses start to think less of China as an independent market of growth and more of ASEAN as a region.

3D printing was a matter of much conjecture, but it was pleasing to see that the regulation of such materials was already being considered. One speaker offered the technology would be a greater problem for toy manufacturers than luxury, but cautioned that fast fashion and high customisation were a potent mix. Current UK regulation allows for printing any designs (of one’s own creation or not) at home for personal use for no gain. Such laws may have to be re-examined as 3D printing becomes more widespread. It is difficult to protect the IP of a fashion designer’s work, and difficult therefore to know where to draw the line between inspiration and infringement. The case of the red shoe, specifically between Yves Saint Laurent and Christian Louboutin, has illustrated such difficulty. In the case of 3D printing, one speaker suggested that printing could be limited via restriction similar to how publishers use paywalls, or a more sophisticated version of the DCMA. The importance of protecting the source code of 3D printing designs looks set to be important; Pirate Bay already has a section for such product. Social networking as a new source of IP was also discussed. David Yurman sought opinions on styles to be included on a Valentine’s campaign; users could drop hints to their partner. Bergdorf encouraged fans to design Fendi bags over social, too. But there have been slip ups; Cole Haan offered to pay fans $1,000 for taking pictures of their shoes, without making it clear it was part of contest where someone would win and that the company was sponsoring the activity. They got off with a warning from the regulator, but luxury brands must treat that as a cautionary tale as they continue to experiment. “The law is not keeping up with the technology”, as one speaker sagely confessed.

David Yurman’s Facebook campaign suggests new IP possibilities for businesses in the future

The M&A chat was equally of interest. Speakers ruminated on the rise of vertical integration as LVMH et al seek to own the whole process. It’s a brave step for companies that traditionally haven’t involved themselves with supply chains or distribution, according to those speaking. Acquisitions were taking two forms: one was spotting missing gaps in the portfolio. For LVMH, the hole in their portfolio was jewellery, which lay behind their purchase of Bulgari in 2011. More recently Giorgio Armani – or as one speaker referred to the man himself, “King George” – reclaimed control of Armani Exchange as it attempts to leverage fast fashion trends. The other form was that of acquisitions in support of brand development – innovation, technology, CRM in Mandarin, social media, etc. More of these sorts of acquisitions were expected on the horizon.

How do these deals play out today? Private equity buyers have a lot of capital and access to cheap debt, but traditionally many of the targets of a buyout have been family-owned businesses who were not ready to relinquish control to a PE firm. These firms are much quicker and more aggressive at deals; they can quickly globalise a brand, can improve the supply chain and stretch the brand up and down from the original price point. Of course, adding new assets, like social media, makes due diligence – and knowing how to allocate risk to a mercurial medium – much harder. Owning supply chains carries risks of more exposure (see Apple and Foxconn). One of the most thorny issues that speakers envisioned was for a luxury good empire known for provenance and quality to be acquired by a a company in a jursidiction that is not known for such things. What if Alibaba bought Balenciaga from Kering, for example?

Digital is expected to drive, on average, 40% of projected luxury sales growth from 2013 to 2020

Next year will see the return of John Galliano to the runway stage to the helm of a fashion house, this time at Martin Margiela. A recent article on the designer’s flameout while creating works of wonder for Christian Dior emphasised the way in which Galliano “had been cloistered off into a strange protective bubble. Sometimes, we isolate (and elevate) talented creatives so much in the fashion industry that they lose connection with reality”. It is arguably a similarly protective bubble that the fashion industry itself has often been accused of being in, and we would argue it is in now with regards to the need for greater digital sophistication and a more significant investment in digital strategy as it concerns customer insights and the law. It is plain to see that the luxury industry continues to face disruptive challenges, be they at the hands of digital, demographic or geopolitical trends. Some of these disruptions will hopefully, as mentioned earlier, be more temporary in nature. The more fundamental shifts in consumption, though challenging, also present myriad opportunities for businesses that are brave and agile enough to test what works best to capture and retain the customer of the future. Last month Exane BNP Paribas published a report illustrating just how important digital sophistication will be (see above chart), and naming those most likely to benefit from such changes. They could do worse than start by reading our previous post on the future of retail.

On newspapers – Time (Inc.) for a shift in strategy

It’s no secret that the publishing industry is struggling mightily as customers shift from paying for physical newspapers and magazines to reading information online, often for free. The shift has caused ruptures among other places at that bastion of French journalism, Le Monde, with the recent exit of the editor as staff rued the switch to online. So-called ‘lad’s mags’, the FHMs and Loaded magazines of the world, have been hit particularly hard, as the family PC and dial-up internet gave way to personal, portable devices and broadband connections, which provided easier access to more salacious content than the likes of Nuts could ever hope to provide. FHM’s monthly circulation is down almost 90% from a 1998 peak, according to the Financial Times. Condé Nast have pushed bravely into the new digital era, launching a comprehensive list of digital editions of its wares when the iPad launched in 2010. More recently, the company launched a new venture, La Maison. In association with Publicis and Google, the idea is to provide luxury goods companies with customer insights as well as content and technology solutions. We’ve often written about the need for more rigorous customer insights in the world of luxury, so it’s refreshing to see Condé Nast innovating and continuing to look beyond newsstand sales. We’ve written about other ways publishers are monetising their content here and here.

Time Warner is not alone then in its struggles for new ways of making money from previously flourishing revenue streams. According to The New York Times, Time Warner will be spinning off its publishing arm, Time Inc., with 90 magazines, 45 websites and $1.3bn in debt. In 2006, the article reports, Time Inc. produced $1bn in earnings, which has now receded to $370m. Revenue has declined in 22 of the last 24 quarters. This kind of move is not new. Rupert Murdoch acted in similar fashion recently when he split up News Corporation, creating 21st Century Fox. But with the publishing side of the business there were some diamonds in the rough for investors to take interest in; a couple of TV companies, as well as of course Dow Jones’ Wall Street Journal, which has been invested in heavily. Conversely, the feeling of the Time Inc spin-off was more one of being put out to pasture, particularly as the company will not have enough money to make any significant acquisitions. Like the turmoil at Le Monde, there have been managerial controversies, as those seeking to shake things up have tried to overcome historical divisions between the sales and editorial teams – something other large business journalism companies are reportedly struggling with – only to be met with frustration.

Setting that aside, Time Warner moved swiftly. A day later, the FT reported that the company was “finalising an investment” in Vice Media. We have written extensively about Vice previously, here. The company certainly seems to know how to reach fickle millennials, through a combination of interesting, off-beat journalism, content designed to create its own news, as well as compelling video documentaries that take an unusual look at topical subjects. Such an outlook however does not preclude it from partnering with corporations. As a millennial myself, it seems what people look for from those like Vice is authenticity, rather than the vanilla mediocrity arguably offered by others. We don’t mind commercialism as long as it’s transparent. It does not jar then when Intel is a major investor in its ‘content verticals’, or when last year 21st Century Fox invested $70m in the company. This bore fruit for the movie studio most recently in a tie-up promoting the upcoming Dawn of the Planet of the Apes. The sequel takes place 10 years after the 2011 film, and Fox briefed Vice to create three short films that would fill in the gaps. A great ploy, and the result is some compelling content to keep fans engaged in the run-up to the film’s release, particularly in territories where the film opens after the US market. Such activity is far beyond the purview of the traditional newspaper. But this is not necessarily a bad thing. Publishers must face up to the reality that newspapers alone will not deliver enough revenue to be sustainable. Seeking other content revenue streams while engaging in strategic partnerships with other companies looks, for now, to be a winning formula.

UPDATE 08/07/14: When it comes to engaging with millennials, mobile is most definitely the medium of choice. The FT reported today on Cosmopolitan magazine’s 200% surge in web visitors, year on year in May. Fully 69% of page views were from mobile devices (compared to a 25% average for the rest of the web). The publication has also wised up to the type of content this group likes to consume, as well as create. Troy Young, Hearst’s president of digital media, said the new site is “designed for fast creation of content of all types… Posts aren’t just text and pictures. They’re gifs, Tweets, Instagrams.” Mobile will only get the company so far though. PwC thinks US mobile advertising spending will account for only 4.6% of total media and entertainment advertising outlays this year. Cosmo is looking beyond mobile though to “exclusive events or experiences”, perhaps along the same lines as those other businesses are practicing who are looking for additional revenue streams. The article suggests users might “pay to see the first pictures of an occasion like Kanye West’s and Kim Kardashian’s recent wedding”. Beggars can’t be choosers.

UPDATE 10/07/14: Have all these corporate manoeuvres on the part of Time Warner been in the service of making itself appear an attractive acquisition? As the famous and clandestine Sun Valley conference takes place this week, rumours abounded that Google or 21st Century Fox were both interested in buying TW. This according to entertainment industry trade mag Variety, which commented, “Time Warner could be an attractive target. Moreover, unlike Fox or Liberty Media, it is not controlled by a founder or a founder’s family and with a market cap of $63.9 billion it is a relative bargain compared to the Walt Disney Co. and its $151 billion market cap”.

Luxury still too good for a digital strategy

Chanel is one of the key culprits when it comes to lack of digital innovation

A recent McKinsey report declared that, for businesses, “The age of experimentation with digital is over“. That may be for most B2B and B2C private sector companies, but not for the luxury goods industry. Bemoaning the woeful development and investment in strategic initiatives for luxury brands online is something this blog has done once or twice before. There are understandable reasons why the industry has been reticent to commit to online retail, based on customer insight (the assumption that HNWIs don’t like to shop for something without being able to see and touch it for themselves) and conflicting priorities (physical store expansion into China and more experiential events has been the name of the game in recent years). But with a China slowdown mooted, particularly in the area of luxury gifting, and no real concrete research to show that HNWIs aren’t just as digitally savvy as their less liquid counterparts, there becomes less and less justification for what are, across the industry, woeful examples of digital strategy and innovation.

It can’t be easy for profitable businesses like LVMH, with an eye on quarterly earnings, to make drastic investments in the online space. Luxury’s brand equity often comes from provenance and tradition; a company’s roots are in its founding stores, the connotations of Milan, Florence, Paris, etc. They also worry about their neighbours; a flash-sale site or, worse, one full of counterfeit knock-offs, is always just a click away. From a logistical point of view, there is also the issue of back-end infrastructure to contend with. For several years, PPR (now Kering) ran much of its e-commerce business through Yoox, as we’ve talked about before. It would be wrong to single out those in luxury. L2 Thinktank recently tweeted with much excitement about Bacardi’s “cocktail discovery site” that worked seamlessly across web, mobile and tablet. Well, forgive us if we don’t leap for joy in an ecstasy of delirium, but this is 2014, that should be the minimum deliverable. Still, luxury is a sector in blatant need of redirection.

eConsultancy eviscerated many luxury brands’ online presences in a recent article

Burberry is lauded by many as an outlier in this world of luxury goods, a company that has truly embraced digital. For all the talk of such innovation though, the website itself is utterly dominated by a rote e-commerce site, as are its social networks such as Google+. It is the physical stores where technological innovation has been injected. And this is supposedly the company pushing the rest of its peers forward. It comes as little surprise then that eConsultancy published a superb piece at the end of April excoriating the sector, leaving no brand unscathed. Headlines included, “painfully slow load times“, “awful UX” and “not making much effort“. But the worst and most perplexing atrocity had to be the above screengrab on the purposeful hiding away of an e-commerce platform, one that was presumably quite expensive to source and implement in the first place. We can’t overestimate the necessity of having a clear user journey through to purchase, just as it would be difficult to overestimate the amount of luxury good companies that are guilty of this sin for which Dolce & Gabbana have been singled out for here.

On this note, Gucci’s recently relaunched mobile site – replacing among other things a tablet site that had been left to wither since 2010 – was welcome news to us, as it seemed to be also (logically) to those wishing to actually part with their money on Gucci wares. L2 in May reported the news, saying that the new site now accounts for 27% of all traffic, a 150% YoY increase. Sounds good, except that means traffic through the mobile site in 2013 was a miniscule 0.18%, right? Terrible.

There are signs of hope. Gucci’s move to invest in a new mobile site, though monumentally belated, is a welcome one. As more brands cotton on to the importance of online, the Financial Times recently reported on the moves many are making to secure ‘.luxury’ suffixes, in the wake of IPv6, if only to avoid the complications of cybersquatting. And Michael Kors, which seems only to be going from strength to strength every quarter, has praised its own social media presence for “driving international sales”. We’ve almost entirely focused on fashion brands here, but other companies within the luxury sector are getting the message loud and clear. Take the auction house Christie’s, a legacy company if ever there was one, having been founded in 1766. Not only have they dedicated time and energy to investing in major online auctions, they have also recently created a new sector vertical of ‘luxury’ within the house itself. New thinking might well take new talent, it will also take C-suite buy-in, as well an acceptance that digital commerce is an integral part of business now, no matter how exclusive your product is.

Adjacencies & Disruptions – Amazon, Armani and identifying corollaries

Zeitgeist likes thinking about adjacencies. We’ve written about it before when looking at the art market, but it’s also prevalent in other industry sectors. Think of the UK übergrocer Tesco. The company has expanded into movie distribution – with Blinkbox – as well into banking and mobile, albeit as an MVNO. Why? To diversify its revenue streams; the grocery market is a cutthroat place of late; Morrisons recent conceding that it would be setting off another price war among its peers was hardly greeted with cheers by shareholders. How? By using the equity of trust they have built up with shoppers over the years, they are able to expand into other, similar territories, where their (claimed) competitive advantage of good value and good customer service can be similarly applied.

Amazon has been nothing if not a company constantly on the hunt for the efficient exploitation of adjacencies. A recent article in The New Yorker detailed how CEO Jeff Bezos got into books because he saw the market was ripe for disruption; he saw the Internet was the perfect platform to sell such a product:

“It wasn’t a love of books that led him to start an online bookstore. ‘It was totally based on the property of books as a product’, Shel Kaphan, Bezos’s former deputy, says. Books are easy to ship and hard to break, and there was a major distribution warehouse in Oregon. Crucially, there are far too many books, in and out of print, to sell even a fraction of them at a physical store. The vast selection made possible by the Internet gave Amazon its initial advantage, and a wedge into selling everything else.“

Zeitgeist remembers buying his first book from Amazon back in 1999. It wasn’t long before the company expanded into music, and from there into myriad other offerings. Like Tesco, Amazon found its original industry to be a highly competitive one – at least in terms of margins. It has become a fairly ruthless behemoth in the publishing industry, acting as monopoly in its rent-seeking tactics. The Kindle was an extension of its strategy to ‘own’ the territory of books, and as a publishing company itself it has so far had mixed success, according to The New Yorker. The Kindle Fire addresses its new media offerings, principally video. Just as a recent Business Insider article identified the Xbox 360 as Microsoft’s short-term ploy to encourage a customer to funnel all entertainment through their device before the launch of its successor Xbox One, so with Amazon and its Kindle Fire before this week’s release of Fire TV. The Financial Times featured good coverage of the device here, quoting an analyst at Forrester,

“It is a slightly faster Roku box combined with voice recognition to make search easier and then they have created a full Android gaming device. This puts the product into a whole class of its own.”

It will be interesting to see how the device competes with the much cheaper Chromecast, from Google, itself an exploiter of adjacencies. Google relies less on an equity of customer trust to move into new industries and more an innate belief that tech can be used to solve pretty much any problem. The search engine provides an affordable smartphone OS platform, connected glasses, globe-trotting balloons and driverless cars.

In the world of luxury, that essence of trust is treated with far greater reverence. This is principally why fashion brands have been such laggards when it has come to embracing digital communications and ecommerce solutions. tIronically, this approach, which by extension neglects a dedicated approach to holistic Customer Experience Management (or CEM) is arguably beginning to have a negative impact on how people perceive and interact with these companies. It is why adjacencies seem to happen less than temporary collaborations, an impressive recent example of which can be seen in BMW’s recent tie-up with Louis Vuitton.

It was gratifying to see Giorgio Armani, a company that has carefully crafted diffusion lines as well as adjacencies into hotels and homeware over the years, recently buck the trend, sending out communications over its newest line, Armani Fiori. While style can be eternal, fashion can be quite ephemeral – as with flowers. It’s not clear how much of a market there is for this. That being said, the sector is not exactly brimming with ultra-premium florists. And it might provide a certain level of reassurance for the man purchasing flowers, who can rely on the brand’s prestige to assuage any feelings of whether he is picking a good bunch. Where it might prove especially successful though is in the B2B sector; the lobbies of corporate headquarters and luxury hotels could soon be awash with the fragrance of a designer flower or two.

Adjacencies tend to work best then when they start by identifying qualities inherent in the brand as it currently exists. I.e. what is our current competitive advantage? Is that scaleable or transferable to a related field? Often, as with the cases above, such acquisitions and movements arise when traditional margins are being eroded or under threat of such. Prada, a leader in the luxury sector, has as that leader borne the brunt of strong headwinds recently as the sector as a whole experiences a slowdown. Its own adjacent acquisition? Last month it bought an 18th-century Milanese pastry shop.

Ski-chic Strategy – Moncler, North Face & Canada Goose

Interesting video from the FT on Moncler, above. London’s more tony neighbourhoods of Chelsea and Belgravia have seen an explosion of thick down jackets over the past three years, mostly colourful, all with the same logo on them. They are worn as much by macho Eurotrash as Yummy Mummies. The brand is seemingly reaching a tipping point, where exclusivity leads to a bling reputation, where mass acceptance is quickly followed by mass exodus. La Martina has done a good job of steering clear of such waters, as we reported on in a state of retail article. While Moncler considers its IPO and a strategy for selling hot coats in Hawaii, North Face takes a completely different tack, embracing its mass appeal while still communicating an aspirational feel by showcasing the demanding professionals who use their apparel. Canada Goose, another recent entrant into the winter sportswear / city chic market, has also seemed to have had a burst of popularity recently. Zeitgeist saw no fewer than a dozen such coats around Soho and Chelsea this past weekend. An interview with the CEO of the company earlier this year described the strategy thus: “By focusing on the made-in-Canada, used-in-Canada story behind the coats, people would clamour for them.”

Twitter activity already points to Moncler having a ‘bling’ reputation. Investors will be hoping this can this be nipped in the bud before it is too late.

It will be interesting to see what happens to Canada Goose as it develops; whether it will try to emulate the more ritzy path of Moncler or the performance-related one of North Face. Zeitgeist doesn’t see many people in Europe on the ski slopes wearing Moncler, and doesn’t see many players on the polo field wearing La Martina (unless they are a sponsor). North Face, on the other hand, seems to have a deeply-seated place among hikers and skiiers, particularly in North America. Time – and a sound strategy – will tell whether Moncler retains its exclusive airs.

Embracing digital – New moves for old companies

Are incumbent companies starting to see the light when it comes to embracing digital? Evidence is slowly starting to point in that direction.

Artists are known for embracing change and innovation, but the art market itself has been slow to adapt to changing consumer behaviour. Now mega e-tailer Amazon is selling art on its site, and venerable auction house Christie’s is pushing headlong into online-only sales, as Mashable recently reported. And while fashion designers know how to use digital to push the envelope, the fashion industry as a business has been notorious for their skittishness at investing in efficient, immersive digital experiences for their customers, so worried are they about detracting from the brand. So it was reassuring to see during Paris Fashion Week recently that French marque Chloé had gotten the message. As Zeitgeist’s dear friend and fashion aficionado Rachel Arthur details on her blog, the brand launched a dedicated microsite for their runway show. Brands like Burberry and Louis Vuitton have been doing this for at least three years, so in of itself it’s nothing new. What made the experience different were two things. Firstly, the site created a journey that started before the show, and continued after it, rather than merely offering a stream of live video and little else. More importantly, it tried to make the experience one that reflected the influence of those watching. As Rachel points out,

“As the event unfolded, so too did different albums under a moodboard header, including one for the collection looks, one for accessories, another for the guests, and one from backstage. Users could click on individual images and share them via Twitter, Facebook, Pinterest or Weibo, or heart them to add them to their own personal moodboard page.

‘[We] are excited to see how you direct your own Chloé show,’ read the invite.”

The recognition of platforms like Weibo should be seen as another coup for Chloé. Too often, companies send out communications to global audiences with perfunctory links to Facebook and Twitter. Not only is there no call to action for these links (why is it that the user should go there?), but there is no recognition that one of the world’s most populous and prosperous markets are more into their Renren and Weibo.

Elsewhere, despite what seems like some niggling problems, Zeitgeist was excited and intrigued to read about Disney‘s latest foray into embracing how consumers use digital devices, this time creating a second-screen experience in movie theaters. Second Screen Live, as Disney have branded it, doesn’t immediately sound particularly logical, as GigaOm point out,

“Of all the places I’d thought would be forbidden to the second screen experience, movie theaters were near the top of my list. After all, you’re paying a premium ticket price for the opportunity to sit in a dark theater and immerse yourself in a narrative — second screen devices operate in direct opposition to that.”

And yet the Little Mermaid experience that the writer goes on to describe cannot be faulted for its attempt at innovation, at reaching beyond current thinking (not to mention revenue streams), in order to forge a new relationship between the viewer and the product. Kudos.

Lastly, Zeitgeist wanted to mention the US television network Fox as a classic example of a company that has slowly come to realise the power of working with digital, rather than against it. In years passed, companies like Fox were indisputably heavily involved in digital, but only from a punitive standpoint. Fox and others were ruthless in their distribution of takedown notices to sites hosting content they deemed to infringe on their product. Fan sites that exploded in support and admiration for shows like The X-Files were summarily threatened with legal action and closed. There was little thought given to the positive sentiment sites were creating around the product, and little thought given to the destruction of brand equity that such takedown notices brought about. Not to mention the dessication of communities that had come together from different parts of the world, their single shared attribute being that they were evangelists of what you were selling. Clips of shows, such as The Simpsons, appearing on YouTube would be treated with similar disdain. So it shows how far we’ve come in a few years that this morning when Zeitgeist went onto YouTube he was greeted on the homepage with a sponsored link from Fox pointing him to the opening scenes of the latest Simpsons episode, before it aired. Definitely a move in the right direction.

Once notorious for their stringent outlook on content dissemination online, Fox now pushes free content across multiple digital channels

Selling Luxury in 2013 – Does brand education lead to monetisation?

At Cannes Lions tomorrow, Burberry’s Chief Creative Officer Christopher Bailey will ask “What if ads didn’t have to look or feel like ads?”. In a guest post, Chloé Hajnal-Corob writes about how luxury goods companies are seeking new and diverging paths in order to engage with their customers. Chloé spent time working at a fashion startup earlier in the year, assisting with the launch of a fashion hub for Vine videos, among other things. She is currently placed at Editd, a fashion data insight company.

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This spring, the House of Dior descended upon Harrods in London, one of the world’s premier department stores, for their “So Dior” exhibition and café. Last month, for one week only, Hermès had their “Festival des Métiers”, at London’s Saatchi Gallery. These two events represent a recent trend for providing luxury experiences, and though they are markedly different in some ways, they share a common goal: to drive revenues via brand education.

The “So Dior” exhibition, café and pop-up boutique took over a large designated area of Harrods alongside their usual concessions. Their presence was felt throughout, and Harrods have described the takeover as “a luxury-charged adventure combining French Savoir Faire and British charm”, the premise of which is to showcase the brand’s relationship with the store, and Christian Dior’s personal affiliation with the capital. Zeitgeist and I paid a visit, after seeing the social media hype from opening night. The event did not disappoint. On arrival, we were offered a private tour of the exhibition. What followed was a complete education into the history, heritage and identity of the brand and designers (Christian Dior, as well as Yves Saint Laurent, John Galliano and now, Raf Simons). The assiduousness and attention to detail demonstrated in the event were striking, and the quality of the experience was exceptional. It stands in particular favour given it was a free event, especially when compared with similar exhibitions such as the recent Valentino show at Somerset House, for which entrance was £12.50. We wondered if Dior and Harrods would set a precedent for luxury experiences where no fee is charged. Enter Hermès’s Festival des Metiers, which has been touring the world in a travelling circus of craftsmen, demonstrating their skills, and charging nothing for the privilege of seeing them. This harks back to how customers at high-end boutiques are treated, but without obvious intent to purchase. We are rewarded for our passion for the brand, not simply our contribution to sales.

Dior’s exhibition excelled at presenting a linear history grounded in contextual relevancy

What is the ROI for these free events then, when the cost of execution is so high? Both exhibitions come after a lengthy stream of brand “experiences” (as noted in a previous Zeitgeist article) that represent the latest luxury market strategy for driving revenue and footfall to retail spaces, in attempt to allay fears of a mass exodus of shoppers from the street to the website. However, Dior’s CEO, Christian Toledano reportedly told vogue.co.uk at the launch party of the event: “This isn’t a marketing tool… It’s a transmission of Couture”. But these are not mutually exclusive concepts; rather they are means to the same end, and arguably an education into the brand is simply the chosen method of marketing. Indeed, Hermès openly acknowledges the lucrative repercussions these luxury experiences have. An article in the FT cites that the event, in each city, draws around 30,000 visitors, which in turn increases footfall to brick and mortar stores. A twenty percent increase, to be precise, in the week following the festival in Seattle, Washington. In a far more low-key event than Dior, these are impressive figures, particularly given that no attempt at sales was made on the exhibition site. A bespoke, or even generic, selection of products on sale at the event would likely have been very popular.

Both events encouraged significant online chatter, though neither seems to have been particularly driven by the host brands. Dior at Harrods was littered with high impact branded totems, ripe for the social media picking, and as usual, Twitter, Facebook and Instagram were filled with images and comments from the event, and now Vine, twitter’s 6-second video app, provided the ideal way to document the experiential nature of the event. It is interesting that Dior made no attempt at harnessing or leveraging the veritable mass of attention the event garnered. On investigation, I found only a limited amount of content around the event on Dior’s twitter feed and Facebook timeline. There was no official hashtag for the event and no evidence (that I could find) of any engagement with consumers who were talking about it. Hermès, though a far more low-key affair, “discreet to the point of invisible branding”, were no less well-represented in the social media space, but were almost equally poor at engineering and engaging with their online audience. The hashtag #festivaldesmetiers seems to have been widely adopted but it is completely unclear whether this was brand-driven, and Facebook interaction was limited to a single status update announcing the event. For brands that exert meticulous control over themselves in the physical space (something that was made patent in the exhibitions), it is strange that they are not attempting to implement this in the digital space, where barriers are borderless and the opportunity for damage is massive. This is a bold (perhaps naïve) move in the current climate, albeit that both events seem to have been highly successful.

It is somewhat ironic that Dior’s exhibition was held at Harrods – an obviously commercial venue, where special Dior products were available to buy – choosing to assert their mission as education rather than marketing. By contrast, Hermès chose an established art space to host their Festival des Metiers, albeit one that is often known for its consumer links, and have clearly acknowledged the potential of education as a means of marketing. Neither space is less appropriate then the other, but both are indicative of the kind of events hosted. Harrods, with its lavish window displays, reputation for luxury and labyrinthine layout, was apt for Dior’s fantastical and grandiose display, not to mention that it was intended to draw on the relationship between brand and department store. The Saatchi gallery’s minimal open space provided a neat backdrop for hosting “a rendez-vous with the Hermès craftspeople”, and apparently, sought to appeal to a younger demographic than perhaps the Hermès customer would ordinarily be. It is appropriate too, to present what can only be described as a fine art and craft, in an artistic space. It’s a notion that rival (and owner of Dior), LVMH, clearly thought worth cashing in on, since they have subsequently launched a similar initiative: the Journées Particulières, which this year will see it open 40 of its ateliers to the public for a weekend.

Hermès attracted large crowds with its silk screen printing demonstrations

Both Dior and Hermès certainly made good attempts at getting people to engage physically (as well as virtually). The “So Dior” exhibition, and of course the café, were multi-sensorial. Beyond visual aesthetics, short films with headphones were provided, touch-sensitive technology was exploited and food inspired by Dior’s cookbook made for a wholly engrossing experience. Perfume was a key focus of the exhibition, explored from many different angles; not content with simply handing out the usual sticks of paper to smell, Dior and Harrods provided a telephone box (grey and white, in-keeping with brand décor, naturally) emitting one of Dior’s signature scents. Hermès was less immersive but more intimate; the possibility of viewing and interacting with those who create the product (and by extension the legacy), and even partaking in the sewing of scarves or ties, successfully created a feeling of exclusivity and privilege that the event no doubt strove for.

Toledano stated of the “So Dior” exhibition, “We need to explain why and how we do what we do. I want people to understand the passion, the innovation and our commitment to excellence.” In a similar vein, Guillaume de Seynes, great grandson of Emile Hermès explained: “We want to demonstrate that for us, craftsmanship is something that happens everyday.” Both brands sought to educate the consumer about themselves – Dior by making comment on the ideas and inspiration that produce the end product, and Hermès by demonstrating their commitment to the heritage of the brand by maintaining the quality of garments through skill of craftsmanship. Were they successful in their mission? Certainly; both provided real insight and inspiration. In doing so, Dior and Harrods, and Hermès’s Festival des Metiers, created an opportunity to become part of a legacy, and with this, the aspiration to turn something memorable into something wearable.

Taking flight – Opportunities and obstacles in democratising luxury

I don’t think democratic luxury exists. I don’t believe in something for everyone… How can we possibly put these products on the Web site without the tactile experience of luxury?”

– Brunello Cucinelli

The democratisation of fashion took a beating this past week as news reached Zeitgeist that Fashion’s Night Out was to be no more. Spearheaded by Anna Wintour at the height of the global recession, the idea was for a curated evening; a chance for stores to open their doors late, inviting a party atmosphere and focussing spend on a calendar event. The Wall Street Journal wrote that last year, “Michael Kors judged a karaoke competition at his store on Madison Avenue, rapper Azealia Banks performed at the MAC store in Soho and a game night was held at a Kate Spade store.” The evening festivities were replicated across New York, London and other cities.
Zeitgeist happened to be on Manahattan’s Spring Street last September when the most recent FNO was held, waiting patiently for a perenially-late friend who works next door to Mulberry. While waiting, it was absolutely fascinating to see the sheer of variety of people out on the street. While the crowds were mostly composed of women, the groups ranged from college-aged JAPs and the avant-garde to hipsters and stay-at-home mothers. Most gawped excitedly as they beheld the Mulberry boutique, enticed by the glimpses of free food and drink, as well the sultry bass tones of some cool track. One elegantly dressed fashionista strode hurriedly past Zeitgeist, lamenting to her cellphone “Oh God, it’s Fashion’s Night Out tonight”.
Ultimately perhaps it was such feelings among the fashion set that caused FNO to come to an abrupt end. But Zeitgeist got the sense that, while undeniably a celebration of fashion and an opportunity for brands to showcase their attractively experiential side – particularly to those who might usually be deterred by luxury brands and their perceived sense of formality – there weren’t a great deal of people actually buying things. It’s quite possible that the whole strategy of attracting a crowd who would not otherwise frequent such stores backfired; they turned up, sampled the free booze, felt what it must be like to shop at such-and-such a label, then moved on to the next faux-glitzy event with thumping music. This then was a failed attempt to bring luxury to the masses.

On a macro scale, the cause for democratisation is hardly helped by the global financial crisis. Although over four years old, the ramifications and scarring done to the economy are still sorely felt. This is illustrated in the unemployment figures around the world, tumultuous elections and anecdotal tales of hardship. More starkly, they are being backed up by solid quantitative research that proves we as a world are less connected now than we were in 2007. In December last year, The Economist reported on the DHL Global Connectedness Index, which concluded that connections between countries in 2012 were shallower (meaning less of the nation’s economy is internationalised) and narrower (meaning it connects with fewer countries) than before the recession. Meanwhile, just this past week, the McKinsey Global Institute published a report showing financial capital flows between countries were still 60% below their pre-recession high. This kind of business environment hardly fosters egalitarian conduct, and indeed such isolationist thinking was on show at Paris Fashion Week recently, where designers clung to their French heritage as a badge of honour. Exactly at the time when art needs to be leading the way in cultural integration, as emerging markets not only continue to make up a larger part of the customer base, but also develop their own powerful brands, it seemed that designers, like the financial markets, retreated to what they knew and found safe.

The world is less connected today than in 2007

Where the ideology of democratising fashion has seen more success is of course online. We’ve written before about how luxury is struggling with the extent to which they invest in e-commerce. One of the principle hurdles is that the nature of luxury – elite, arcane, exclusive – is more or less diametrically opposed to the nature of the Internet – open, borderless, democratic.
Yet the story of Yoox – the popular and, in online terms, long-lasting fashion ecommerce platform – and its founder is one of just such democratisation. (It is particularly stunning to read of the difficulties the founder, a Columbia MBA graduate, Lehman Brothers and Bain & Co. alum, had in attracting VC funding). It also, crucially, points to the importance of recognizing multiple audiences, and how they like to shop differently depending on context. John Seabrook, writing in The New Yorker, reports that when Federico Marchetti set up Yoox in 2000, the world of ecommerce for fashion was regarded as a not particularly salubrious environment. Rather, the magazine compares it to outlet stores like Woodbury Common, fifty miles north of New York. Luxury brands like Prada and Marni could be found there, offering deep discounts on their wares, and it was for that reason – and the lack of control over their own brand – that they didn’t like much to talk about such places. This, despite the fact that they attracted 12 million people in 2011, “almost twice the number of visitors to the Metropolitan Museum”. Yoox was likewise greeted with much trepidation by fashion retailers. The article quotes an analyst from Forrester Research:

“It was a matter of principle with luxury brands that only people who shop on eBay use the internet – and their only interest was in getting a low price.”

Marchetti’s only available source of designer clothing was from last season and beyond, as no brand would sell their current collection. He curried favour with some of them though by advertising the prices without noting the discount customers were getting. Other than that, luxury brands took little or no notice.

Online shopping though would prove to be “one of the largest disruptions of the luxury-goods industry since the birth of the department store”. There are three kinds of online store today; those that sell deep-discounted goods on end-of-season wear, those that sell in-season clothing, and those that have flash sales of small numbers of clothing or accessories. It turned out there was an audience for all of these types of website. Bridget Foley, executive editor of WWD is quoted in the article saying “[T]here has been a sea change in attitude… I think [it] surprised the fashion industry… Just because you love clothes doesn’t mean you love shopping“. This struck Zeitgeist as one of the more important insights in the lengthy article. Though retailers often harp on about the importance of the retail environment, the need to touch the product, to be in an atmosphere where everything has been curated down to the finest detail, online neutralises all of that. This idea threatens those in the luxury sector, as the thinking goes that any such premium on products may seem less justifiable away from a Peter Marino-designed armchair and a nice glass of champagne. Such ideas are being challenged though. Not only is the nature of the store changing – from robotic sales staff to customers as models on the catwalk – but so is the view of the luxury customer as a homogenous, static group, devoid of context. Zeitgeist was at a Future of Media summit at the Broadcast Video Expo last week, where, as behavioural economics suggest, MD of Commercial, Online and Interactive for ITV Fru Hazlitt insisted that consumers had to be targeted in ways that were pertinent to them, not only as demographic groups, but in ways that recognised the context of how approachable they were likely to be at the time, given the programming they were watching. Fru admitted that in years past, broadcasters like ITV had seen advertising as “space to rent out”. Now they were thinking deeply about how and when is the right moment to reach their target consumer. It is the same in fashion. There is not one single way to reach the consumer; buyers of luxury goods do not want to be solely restricted to being able to buy your wares in a physical store.

Chanel are one of the few remaining luxury brands to resist fully integrating online

Behavioural economics played a role in Marchetti’s initial framing of the audience for the website as well. He hired pedigreed fashion writers, as well as artists, architects and designers to make special projects that lent the website an air of curation, of something more special and rarefied that what one might find – or more importantly the way one might feel – at an outlet mall. Marchetti wanted the customers “to see themselves as connoisseurs, even if they were really just hunting for bargains”. The New Yorker article goes into some anecdotal detail about the way people shop on Yoox, which crucially differs not only from the way they would shop in-store, but also from other e-tailers. For online shopping in general, the experience is one where you can purchase ten items, and return nine of them with very little hassle, with credit for multiple rather than a single brand, and certainly no raised eyebrow from a pretentious shop assistant. Regarding specific sites, Yoox, unlike Net a Porter, for example, does not try to force a set of looks onto the user. Behavioural economics tell us that people irrationally value something more when they’ve been made to work a bit to get it. Such is the case now shopping for luxury items, which makes clothing not in-season (i.e. not currently in every shop window), both cooler and cheaper. It’s an act not to be discouraged. A Saks representative says customers who shop online as well as in store buy four times as much merchandise as customers who shop only in the store. What will worry retailers though is that the convenience of the online store outweighs the experience of the physical boutique. The New Yorker quotes a shopper: “I’ll never buy a dress at the Prada boutique again after getting these really amazing ones on Yoox.”

As well as setting up the Yoox website, Marchetti’s company now also powers the online stores of more than thirty fashion houses, including Armani and Jil Sander. Last summer, PPR joined in too, after conceding that their in-house expertise was not up to snuff. The latest development is making designs available to any customer as soon as it hits the runway. Burberry, as well as separate sites like Moda Operandi, have spearheaded this innovative change, which is effecting editorial as well as buying methods previously seen as unshakeable. The demand for this type of instant purchasing seems to be fueled by a niche – albeit a sizable one – that is not representative of the majority of luxury shoppers. The accessibility of a brand and its products is a tricky one to tread, one which Zeitgeist has written about several times before. Tom Ford performed a volte-face this year, after debuting his womenswear collection with no press and VIPs only, relented this year at London Fashion Week by letting bloggers write about the show. Chanel still steadfastly refuses to fully engage with online shopping. The tension is keenly felt in the New Yorker article, where Amazon’s new entry into the world of fashion is referenced. The CEO of Valentino is unconvinced: “Valentino is high luxury… People going to Amazon are not going to Valentino“. This smacks a little of pride and ignorance, for they most assuredly are, though perhaps not with luxury purchases in mind… yet.

It comes back to the idea that there are myriad types of luxury consumer. The industry has not fully acknowledged as of yet that the buying behaviour of a descendant of the ancien regime in Paris is unlikely to buy in the same way as a newly-minted businessman in Shenzhen. They may know that these types of buyers exist, and they may even create different products for each. Importantly though, they are not recognising that these people may go about purchasing in a different way. It’s not just a purchase journey that has changed massively in recent years, as McKinsey’s consumer decision journey illustrates above. It’s also, as ITV’s Fru Hazlitt insists, about recognising that different people shop in different ways, wholly dependent on context. Though Fashion’s Night Out may be on permanent hiatus, and though the global economy may be sputtering along in second gear, the opportunities to leverage deep insights into consumer purchase preferences are there for the taking. Yoox, along with a deeply complicated algorithm, are trying to tap into just this. But the process must start with realising that yes, actually, someone might want to pick up that Valentino dress while surfing on Amazon.

Selling the extraordinary

“Everything has become more experiential”

– Dante D’Angelo, brand and consumer development director at Valentino

It is an odd state of affairs indeed for the retail sector at the moment. On the one hand, consumers are flocking to digital devices like never before, particularly for their shopping. Conversely, this means that the physical experience of shopping becomes rarer, creating more opportunities for specialism. An article in the Financial Times a few weeks ago read as if a commercial plague had swept through the UK high street over the past few years. With 4,000 stores affected, 2012 was, according to data from the Centre for Retail Research, the “worst year since the start of the credit crisis in 2008”. Names of erstwhile stalwarts like Woolworth’s, Jessop’s, Peacocks and Clinton Cards have all fallen under the knife. As we wrote at the beginning of last month, what little salvation there is lies in embracing digital technologies.

The luxury sector however has its own special, gilt-edged cards to play. In St. Tropez, the Christian Dior boutique’s ample courtyard has recently been made use of with an all-day restaurant. Louis Vuitton have a cinema screening classic Italian films in their Rome boutique. It’s no wonder such brands have also branched into the hospitality sector, the former working with the St. Regis to develop branded rooms, the latter into full-scale hotel management. Ferragamo have been involved in the hotel sector for years. Two recent examples show how companies can extend the experience for visitors, and help drive revenue at the same time.

The auction house Sotheby’s will tomorrow auction a rather large collection of surrealist art. One of the few things that definitively puts it ahead of Christie’s is that it has its own cafe, which, last week and this week, is pushing the surrealism theme into its catering (see above menu). It’s a simple, creative idea that creates a cohesive brand, celebrates a big event, and ultimately hopes to drive revenue from peripheral streams around the auction. The RA’s current Manet exhibition is taking a leaf from this tactic, opening later but charging double the usual rates for a special experience, including a drink and a guide. The other interesting news of note was a new tactic being employed by the fashion company Valentino. Not content merely with having a major exhibition at London’s Somerset House, the label is also tinkering in an innovative way with its event structure. As detailed last week in Bloomberg Businessweek, Valentino is opening a new boutique in New York later this year, during which the typical glitterati will be in attendance. However, the new idea comes in the form of the company inviting prized customers to the opening for the chance to rub shoulders with said VIPs, for a steep price. Similarly, Gucci is offering its non-VIP customers tours of its Florence workshops for the first time.

Something that Zeitgeist has been noticing for a couple of years now, recently echoed by Boston Consulting Group (BCG) senior partner Jean-Marc Bellaiche, is the importance, particularly for those in their 20s – like Zeitgeist – that people place in defining themselves by what they’ve done rather than what they own: “In an era of over-consumption, people are realizing that there is more than just buying products… Buying experiences provides more pleasure and satisfaction”. On a macro level there is significant bifurcation in the retail market; not everyone will be able to afford in creating extraordinary experiences for their customers. A recent BCG report helps illustrate this, noting that while the apparel sector as a whole saw shareholder returns fall by 1.3% for the period 2007-2011, the top ten players produced a weighted average annual total shareholder return of 19%. Expect then for retailers – those that can – to increasingly provide exclusive experiences to their customers, beyond the celebrity, whether it be early product releases, tours, or events. Just don’t expect it to come without a pricetag.