Richard Edgley

This is a piece myself and my colleague Sheel Patel have written about developments in the luxury market. It is the first in a suite of pieces that will look at different aspects of the industry in advance of an event we are hosting at Fluxx - Flux[x] Lux[x].

Over the past few months, we at Fluxx have been observing developments in the luxury sector. There has been much discussion recently about the luxury sector bucking the recessionary trend and being one of the few industries to be growing in this age of Western austerity. While the high street suffers, luxury brands are being championed as a possible savior of the UK economy, not just bricks and mortar sales, but online too.

The BBC recently reported that Britain’s reputation for producing crafted luxury goods and services should be leveraged. Many experts perceive the rise of the aspirational emerging affluent in China and India as a growth opportunity for British luxury brands. It is hoped that with this new demand for luxury goods, the UK economy might be able to export its way out of recession.

There has been evidence of this in the luxury car manufacturing industry. Land Rover has recently partnered with Victoria Beckham to launch a special edition Range Rover, the Evoque. In response to the growing global demand for the model, Land Rover’s Halewood manufacturing plant is operating round the clock for the first time in its history, creating 1,000 jobs for the local economy in the process.

The global market for luxury spirits also promises to benefit the UK economy. Diageo recently announced plans to invest £1billion over the next five years in Scottish whisky production to meet anticipated global demand. This investment will involve infrastructure improvements such as a new distillery and storage facility, through to benefiting small craft workers making barrels.

The potential for global growth in the luxury market is not just limited to the established brands. Many British niche companies are either benefiting now, or have plans to do so. Sipsmith, the London-based micro distiller, is seeking to develop and capitalise on the niche market for super-premium gin in China. They see the potential for gin to follow whisky, and are engaging affluent Chinese consumers.

At London Fashion Week, the talk was not just been about next season’s fashion trends, or the new hi-tech Burberry flagship store. The Financial Times reported that the next big British brand is the luxury leather goods retailer Smythson. They have ambitious international growth plans, including expanding their retail presence from a dozen to between 40 and 50 shops in the next four or five years, eventually reaching 100.

This will not be an easy journey. British poster child Burberry have had mixed fortunes recently. The opening of their flagship London store, designed to blend the physical and digital retail experience, was accompanied by a profit warning which wiped a fifth off the value of its shares. Mulberry had a disappointing 2011, resulting in a drop of 22% on their share price with a cautious outlook for 2012. Likewise, Aquascutum has seen tough times. Earlier this year they were bought out of administration for £15m, which some might argue is a bargain for an upscale heritage brand. But it is the value of their historic roots that is their saving grace. UK chief executive Tim Dally told Retail Week that he wanted to exploit the brand’s “quintessentially British heritage” by opening a flagship store in the West End. He sees their target audience not only coming from China, but also Russia, Middle East and North America.

So it seems that the UK luxury market is not as resilient as first thought. On the one hand there is LVMH, who reported revenue of £13billion in the first half of 2012 (an increase of 26%), and on the other you have a number of luxury heritage brands reporting flat results.

 There is no doubt that China still offers much to UK luxury brands. However, countries such as France and Italy have also a strong tradition for crafted luxury goods that appeal to global consumers be they from emerging/existing markets. For UK luxury brands to meet their ambitious plans they need to focus as much on evolving their commercial model as much as their product lines.

 The luxury market is at interesting stage. There are new emerging markets to explore, which bring fresh challenges to many luxury brands. In addition there are challenges closer to home which are forcing brands to reconsider their current business models and how they engage with their customers.

Fluxx will be exploring these themes through a series of blogs leading to our Flux[x] Lux[x] event on 22^nd November 2012. Watch this space for further details.

 

A piece I wrote in character for an event we are having at Fluxx on innovations in the payments industry.

There’s a new kid on the block – and he’s looking to wipe the floor with the opposition at Fight Night on 4th October.

Fluxx is hosting an evening of Contactless Boxing – debating the future of payments and what it means to all four corners of society. And fresh face ‘The Innovator’ came out swinging when he vowed to win over the crowd at the Carter Lane event in three weeks’ time.

“I understand the consumer, the retailer and how to make it work better than anyone,” he insisted. “For most people mobile payments are not core to their needs. Cash and plastic works for them. Right now they are confused by the different options available to them – contactless, SMS, proximity, QR etc. But we know that in five years’ time our products will be integral to their lives, the natural way to pay.”

If you read the press you would be forgiven for thinking that we are in the middle of a mobile payments revolution. In the near future we will be binning our wallets stuffed with plastic cards and paper notes in favour of a contactless nirvana, where with a swipe or a tap or even by our mere presence we will be able to pay for a coffee and, given time, a television or a new kitchen.

With Barclays Pingit we can now pass money between each other with nothing more than a mobile number and a bank account. In case you hadn’t noticed, the London Olympics were billed as the first contactless Games. So will paying for things be quicker, less hassle and safer? Are we heading towards a cashless utopia or payment chaos? Do people really care – or is it a case of inventing a solution for a problem that does not exist. After all coins, bank notes and plastic cards are all mobile, easy to use and accepted everywhere.

If a solution is required, The Innovator is convinced the ensuing fight will be straightforward for his camp. He explained: “I’m no banker, nor do I come from a deep financial services heritage – and that’s an advantage. I’m a lean start-up venture like Jack Dorsey’s Square and Europe’s iZettle. I’m free from legacy systems, a cumbersome corporate culture or a tarnished public perception. My strength is through insight, clear thinking, and an ability to be lean in delivery, making the right partnership deals.”

“The problem with the banks and payment providers is that they seem to have missed the point. They are caught-up in an arms race with each other – releasing multiple products from mobile wallets, to apps and stickers. These only serve to confuse customers and frustrate retailers. They have missed that it is not about payments and more about customer experience. It is about simple ease of use and a value add – be that loyalty and reward, or a deeper understanding of what they want mixed with the magic of discovering something new. Innovators like Jack Dorsey get this.”

“I liken it to the Betamax and VHS video format wars in the 1980s. Betamax was perceived as being the superior product to VHS in having better picture quality. But for most consumers that difference was negligible. VHS won out because it was a better customer experience – it was affordable, available and offered 30 minutes more tape capacity for recording. It will be same with contactless payments, the winning format will be the one that gets the customer experience right – and that will be me.”

It is fair to say we are in the midst of a gold rush, with all the associated fevered confusion. Banks and payment providers, mobile manufacturers and network providers, Silicon Valley tech giants and innovative start-ups are all seeking to claim their stake on our financial lives and its associated consumer data. It is hard to tell who the winners and losers will be. One thing is certain: The Innovator will be the first in the ring.