Recalibrating Luxury for the Digital Economy

Though digital has fundamentally altered the commercial playing field, lamentably most of the conversation around the art and science of luxury brand management has centred on how brands ought to communicate and commercialise online, balancing the need to maintain exclusivity and avoid ubiquity. While this is certainly a concern, particularly for luxury businesses that still struggle with the transparency and immediacy that digital offers, it does strike as secondary to a number of bigger questions. For instance, what does luxury even mean today? Is our definition still relevant in the digital age we find ourselves living in?



The current definition of what luxury stands for revolves around something expensive or hard to obtain; and / or something that exhibits superior manufacturing and craftsmanship. Both could be easily disputed and thus are insufficient to describe the meaning of luxury in this day and age: Expense is difficult to defend as a pre-requisite for luxury, mainly because expense is both subjective and because there is much too much controversy and obfuscation around the subject of luxury pricing. Meanwhile, the idea that luxury is hard to obtain is somewhat derisory, when this notion is held up against an industry where double-digit growth targets are achieved via aggressive store roll-outs.

Lamentably most of the conversation around the art and science of luxury brand management has centred on how brands ought to sell and communicate online. But what does luxury even mean today? Is our definition still relevant in the digital age we find ourselves living in?



While a definition that centres on superior skills in manufacturing appears to encapsulate what luxury stands for in our collective imagination, this too ultimately falls short. It’s not so much a question of form, as one of function: a designer bag may show superb craftsmanship, but why – in the increasingly technological times we live in - are we placing a “luxury” label, a social premium, on products that exhibit superior manufacturing? Isn’t this a very industrial-age approach to luxury? Shouldn’t superior manufacturing be a given by now?

Ultimately, to focus exclusively on craftsmanship as the hallmark of luxury seems reductive. In the absence of a functional definition, perhaps we should recalibrate our meaning of luxury to better take into account our present reality?

This means firstly, understanding the larger implications of the digital economy. From an economic standpoint, the digital space has affected a shift in the location where most transactions take place to outside of a physical marketplace: selling is no longer linear. Arun Sundararajan, professor of Information, Operations and Management Sciences at NYU Stern and a leading authority on digital economics and how information technologies transform business and society, believes that the biggest impact of this shift lies in the fact that assets have become disaggregated from their physical selves, and may now be offered up as something else. This disaggregation in turn has had considerable implications for commerce, not least because it requires a dramatic departure from traditional distribution models, towards supply models that better captures the reality of our new digital economy.

In the digital economy, assets have become disaggregated from their physical selves. This requires a dramatic departure from traditional distribution models, towards supply models that better captures the reality of our new digital economy.

Secondly, it’s critical that we fully appreciate the effect digital distribution models are having on our notion of luxury. It’s no secret the fashion industry is undergoing some radical disruption as a consequence of the numerous, digitally centred fashion commerce models that go “beyond” pure ecommerce: subscription commerce, crowdfunding, D2C and re-commerce to name a few. These new businesses are not only altering how luxury and fashion are distributed, but in the process revolutionizing the traditional “legacy approach” to luxury brand management, turning inside out the consumer’s understand of what a fashion designer is (or should be), or what a fashion retailer does (or should do).

Subscription commerce platforms such as Rent-the-Runway provide a compelling case that dove-tails with Prof. Sundararajan’s traditionally less fashion-oriented examples of Airbnb, Ziply and the like. The common message is that commerce is no longer necessarily about ownership. But if luxury can be rented (and, perhaps more importantly for Rent-the-Runway investors, if luxury renting can be scaled) then what are the implications of what it means to consume luxury? What’s more, if the consumer’s understanding of what owning luxury is being subtly recalibrated, how are traditional luxury brands planning to meet this threat?

The worry is not that the sharing economy will spell the end of the luxury industry – it won’t. The worry is that, with all the talk about online commerce and social media, luxury brands are missing the woods for the trees. Our common understanding of what luxury denotes is shifting. The implications for the traditional fashion brand or retailer – not to mention the traditional luxury brand manager - are on the wall.

Ceci Joannou works with companies to develop commercial strategies designed to create operational efficiencies and impact overall brand growth. She is the founder and editor in chief of Brand + Commercial. You can say hey to Ceci on Twitter at @ceci_joannou.