What do Netflix’s co-founder Reed Hastings, Italian polymath Vilfredo Pareto and Neil Young have in common?
Let’s begin with Hastings: a few weeks ago, the New York Times dedicated a whole page to his latest venture: Powder Mountain. It’s a ski resort somewhere in Utah, which, at first glance, is exactly the kind of extravagant purchase you may expect from a billionaire (“I bought myself a mountain” has a nice ring to it).
Upon closer inspection, the actual news is that Hastings wants to turn half the resort into “a private club for the élites”. That is, a members only ski slope. Well, Soho membership, it ain’t.
Hastings’ thinking is that, while many ski areas are struggling, by going “boutique, higher-end, private”, you can actually make some money.
Further up North, Neil Young, the legendary (and allegedly anti-corporate) songwriter, just released a live album which is in fact a recording of the private concert he played for Dani Reiss, the billionaire CEO of Canada Goose. The fact that Neil Young was merely the opening act will possibly give you a sense of how much the whole thing cost.
…which brings us to Pareto’s Law, a principle stating that, for many events, roughly 80 percent of the effects (revenues) come from 20 percent of the causes (customers).
The 80/20 rule comes with an even stricter Luxury version: according to the good folks over at Bain & Company, in 2022 a mere 2 percent of customers drove 40 percent of global luxury sales.
In other words, a small number of ultra-wealthy people drive a disproportionate amount of revenues.
This is no big news but it’s becoming newly relevant, circa 2024, as “aspirational buyers”, the remaining 98 percent, are hit by the increased cost of living, the vagaries of the global economy and the whole “vibecession” feel.
So, let’s cut to the chase: you should probably focus more on VICs (Very Important Customers): stealing them from the competition, nurturing them, retaining them. It surely beats, ROI-wise, endlessly “prospecting” for new shoppers that will likely never return or enticing aspirational buyers with ocean-deep promos.
Make luxury exclusive again!
Focusing on VICs makes a lot of sense from a business perspective. It makes even more sense in terms of branding.
For the most part, luxury has become too ubiquitous, too visible, too obvious and too accessible (which kind of makes sense, if you have to make yourself readily available to legions of aspirational buyers).
There is little mystery left and instead of things that are both invisible and truly unattainable we have manufactured scarcity (“drops”), haute couture as a marketing gimmick and – what? – memes about Birkin waitlists? Exclusivity is what builds desire and…we have quite low levels of that at the moment.
This is not (entirely) new
To be fair, a sizable number of brands have beenfocusing some actual efforts on VICs (plenty more pretend to be doing the same…): MyTheresa, while not a perfect business, is one of the few luxury e-commerces in good financial shape, mostly due to its focus on VICs, which are both closely followed by a small army of personal shoppers and the focal point of major brand-sponsored extravaganzas.
Chanel is one of the first luxury brands that created VIC-only boutiques (or “salons”). They do not carry the “Chanel” insignia on the outside although, for some reason, they didn’t resist the temptation of putting some form of branding above the entrance, opting for the not-very-coded “31 Cambon” label.
Plenty of competing brands followed in tow, with mixed results (moving from aspirational buyers – the bread and butter of many managers working today in “luxury” – to VICs is a bit of a cultural stretch).
Hard luxury is likely the segment that has more familiarity with VICs, as most houses have teams devoted to “high jewellery” and one-to-one relationships are how sales are closed there in the first place.
How do we make things exciting?
So personal shoppers, VIC-only shops and more personal shoppers, with private dinners and events thrown in for good measure. It all feels a bit… commercial? What’s largely missing so far is the communication part.
Why don’t brands make whole campaigns (the word should be interpreted in the broadest possible sense) entirely devoted to these people instead of having “just” celebrity-fronted ones for the masses and
IYKYK parlour tricks for the tastemakers? Is there life beyond clienteling as a cold calling tool, CRM as an IT driven headache and not so subtle “enjoy-the-champagne-now-buy-mesomething” events?
Perhaps we are only dreaming but here at the SEO-friendly Fashion and Luxury studio I’m part of, we believe that just as VICs command a large portion of your sales, they should command not just a dedicated retail space and sales staff. They should also get their own marketing and please! – make it worth their while.
By: Simone Oltolina, Director for Fashion & Luxury at Dentsu Creative
