Resilience of Luxury Companies in Times of Change is based on an analysis of six key luxury industries (fashion, automobiles, accommodation, furniture, cosmetics and jewelry), examined through an international lens, with examples from Europe, the US, the Middle East, China and Japan. Published in July 2021 by De Gruyter, in this book Gabriella Lojacono and Laura Ru Yun Pan delve into the myriad challenges that companies are facing at this particular point in time: from the shock of the pandemic to the need for process digitalization, from sustainability to new business models, from innovation to internationalization.
We asked the two authors to talk to us about the main points of their latest book.
The two pillars of the book, as you explain in the introduction, are the need to have valid, updated didactic support, and the need to rethink the luxury sector in light of the repercussions of the pandemic. “If the world is changing, education has to change too.” What’s the connection between the two? And how are they delineated in the pages of your book?
At a time when companies are completely rethinking their business models, within the context of a profoundly transformed economic and social scenario, they need to be agile, and develop the right competencies to support change. Change that often goes hand in hand with an organizational transformation and a reformulation of the company’s fundamental values.
The contents that are being taught today are rote, devoid of any value. Generalism left the door open for hyper-specialization in areas that were inconceivable just a few years back. As researchers and teachers, we are also called on to be agile. With profoundness and professionalism, we must be capable of molding the leaders of the future.
Can you describe the transition from the old world of luxury to the new? What should luxury companies leave behind and what should they really be focusing on?
The concept of luxury in the old world was shaped by historic events and by culture. In Chapter 2 we draw some similarities between Europe and China, where royals and emperors enjoyed lavish lifestyles and demanded the highest quality materials. These behaviors gradually trickled down to aristocratic families and the wealthy class. In the new world, places like the Americas, Japan and the rest of Asia imported these behaviors as their economic expansion progressed.
Today there’s little difference between the old world and the new one; tastes have leveled out. Just think of Chinese consumers, who are known for their flashy taste, but in the last ten years they’ve evolved into sophisticated admirers of more sedate luxury. All this thanks to the internet and the free flow of information on the history of a brand, its DNA, and its latest marketing strategies. This is why luxury companies have to concentrate on the message they want to convey. Not only to conserve their DNA, but also to keep up with the times.
Let’s talk about the concept of sustainability, one of the three key words in the book that jump off the page, along with innovation and resilience. For luxury companies, how can – and should - sustainability be put into practice every day?
Sustainability has become a rallying cry in the luxury industry. Many companies focus on purchasing ‘ethical’ raw materials (for instance, using vegetable-tanned leathers instead of fur from animals), even though sustainability encompasses much more than single products. In Chapter 7 we explore the importance both of the luxury industry and luxury consumers, and how they play critical roles on both sides. Not only is it essential to regulate the industry’s supply chain, but consumers must learn how to deconsume too, and measure their carbon footprint on the environment.
In the same chapter we describe basic frameworks for measuring sustainability, such as the Triple Bottom Line and the Life Cycle Assessment (LCA), with an accent on how consumers should be re-educated to learn sustainable consumption. What’s more, we analyze how companies are applying new technologies such as blockchain to implement better metrics and greater transparency to manage their supply chains and reinvent the customer experience.
One chapter in the book is dedicated to new business models. Can you tell us something about that?
The luxury industry has changed a great deal in the past 20 years, and it will continue to change extensively in the years to come. The lion’s share of this change is being driven by technology and social behaviors. In this sense, there are five key elements for companies so they can best position themselves in these times of change: shift the focus from the product to experiential enticement; engage the consumer via digital channels; invest in data, privacy and artificial intelligence; rethink the supply chain; and put employees’ needs at the center of the company.
Traditional approaches toward the product and services aren’t enough to satisfy future customers; deeper involvement - both physical and digital – is needed. This means transitioning from the product to the experience, from transactions to aspirations, with the customer fully on board through all the different touchpoints. Likewise, with technological advances, greater data protection is necessary. As luxury companies commit to using new technologies, they have to be careful about the best way to follow new business models while protecting the privacy of their customers.
The myriad new technologies available in the retail industry have also allowed luxury companies to rethink their supply chains. Not only does this give them the chance to become more sustainable and transparent, they can also cut delivery times, production volume and inventory costs. Last of all, companies have to make their work force a bigger priority, in contrast to the customer-centric view of the past.
SDA Bocconi School of Management