Luxury Industry Report 2019

London’s luxury goods scene draws in consumers from around the world. In October 2018, average spend on Bond Street was up 13% from the previous year, with visitors from the UAE contributing most to driving this up thanks to their average transaction total of £2,074.

Heritage British brands including Mulberry, Burberry and Alexander McQueen appeal around the world, in part because of their decades of rich history and status. These British brands, as well as the other luxury retailers that can be found on UK High Streets, have contributed to a growth of 24.8% for the luxury retail sector in the UK between 2013 and 2018, making the luxury industry one that’s growing at more than twice the average of other sectors (11.9%). While retail sectors across the globe and on our own doorstep suffer in an increasingly digital-first world, the luxury industry seems to be bucking this trend and succeeding.

The Q4 into Q1 period is vitally important to the health of luxury brands. While only a small section of the market might buy luxury treats for themselves year round, sales ramp up significantly over the Christmas period with consumers buying gifts for loved ones. In fact, 76% of shoppers who usually buy from mid-range High Street brands switch to luxury retailers in the run up to Christmas.

In order to secure a slice of this large and growing market, luxury brands need to project a vivid image of the lifestyle that they can offer to consumers. So, to what extent do consumers find luxury brands memorable, and how favourably do they think of them? Read on to find out.

A quick note on methodology

The data for this report was gathered from 1,000 nationally representative UK consumers aged 18-65, surveyed in January 2019.

We asked respondents to consider the Luxury industry, and proceeded with questions on three key metrics:

1. Unprompted Brand Recall – the first brand which comes to mind within the named industry.
2. Purchase Intent – the percentage of respondents who are ‘Very likely’ to shop with the brand they previously named, based on their response to a single choice answer scale from ‘Very likely’ to ‘Very unlikely’.  
3. Net Promoter Score (NPS) – how likely respondents are to recommend the brand they named to a friend or colleague, based on their response to a single choice scale from 0 to 10.

NPS is calculated as the number of promoters (those who voted 9 or 10) minus the number of detractors (those who voted 6 or less), while passive respondents (who voted 7 or 8) are removed from the calculation. If 100% of respondents were brand promoters the brand would score an NPS of 100, and if 100% of respondents were brand detractors the brand would score an NPS of -100.

These three metrics are combined to give two overall scores for each brand named in the report:

1. Brand Strength – irrespective of how highly recalled the brand is, this is a measure of how well the brand is thought of within the market. Brand Strength is calculated by adding together the brand’s Purchase Intent and Net Promoter scores.
2. Total Brand Equity – how well thought of each brand is in relation to how well recalled it is. This is calculated as Brand Strength multiplied by Unprompted Brand Recall.

Click here for more information on the metrics you can use to establish the health of your brand.

Continuously broad category

While there are some luxury heavyweights – notably fashion houses including Gucci, Chanel and Armani – that appear consistently across quarters, the variety of sub-sectors represented within the leaderboard continues to be broad.

It’s not only fashion houses and clothing retailers that are recalled, technology brands, confectioners and high-end department stores also feature. The luxury industry clearly bridges many sectors, with a ‘luxurious lifestyle’ meaning different things to different people.

Lindt enters the leaderboard with 1.6% of the total Unprompted Recall, following a successful festive period where countless households up and down the country found Lindt products in their Christmas stockings.

Another notable addition to the leaderboard is Apple, also with 1.6% Unprompted Recall. While it’s a brand that’s becoming less and less exclusive and niche – the average American household contained two Apple products in 2017, likely more in 2019 – the offerings are still considered ‘luxury’ by many. The large price tags likely have an impact on this perception; the newest iPhones are sold for over £1,000 and their high-end laptops are more expensive than ever.

The only other newcomer to the leaderboard is Hugo Boss, who joins with a significant 2.1% recall. They last appeared in the Luxury Brand Index in Q3 2018, so have returned after just one quarter away from the top 10.

The brands that remained within the leaderboard from last quarter experienced only marginal shifts in recall, of no more than +/-0.8%.

Significant shifts in NPS

Within this industry, reputation counts for a lot; consider the 13% dip in share price for Ted Baker, following the Q4 2018 workplace hugging scandal.

One measure of how well a brand is thought of in the market is the brand’s Net Promoter Score (NPS). NPS can rise and fall significantly from one quarter to the next, with consumer expectations difficult to consistently satisfy. A single bad experience, poor quality item, pushy sales clerk, delivery error or any number of other interactions might send someone from a promoter to a detractor.

Chanel experienced the biggest plummet on the leaderboard, their NPS down to just 8.9 from 30. At the other end of the scale, Christian Dior had a significant boost to their NPS, up to a respectable 26.3 from -22.2.

Harrods continues to have a negative NPS this quarter, and is joined on this side of zero by Gucci, who experienced a dip from 5.4 to -11.3.

As with Rolls Royce, who dropped out of the leaderboard this quarter after receiving an NPS of -15.8 in Q4, Gucci must work hard to turn around their ability to inspire positive word of mouth from consumers. Their fall in NPS caused an overall drop from 1st to joint 8th place this quarter.

Newcomers to the leaderboard, Hugo Boss and Lindt, enter in a strong position with the two highest Net Promoter Scores – 38.1 and 31.3 respectively. Apple, who also joined the table for the first time, does so with a middling NPS of 18.8.

Steadier picture for Purchase Intent

Despite some brands experiencing noticeable dips in their NPS metric, Purchase Intent scores remain steady. In fact, average Purchase Intent across the top 10 brands has shifted (downwards) by less than 1%.

The biggest growth in Purchase Intent came from Marks & Spencer; 40% of consumers were very likely to purchase from this brand in Q4, and this figure has now grown to a round 50%.

This rise matches Marks & Spencer’s own reported figures from Christmas trading, with Marketing Week reporting: “M&S claims its product-focused Christmas campaign – which the retailer’s director of marketing for clothing & home Nathan Ansell said it decided to take an “unashamedly commercial approach” on – worked well, with record sales across all advertised lines.”

The biggest downwards shift fell to Armani who received 52.4% in Q4 and 31.8% in Q1.

Of the three newcomers to the leaderboard, Apple – who received the lowest NPS of the three – leads the way with a Purchase Intent score of 56.3%. This tops the entire table, with Harrods sitting at the bottom of the leaderboard with just 5.9%. However, this is still up from their score last quarter of 4.2%.

There is a disconnect between NPS and Purchase Intent scores in the luxury industry; most brands score well for one metric but not the other, which shows that a brand’s NPS and a consumer’s likelihood to purchase aren’t intimately linked. What is it, then, that drives customers into the silken open arms of leading luxury brands?

Key attributes

In 2019 we’re asking respondents to rank the brand they named in our ‘Unprompted Recall’ question for a variety of qualities in order to establish which brands are best known for their service, online presence, and value for money, as well as five other industry-specific factors.

1. Trend-setting 

The most trendsetting brand of the top 10 is Apple. The technology heavyweight, who pride themselves on innovation, received a weighted ranking for this quality of 90.6%. As this article outlines, a decade or so ago mobile phones came in all shapes and sizes: bricks, sliders, flippers, spinners… Today, (almost) all smart phones are black rectangles, and that’s thanks to Apple. They well and truly set the trend for years and years of product development for their competitors. The competition is heating up, though, with Android innovating at a rate Apple may not be able to contend with for much longer.

At the other end of the scale, Harrods received the lowest weighted ranking for trendsetting, at just 68.8%.

2. Branding

Despite Apple’s laser focus on marketing, they receive a decidedly middle-of-the-road 78.1% for having memorable branding and adverts. The crown for most memorable branding in fact goes to Marks & Spencer with a weighted ranking of 86.3%.

Perhaps this follows the department store’s 180 degree turn on their usual Christmas advert style in 2018, opting for a product focus over a one-off blockbuster production, including the use of Holly Willoughby and David Gandy as influencers. The memorability of their adverts might also be the result of the brand’s iconic ‘This is not just a chocolate pudding…’ campaigns, which officially made food sexy and perhaps still stick in consumers’ minds today.

3. Quality

All luxury brands did impressively well in this category, as would be expected to justify the high price tags. The brand voted highest quality of all was Rolex, with a weighted ranking of 97.2%.

All of the top 10 brands received more than 90% for this important characteristic, with the lowest score – 91.5% – going to Gucci. 

4. Value

The highest value brand is the one with the lowest ticket price of any in the top 10, Lindt. The chocolatier received a weighted ranking of 75%, compared to Harrods’ relatively low score of 54.4%

5. Ethics

The most ethical brand of the top 10 was voted as Harrods, with a weighted ranking of 68.2%. This score is the lowest winner of any of the eight metrics covered, indicating that expectations for ethical behaviour in the luxury marketplace aren’t being met to the same extent as the other characteristics.

Harrod’s winning ranking could in part be due to French fashion collective Vetements’ Fashion Week display in 2018; an effort to address the overproduction and overconsumption in the fashion industry. Vetements took over the Harrods window display during London Fashion Week 2018, and rather than displaying the usual pristine and carefully selected clothing items, they showcased an unsightly mountain of dumped clothes.

Armani bottomed out as the least ethical brand amongst the top 10, with a score of 58.33%. The Italian fashion house was noted within the Fashion Transparency Index in 2018 as having a worryingly opaque supply chain, though this is a problem rife within luxury fashion and not exclusive to this brand.

6. Service

The brand with the best customer service of the top 10 is Rolex, with a weighted ranking of 88.4%. It seems that with expensive products comes a certain level of service as standard, that doesn’t extend to inexpensive items. As such, Lindt received the lowest score in this category, just 77.5%.

7. In-store customer experience

While Rolex has the best customer service in the business, according to consumers, their in-store experience leaves something to the imagination. This is most likely because they’re stocked within third party shops, so the in-store experience is out of the luxury watchmaker’s control. In this category they scored a middle-of-the-road 86.3%.

The crown for best in-store experience goes to Harrods, who scored 89.3%. At the other end of the scale sits Apple with the lowest score, 82.8%, though this is hardly disastrous. That said, despite their helpful Genius Bars and owning some of the biggest physical shops in the UK (their Covent Garden store employs 300 people), consumers up and down the country want better in-store experience from the technology brand.

8. Online presence and website

While Harrods does well for physical service, their online offering receives the lowest score of the top 10. For their online presence and website Harrods received a weighted ranking of just 63.3%.

Meanwhile, though Apple scores poorly for offline service, they top the table as having the best online presence and website, with a weighted ranking of 87.5%.

Luxury Index leaders

The overall leaders of the Q1 Luxury Brand Index were as follows (ranked by Total Brand Equity):

You can see how this looks plotted as both Total Brand Equity (TBE) and against the matrix of ‘well known and well liked.’

Key takeaways

The luxury industry means more than just silk blouses and leather brogues to a lot of people; everything from gold wristwatches, to the phone in their back pocket, to the food they eat and the gifts they give can have a touch of luxury. This expansive market means there’s lots of room for seasonal trends and disruption amongst the top 10 brands.

While seven brands held on to a top spot from Q4 2018 to Q1 2019, the introduction of a chocolatier and a technology company indicates that everyday luxury might be just as important and memorable to consumers as a one-off purchase from Chanel or Rolex.

Net Promoter Scores have shifted significantly from the preceding three months, with Gucci dipping into minus figures, and Christian Dior rising to positive figures.

There were also shifts within Purchase Intent from Q4 2018, but to a lesser extent. Marks & Spencer rose in this domain, whereas Armani suffered a dip of 20%.

The brand with the highest Purchase Intent score, Apple, scored highly amongst the eight key characteristics for their trendsetting ability and their online presence. Meanwhile, the lowest Purchase Intent score went to Harrods, who were ranked highly for their ethics and in-store experience. This goes some way to evidencing the trend towards eCommerce for luxury brands. It’s a sector that has remained firmly rooted in the physical space, but Apple’s success indicates that the future of the luxury sector is almost certainly online.

Conclusion

The luxury industry is large enough to accomodate all nature of products and brands, though it can be difficult to win a slice of this lucrative market over the critical Christmas period with the sheer breadth of products for sale.

The success of Marks & Spencer’s advertising over the period secured it joint 2nd position amongst the top 10 brands, while Apple, also known for their marketing efforts, entered the leaderboard in joint 5th place.

Rolls Royce and Burberry both dropped out of the leaderboard this quarter, showing that even heritage luxury brands can’t rely on this in order to stick in consumers’ minds from one quarter to the next. The industry needs to remain on its toes and each brand must track their success over time to remain relevant and well-liked.  

Measuring these key metrics (Unprompted Recall, NPS, Purchase Intent and so on) will help your luxury brand to figure out which aspects of your strategy need to be worked on so you can stay (or break into) the top echelons.

And if your brand wasn’t featured, we can help you run a tailored brand equity matrix specific to your category or target consumer (e.g. just for luxury fashion, or just for luxury cars).

Get in touch with us to learn more.