Why tomorrow’s luxury winners will prioritize human experiences
Download the full What The Future: Indulgence issueThe luxury business is dividing as consumers reject traditional exclusivity for dupes, secondhand and non-luxury alternatives that better serve their needs. Shoppers increasingly want authentic experiences and accessible entry points, so brands must adapt. Luxury marketing expert David Klingbeil thinks artificial intelligence offers an ally. He analyzed data for luxury brands at Google before teaching at New York University and founding Submarine.ai. He thinks that luxury’s deeply human craftsmanship and stories will give brands a unique edge as AI makes authenticity precious.
Kate MacArthur: What forces are changing how Americans make luxury purchases?
David Klingbeil: There has always been this dual aspect of the luxury market, which is that luxury is at the same time the ordinary of the extraordinary and the extraordinary of the ordinary. For the 1 percent of people who have financial wealth and cultural wealth, almost everything they buy is luxury.
But if the whole luxury market was only this 1 percent, it would be much smaller. Luxury has evolved over the last few decades into another part, which is the extraordinary of the ordinary. Today, a large number of people can afford some form of luxury.
MacArthur: How are small luxury purchases serving as gateway indulgences for Americans?
Klingbeil: One way is having more accessible products, so luxury brands can have a first touchpoint with the next generation. It's important to make sure that even though this younger consumer probably is going to be at a much lower price point, they still get an amazing experience that's going to make them want to be a client in the future. For instance, someone may never buy a couture jacket, but they can buy a couture lipstick as a birthday gift.
MacArthur: How do these tiered offerings shape the way traditional luxury buyers perceive brands?
Klingbeil: There is a limitation to this expansion strategy that's an existential risk for luxury. A brand can become too accessible by lowering the price more and more, losing control over distribution and design, and giving too many licenses. Then you enter what we call the ordinary of the ordinary. It's a very dangerous zone because you are not luxury anymore.
MacArthur: What does Gen Alpha’s interest in luxury brands, especially skin care and cosmetics, tell us?
Klingbeil: Younger consumers are specifically sensitive to the experience. When they go to a store, they want to have an experience, they want to be welcomed in a specific way. They're very sensitive to packaging. TikTok is full of unboxing experiences. They create those videos called ASMR that highlight the sensory experience of opening packaging. Luxury can offer an amazing experience to what we call the “happy few.” But we see other people, the “unhappy many,” who are waiting in line one hour to get the chance to enter the store or who've been on the waiting list to get a watch, and they will never get it because they don't know the right people, or they haven't purchased six other watches in the past. They’re posting on TikTok, having poor experiences and having a better experience with non-luxury brands that have learned from the luxury playbook.
Luxury has a unique card to play in this AI era, because luxury brands are the experts in creating products, content and stories that feel deeply human.”
MacArthur: How is dupe culture shaping how people buy luxury?
Klingbeil: We see this polarization of fragrance. On one end of the spectrum, you have dupes, and at the opposite end, you have ultra-niche perfumery.
MacArthur: How are Americans navigating their desire for luxury with wanting to share experiences on social media?
Klingbeil: There's one channel that is growing in luxury retail, especially online retailing, which is TikTok Shops. That's typical for the younger clientele, specifically for more accessible luxury and beauty.
MacArthur: In our survey, 73% of Americans agreed AI will make it impossible to tell fake goods from real goods. How will that impact luxury?
Klingbeil: There is a startup called Entrupy that uses image recognition to recognize fake handbags from real handbags. People are going to value authenticity more, and the human touch. That's why luxury has a unique card to play in this AI era, because luxury brands are the experts in creating products, content and stories that feel deeply human.
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