The dynamics of today’s luxury market can be defined by 3 trends:
1. Globalization – in essence, every luxury brand must be a global brand.
2. Consolidation – which translates to luxury conglomerates supporting a market that is highly fragmented, oversaturated, and fiercely competitive.
3. Diversification – luxury brands are under tremendous pressure - threatened by mid-tier brands. Across all categories, consumers’ expectations have increased as technology has enabled mass production of higher quality, better designed products
Never has packaging design played such an important role in the success of global brands as it does today. In the current marketplace, luxury brands face increased challenges to stay unique, aspirational, exclusive and coveted.
Looking ahead, perhaps the most significant impact on luxury brands is the geographical & demographic shift in the luxury consumer.
The key countries that will have phenomenal influence on the future of personal care products and set new expectations on packaging are the BRICs: Brazil, Russia, India and China are the future. In the next 10 years, this group of countries will take over as the leading consumers of beauty and personal care brands.
Brazil has the fifth largest population in the world and it is estimated that compound annual growth in the cosmetic and personal care market from 2011-2014 will be over 13%. What is interesting about Brazil is the dramatic change in purchasing by multiple consumer segments: lower middle class, and upper middle class and upper class.
Russia, one of the largest consumer markets in Europe, continues to grow despite the financial downturn since 2008.
And then there are India and China, the two largest populations in the world – both witnessing unprecedented growth in the cosmetics sector driven by improved purchasing power and rising fashion consciousness of both the Indian and Chinese populations. Expectations for India are a 15% compound average growth in the next two years on a population base of 1.2 billion.
But the country that will have the single greatest influence on our perspective of luxury design in the future is China. It is imperative for all luxury brand builders to take a more comprehensive look at the new luxury China consumer. Let me share with you a few enlightening statistics:
• It is estimated that by 2013, China will be the world’s largest consumer market of luxury goods (overtaking Japan & the US).
• By 2020 China will account for 45% of total global sales of luxury goods.
• There are over 115 billionaires (in US $) second only to the US.
Already today in 2011, China has outpaced the rest of the world in areas of consuming luxury:
• Largest consumer of diamonds
• Shanghai Car show has become as important as NYC Javits Center show
And, perhaps the most poignant statistic of all:
• In the past 20 years, car ownership went from 1,300 in the entire nation to 3 million in Beijing alone.
No longer is China’s luxury consumer just about key cities (Shanghai, Beijing, Guangzhou). It is the 2nd and 3rd tier cities in China that represent growth. The sheer population of these cities is why China will lead as the tastemakers and decision makers that determine the success of luxury brands of the future.
In addition to the overall geographic shift in consumers led by the BRIC countries, the demographic shift within China is significant and as such, China represents one of the most dynamic cosmetics and toiletries markets in the world.
In 10 years, China will add over 270 million consumers – this is almost the size of the entire US.
The next generation will open the door for profound shift in consumerism. A fundamental transfer from communism to capitalism to consumerism will unleash a new type of consumer with advanced preferences towards brands, products and services.
With 300 million adults in China under age 30, and the largest gender imbalance in the world—125 men for every 100 women—connecting with the multi types of male and female Chinese consumers and savvy consumers from all BRIC countries will become the key to success for luxury brands.
They will dictate the future of the luxury industry and the role of design in packaging. In fact, for these brand conscious consumers, packaging is as important as product in securing brand loyalty.
What will this mean for the way we package our brands?
What will global beauty brands look like in the future?
Where will they be made?
Many of us are used to thinking of China as the supplier amd manufacturers of goods and packaging – but in the future their key role will be consumers and creators of the brands they consume. New younger consumers will dictate what is cool and what is luxury.
Perhaps the most important trend for us in the cosmetic and packaging world to remember is that Chinese want their own luxury brands – not imports. In the past two years, our firm has worked with numerous Chinese firms that want to create their own luxury brands. They desire the design aesthetic from Europe and the knowledge of American business for branding and strategy.
More than ever we all must think with a global mindset, companies need to bring design into the process early and listen to the new luxury consumers to create brand assets that are unique and inspirational.
To be successful, we all must be prepared to observe and adapt to create icons that appeal to the aspirations of these new consumers. Our responsibility as designers and innovators is to adjust with the times to create and please the changing luxury consumer.
About the Author
Jana Reichle is the CMO of Berard Associates. An accomplished executive with strong international marketing and strategic branding experience, her career extends over 20 years working in the beauty industry and consulting industry for brands such as Avon, Lancome, and Yves Saint Laurent.
Berard Associates is a global strategic branding and design firm with clients ranging from entrepreneurs to Fortune 500 companies. Berard Associates has created iconic identities and custom luxury packaging for brands such as Laura Mercier, Frederic Fekkai, Godiva Chocoiste, Temple St Clair jewelry, Mark cosmetics as well as several beauty brands for The Procter and Gamble Company. Email: jana.reichle@ berarddesign.com. Tel: 212-925-5055. Website: www.berardassociates.com