Brands will flock around the VIC (Very Important Customer)

As luxury brands expand their appeal to an ever-wider customer base, they face the thorny problem of how to keep their highest spenders feeling special. An increase in affordable, accessible products, as well as growing experiential offerings such as restaurants by Dior, hotels by Bulgari and a chocolate shop by Louis Vuitton, provides customers with a growing number of ways to connect with what was once only aspirational. In 2023, brands will place greater emphasis on hyper-exclusive propositions to retain the loyalty of their VICs: very important customers.

Forecast to be one of the most resilient sectors amid global recession fears, the luxury market is expected to grow between 3% and 8% next year. Among the factors fuelling its growth is a record 218,200 people now classed as ultra-high-net-worth individuals. But there’s more to luxury’s relative boom than a “Covid-19 episode” that facilitated the rich getting richer, says managing director of the International Association of Department Stores - IADS , Selvane Mohandas du Ménil , who has held positions at several luxury fashion houses in his career, including 路易·威登 , Saint Laurent and Sonia Rykiel . “It is also the result of a strategy carefully crafted over the years,” he says. “Expansion is based on a combination of, first, mainstream or permanent products more or less available to all, second, aspirational experiences generating additional streams of revenues, and third, super exclusive products only available to the (very) rich and (not willing to be publicly) famous.”

This strategy has played its part in redefining what brands’ highest spending customers now perceive as luxury. One person who has kept an especially close tab on this change is Christopher-Jacques Morency . Before becoming chief brand officer of the relatively new luxury group Vanguards , whose LinkedIn tagline reads: “leading where luxury goes next”, Morency was on the frontlines of luxury fashion reporting at Highsnobiety and The Business of Fashion . He says that though items like Gucci loafers and Louis Vuitton handbags are still luxury by virtue of price point, “those wanting the scarcity and exclusivity that once was connected with these items simply want products and experiences that are even more exclusive by today's standards.”

What exactly do these products and experiences look like? The elevated perks bestowed on VICs are largely kept schtum by both parties, but Morency says they range from private dinners and parties to exclusive shopping events, 24-hour-a-day customer support, elaborate Christmas gifts, celebrity introductions and fashion show priority seats. “It's these clients' spend that often makes up a big chunk of a luxury brand's overall revenue globally,” he says.?

Seeing the potential to onboard more clients into this category, the confidentiality of these benefits is likely on the cusp of changing, with Morency suggesting brands may now start to drip-feed more information on their VIC offering. “While these perks have long been bestowed on the few, I predict that in the next 12 months they will become more public,” says Morency. “Brands will want to show off what they're doing for VICs as a driver of heightened exclusivity and to attract a new clientele that wants to buy upwards.”

One way these perks are already becoming more visible is via private boutiques. Asia’s unique shopping culture and high potential for luxury growth have made it the perfect testing ground for ultra-exclusive physical spaces. Fashion house Chanel has unveiled plans to open private boutiques in major Asian shopping hubs next year, while British luxury retailer Harrods already operates "Residence" private shopping suites in Shanghai and Beijing. Such ultra-exclusive stores make ideal venues for industry events and special product presentations, and they double as elite social clubs.?

"These are closed spaces where brands can inject whatever cultural content they want their super spenders to know, allowing them to form very special relationships," says Mohandas du Ménil. "It’s almost engineering a whole new social sphere. If you're an ultra-high-net-worth individual living somewhere where only 10 people are part of a club, you’ll want to be part of it, so you’ll spend more to gain access."?

What’s interesting about the concept is that it’s very analogue in an increasingly digital world, notes Mohandas du Ménil. So where exactly do VICs factor into the other big idea engulfing the luxury sector these days: Web3? According to Morency, this is a connection luxury brands haven’t quite mastered yet. “To this day, I have seen no fashion brand properly execute a loyalty or membership programme,” he says. “Some have experimented with NFTs for creative purposes, leaving out the actual power of the technology which is membership and ownership. Imagine a brand like Balenciaga issuing 10,000 NFTs or "Balenciaga Coins" that both look incredible, but more importantly give access. Those coins would sell for six figures each.”

Regardless of whether brands can align their VIC offering with the digital status quo or not, something all will have to keep in mind is how new offerings for a select few could negatively impact the rest of its customer base. “Luxury has long been known for selling goods at unjustified markups. We pay for the dream, the aesthetic, the craft, but mostly for the status the goods purchased will signal to others,” says Morency. “Yet at one point, prices will become so high, most of us will no longer be able to justify the return on investment. It will cause a disparity between those for whom cost isn't a limitation and the rest of us. Brands need to watch out that they don't end up confusing alienation for exclusivity.”?

For now, as a select few VICs in Asia enjoy the elevated exclusivity of emerging private boutiques, alienating customers feels like a problem for luxury’s future. But it won’t be long before the concept extends beyond the borders of China and Singapore for one simple reason: jet-setting VICs don’t just shop in a single country. According to Mohandas du Ménil, If they receive exclusive treatment in one location, they'll expect the retailer to provide it wherever they are in the world – a caveat that’s sure to secure their ongoing importance in the sector.

This article is part of LinkedIn News UK’s Big Ideas 2023. What’s your prediction for the coming year? Share your thoughts with #BigIdeas2023.

Reported and proofread by: Aaron Toumazou

Edited by: Emma Hudson

Creator Managers: Patrick Shea-Stamford , Sarah Ohlson

Managing Editor: Emily Spaven

Special Projects Leads:?Marie Malzac?(EMEA),?Michele Pierri?(International)

Regional Lead:?Julien Wettstein

International Executive Editor:?Sandrine Chauvin