As you can tell, I'm learning in public at the moment. Which is a vulnerable thing to do, because you frequently look like an idiot. But I've learned not to care. Not least because:
If VC has taught me one thing, it is to always be acutely aware of the tremendous amount of sh*t I don’t know.— Max Niederhofer 🤟🏻 (@maxniederhofer) May 8, 2018
In starting to learn about luxury, I had a delightful lunch yesterday with Anton Jurina, founder of Armed Angels, who is now running Maison Héroïne, a line of functional and beautiful bags for women. He recommended The Luxury Strategy as a good intro read. As I was discussing with my wife this morning, there's a real question whether we should be thinking about it as investing in luxury at all. Perhaps just the "modern luxury" as defined by Lean Luxe.
In that respect, I particularly enjoyed the extremely different perspectives that people had on Facebook. Lover of all things beautiful Charles Nouÿrit, founder of SmartPay.me, said "Hermès has always been there and will remain a luxury brand for ever", stressing the importance of status signaling and identity seeking that is the traditional domain of luxury brands. Alexandra Depledge, who I've wanted to back for a while but who seems to have gone off VC totally after her experience founding and selling Hassle (!), put it as succinctly as I would have liked to have done it:
"Unless you are accessible and authentic today, you are writing your own demise."
I mean, we should just print and frame that as part of our direct-to-consumer/DNVB investment thesis. We're seeing it first with "millenial" brands, but the older crowd will catch on soon. Just look at this chart by McKinsey - there is no more discernable difference between the "silver surfers" we invested in at Audibene and the rest of the market. Except for social media:
80% of luxury sales are digitally influenced. By 2025, a good 20% of the luxury market ($74 billion) will be online. And the digital touchpoints are growing: already consumers *are* the channel: the volume of chatter dwarves the brands' official communications.
Chanel has 700 official posts on Instagram, but 48 million hashtag mentions (Source: Instagram 2017). It's silly to think they can continue controlling the conversation in any meaningful way. The Cluetrain has well and truly left the station.
Right now our thesis is that the trends we see in the broader "new consumer economy" are as relevant for luxury as they are for mass market or premium goods:
1. Consumer preference is fragmenting, with clear preference emerging for smaller and local.
2. Distrust of big brands is growing, with millenial consumers actively distrusting scale and seeking out purpose-led brands.
3. Online has killed the moat of shelf space, with direct-to-consumer distribution backed by an online conversation dramatically reducing the costs of starting out (and hence the "Cambrian explosion").
4. Continued hyper-growth of natural, organic, wellness, eco-conscious, meaning-making brands.
If you're founding a direct-to-consumer DNVB along those lines, we'd love to chat. email@example.com will find me. I'd love to keep learning.