Luxury brands are missing out on ethnic minority customers

    Posted on 21-Nov-2019 14:12:45

    Ethnic minority communities are redefining the codes of the luxury sector: the future now trumps the past, ostentatious consumption appeals more than old-fashioned discretion, informality supersedes stuffiness and celebrations of individuality matter more than tradition. 

    Luxury

    High-end department store attendants know better than to dismiss the older White gentleman who’s dressed in somewhat casual, even scruffy, clothing. When it comes to ‘high net worth’ white English people, luxury brand customer service reps often hold back on making assumptions and assessments based on dress codes and looks, as there really is no telling how wealthy that customer might be. 

    However, research we conducted with luxury car retailers revealed that brand representatives are much more likely to under-serve and even ignore high-earning ethnic minority individuals. During shop-alongs with potential ethnic minority customers, we observed a very different level of service and hospitality for people of colour compared to that enjoyed by their White counterparts.

    If agents, working on commission and motivated to produce high sales numbers, regularly miss out on a big sales opportunity as a result of profiling and misguided assumptions, it’s easy to imagine the cumulative effect this has on the business as a whole. Each time a potential customer from an ethnic minority background is turned away, and turned off from the brand, money is lost.  The potential of recapturing this money also diminishes as customers share their treatment and experience with peers and relatives: negative word of mouth will spread about the brand and amplify the consequences of that failed interaction in a wider community. 

    This is clearly something to be avoided. However, knowledge is power and we are here to give you the knowledge you need to be aware of, and tackle, the assumptions that could be harming your business. So...

    What are the assumptions about consumers from ethnic backgrounds?

    1 - ‘They don’t have enough money’ 

    The most persistent assumption among some luxury brands is that these audiences cannot afford high-end products.

    In reality, there are significant pockets of wealth within minority ethnic communities that are being overlooked by the luxury sector. According to ONS data on household income by ethnic group, 42% of Indian households have a weekly income of over £1000, compared to only 26% of White British households. This figure is 29% for Chinese households, and 28% for other Asian households. Even in places where an ethnic minority is doing less well, as a whole group, than the white British population (e.g. black Caribbean, black African or Pakistani communities) there are still sub-groups who can afford luxury and are keen to be perceived as ‘high-end’ by brands. Clearly, luxury brands need to update their perceptions of who is wealthy and who is not. 

    2 - ‘They will cheapen the brand’

    There seems to be a worry in the luxury sector that diversifying the customer base could somehow ‘cheapen their brand’. It is assumed that luxury should be associated with heritage and that it should be the exclusive preserve of white people. 

    However, splendor and magnificence exist in different shapes and forms around the world. There are also other definitions of luxury which are much more modern and appealing to diverse audiences, such as associations with the finest design and latest technology. 

    Moreover, when a luxury brand is successful at targeting ethnic minority audiences, we find that new life can be breathed into a stuffy old brand that may have been repeating campaigns for decades. It makes the brand feel more relevant, more modern and dynamic, as it broadens its appeal; not just among ethnic minority consumers but also among liberal, cosmopolitan, under-50 year olds, whatever their background.  

    3 - ‘There are not enough people of diverse backgrounds to justify the time and money’

    Another big misconception is that it is not worth trying to cater to such a niche market. Actually, the ethnic minority population is a large, growing and increasingly monied group. It made up 9% of the general population in 2001, 14% in 2011 and it is projected to increase to some 30% by 2051. In 2012, the ethnic minority spending power was estimated at £300 billion - which is bound to have increased since then.

    People also spend their money differently. For example, black women spend six times more on hair and beauty than do white women. This partly explains the phenomenal success of Rihanna’s Fenty Beauty. Named as Time’s “invention of the year”, the brand generated $570 million in just 15 months by specifically targeting a diverse group of women that were so often ignored by mainstream brands. This success story should put to bed once and for all the idea that ethnic minority women are ‘not worth it’.  

    Importantly, the 2011 Census showed that ethnic minority communities are, on average, almost a decade younger than White British communities. This is hugely relevant since, according to Bain & Company, in 2018 Millenials and Gen Z contributed 100% to total luxury market growth, compared with 85% in 2017. 

    What’s the real picture?

    An orientation towards the future, not the past

    We discussed the mistaken assumption that ethnic minority communities do not have the money to spend on luxury products. In fact, many ethnic minority households simply have very different attitudes towards wealth, success and celebration.

    For the luxury market’s traditional white customer base, luxury tends to be associated with the past, with tradition and heritage. Assets might be owned - almost hidden - in the form of art, wine, property or land. Traditional craftsmanship is highly valued.

    For people from ethnic minority communities in the UK, the fundamental orientation is more towards the future. While the past can feel like a stuffy place that excludes them, they can belong in the future. The traditions and heritage celebrated by the luxury industry are usually not theirs (indeed, anything that smacks of the ‘British Empire’ will be off-putting to most). They are a much younger and entrepreneurial group who are early adopters of all things ‘tech’.

    An ostentatious, celebratory attitude to luxury 

    While reserve, stiff upper lips and discretion are valued among the old elites, for successful immigrant communities, wealth is something to be celebrated, enjoyed and displayed in the here and now. It is more about an experience, ideally shared with loved ones. What traditional white British people might regard as ostentatious, or even tacky, is simply more celebratory and open.

    If you’ve ever been to an Indian, Pakistani, Nigerian or Israeli wedding, you will have experienced the celebratory attitude towards enjoyment, indulging in luxury, and showcasing wealth and success to the community. A public display of wealth at these functions feels like a joyful expression of togetherness and success. 

    The brands that are purchased for these occasions become associated with celebration and family occasions that will be remembered for years to come. The ones that get it right will be held close to the hearts of their new audiences, and enjoy a celebrated status. Given the importance of word of mouth within ethnic minority communities, these events and experiences can translate into precious free publicity and brand advocacy.  

    Conclusion

    In some ways, ethnic minority communities are redefining the codes of the luxury sector: the future now trumps the past, ostentatious consumption appeals more than old-fashioned discretion, informality supersedes stuffiness and celebrations of individuality matter more than tradition. 

    High-end brands need to pay attention to this massive shift, or become irrelevant. They need to tackle the biases - conscious or otherwise - that lead to them missing out on some new audiences. 

    Those brands that do recognise the diversity of wealthy customers spread a positive message of inclusion and respect. It says that success and wealth are no longer solely the preserve of the traditional, white, ‘old money’ seats of power. It recognises the success and hard work of newly-established communities and it begins to chip away at stereotypes. 

     

    Written by Hirra Khan Adeogun

    Topics: Diversity, Inclusion, Marketing, Stereotyping

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