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A Conversation With... Michel Gutsatz and Gilles Auguste

Michel Gutsatz and Gilles Auguste talk about their recently published book Luxury Talent Management and the issues and opportunities that resonate in the luxury industry today.

What's different about managing luxury products or brands?

Luxury brands have long been considered as somewhat “special” and different from other brands. Very few books have been written about them until recently. But now, all of a sudden, people realize that their branding strategies are becoming models to be copied or that inspire major brands (like Nespresso or even Apple for instance).

Boards of major brands hire former luxury brand executives or implement strategies where image control, premium pricing, and controlled distribution are key elements. Nevertheless, if there are two things that are still different about luxury brands these are: the focus on creation and the very high profitability of the major actors.

How did you go about selecting the case studies included in Luxury Talent Management? Which one offers the most pertinent lessons to you?

We have selected our case studies based on our intimate knowledge of the industry. Our purpose is twofold:

• To highlight, through real brand examples, what the critical luxury specificities are: the importance of the luxury brand image, the role and mission of a successful leadership duo (as in the Dior case and in the Shangxia case), the critical role of creation (as in the Tom Ford case), etc.

The “Cartier Odyssey” case study, for instance, is the perfect illustration of how and why Cartier’s communication is very consistent with its history and its heritage.

• To provide, using examples coming from a wide variety of luxury brands, key lessons about specific luxury challenges: learning the intricacies of family businesses, the issues around the recruitment of a Brand Manager, the principles for building an in-house academy…

For instance the “A succession plan that fails in a family luxury business” case study is an example that points out the main pitfalls to keep in mind when dealing with a luxury family business.

We chose these case studies because they come from the “best in class” luxury and fashion brands; and when we cannot mention the brand name we crafted the case from multiple brands that have had to tackle similar issues.

We hope the readers can learn from each of them by understanding some of the fundamental luxury idiosyncrasies and by discovering appropriate tools that are very easy to use – because this book is also a real toolbox for executives in the luxury industry.

How does the digital environment and changing consumer behavior affect the luxury industry specifically?

Consumers have become ever more global in their luxury shopping attitudes thanks to their increasing mobility. Let’s focus on Chinese consumers: one-in-four global luxury consumers are now Chinese. They have an enormous impact at home and abroad representing 50 percent of the total luxury purchases in Asia and almost 30 percent on the European market. Chinese consumers are the most engaged on the web in the world (even above the Americans). Therefore to reach them, luxury brands have to devise innovative digital strategies.

More broadly we think that the digital challenge is a fantastic opportunity to build real time communication between luxury brands and their consumers. As a consequence, luxury brands are increasingly becoming luxury services companies that bring a wide variety of services to all these clients’ aspirations: Burberry is presenting itself today also as a “media content company”! We show in the book how some brands, such as Burberry or Net-A-Porter for example, are very innovative and ahead of the pack. And, why other more conservative European brands remain very cautious about the change of mindset this digital challenge means for them.

Our strong belief is that significant shifts to the luxury business model could be successfully addressed with a smart duo CEO/digital expert that will integrate traditional retail with digital channels (both in communication and distribution).

What competencies do individuals need in order to succeed in the luxury industry? How you can yourself apart and how can managers recognize the best talent?

To succeed in the luxury industry some specific core competencies and personal attributes are required: one has to find his/her way inside the company and fit in with the organizational brand culture (often that of family businesses), so as to act effectively.

The basic skills luxury brands are seeking are the following: brand DNA knowledge, an understanding of customer experience, and an ability to act as a “brand ambassador.” An international track record gained on a major emerging luxury market is a plus. In addition to these qualifications, others such as respect for the founder's vision and heritage, passion for creation, product curiosity, and respect for the craftsmanship experience are important.

We developed a wide range of management tools: a career in luxury test; a luxury competency model; and job descriptions for retail, management, and creative functions. We crafted them to help luxury managers and executives optimize their search of the particular competencies luxury brands need. The battle for talent is ongoing and is even getting tougher on emerging markets like China.

The luxury industry is expanding into emerging markets and is no longer purely concentrated in Europe and North America. What does a global luxury industry mean for Western luxury brands?

To be global means to offer to a large clientele the same product portfolio and the same superior services. To accomplish that, Western luxury brands which want to expand in emerging markets need to refine or to reinvent their business model. In other words, to lead their business development and profitability they have to bring a great attention to address very carefully the generational shift and the new market trends, while preserving their DNA: history, creation, heritage, craftsmanship experience, and specific “savoir faire.”

Addressing the generational shift means:

• Offering sophisticated and superior service to the Baby boomer and members of Generation X, who are the traditional core customers of Western luxury brands. This generation are always expecting: exclusivity, status, personal relationships, scarcity … and the new online services from their favorite luxury brands.

• Simultaneously luxury brands must innovate with relevant insight to attract younger generations (Y and Z) that are fond of “online services ” and are expecting new things from luxury brands: uniqueness, 24/7 availability (at a click), great experience in stores (e.g. digital screens, tablet catalogues … plus the traditional services).

This global challenge requires new luxury leader profiles able to balance traditional and digital organizational cultures to generate growth and profitability. He/she has to inspire the entire organization that will trust his/her vision of the future.

Do brands need to 'go global' and recruit employees across the world to infiltrate new markets?

Yes they do, because new markets such as China and India cannot be ignored by all luxury brands hoping to be global players. The major move we have witnessed these past 20 years is the globalization of luxury brands: even regional brands like Coach (once strong only on the US and the Japanese markets) are now going global.

The three big challenges for luxury brands are to tap into local entrepreneurs, to train employees at middle and junior levels (who have little experience as to how luxury brands operate), and to understand new market consumers and local trends.

Attract and retain new talent across the world supposes that luxury brands:

• Educate their employees on how to behave with luxury customers — the art of execution, the attention to detail, and human touch …
• Offer career path opportunities that allow them to grow regionally and internationally
• Provide fair reward systems

Our strong belief is that luxury brands need to create “leadership duos” e.g. to pair a local executive with an European/American business leader so that both can learn from each other while establishing the brand successfully in the new market. For Luxury Talent Management, we interviewed the duo that leads the Shangxia brand in China and we studied the Taiping Carpets case. Though quite different, these could be inspiring examples to replicate.

What key advice does Luxury Talent Mangement offer business professionals and how can this be applied?

We point out three key pieces of advice for luxury leaders and business professionals:

1. Talent management challenges should be addressed as a real strategic issue and a primary dimension of all business decisions to be made. We show in the book, through several examples, how delivering on recruiting, retention of key talents, managing succession planning, and developing leadership can generate revenue growth and achieve positive impact on the profit margin.

2. Investment in business education in order to prepare all their managers to better serve and retain their luxury consumers is a must. Our strong belief is to build in-house academies (or to partner with a business school) that will provide specific training and help strengthen the brand’s organizational culture. Having those that lead the brand on a daily basis involved in the teaching is a priority.

3. Luxury brands should deal with the digital age challenge with a positive mindset: the perspective to be in touch with their customers’ aspirations and particularly with the young generation should drive them. Never forget that the young affluent generation (most Chinese millionaires are under 40!) is internet-savvy and wishes a balanced mix between traditional forms of service and the instantaneous gratification of the web.

The luxury leaders and business professionals that are aware of these vital questions, widely analyzed and developed in our book, and are already committed to addressing them will definitely gain a tangible competitive advantage in the luxury industry.

We designed Luxury Talent Management to focus on these critical challenges. As a result, we illustrate each of these insights using industry best practices and we craft our management tools with the intent for them to be used with ease.