As Luxury Brands Embrace Data, Will They Use It Like a Butler or a Stalker?

This article has been originally published in Adweek on November 11th.

The secret to the luxury dollar today is what consumers do, not what they own. This shift in luxury spending makes brands reconsider their own articulation of value and the core they built their business around.

The newcomers like Farfetch, Uber and Net-a-Porter force luxury brands to shift their focus from selling products to providing services and experiences in order to remain competitive in consumers’ minds. Spoiled by seamlessness, convenience and frictionless experiences that these upstarts provide, consumers expect the same thing from their legacy brands.

As they reorient their business toward service and experience, luxury brands, who suddenly have access to an intoxicating abundance of data, need to learn to use this information like butlers and not stalkers.

Seamlessness, convenience and frictionless experiences come at a price. They require customers to share their personal data, and a lot of it. Luxury brands that manage to collect and capitalize on this wealth of data to offer white-glove, data-based, impeccable service without scaring off their fickle customers will come out as winners.

Currently, customers are willing to give their data in exchange for superb service. “Everyone will expect to be tracked and monitored,” observes Google chief economist Hal Varian. “The advantages, in terms of convenience, safety, and services, will be so great.”

Some of the advantages are undeniable. Ringly, a fashion technology startup that creates smart jewelry and accessories, promises its customers effortless connection to the “things that matter most.” Via discreet alerts, Ringly accessories keep their wearers informed on everything from whether a boss has called to the user’s current calorie count.

Ringly is built around the premise that technology is most useful when it is invisible. Net-a-Porter, Rent-the-Runway and Uber share a similar belief. The “press the button, and we do the rest” mantra penetrates most of today’s fastest growing luxury upstarts, from mobile luxury shopping application Spring to high-end, short-term apartment rental service One Fine Stay. With a swipe on our smartphones, we can purchase the latest coveted bag or plan a weekend in Paris.

These modern brands built their entire businesses around customer information. They heavily invested in data mining and analytics, which allow them to better target, service and convert their customers.

Yoox has so much data on customer behavior that it can confidently claim that Germans are the biggest returners of merchandise and that the bulk of online shopping happens on Monday mornings, with customers battling their beginning-of-the-week slump by treating themselves to something pricey.

Gabrielle de Papp, svp of business and brand development at Farfetch, recently told me that, thanks to data, they discovered that 40 percent of their customers are men and managed to select relevant boutiques accordingly.

The most innovative business models and the fastest-growing luxury players today revolve around customer data.

The question is whether the butler-like behavior of a modern luxury brand provides a sustainable competitive advantage. Commoditization of privacy easily leads to a situation where it becomes a scarce resource. Scarce resources define luxury.

Once consumers realize that they are the true owners of this luxury, the business models and value propositions of luxury brands will have to evolve together with it.

Apple, a brand increasingly identified with modern luxury, is already a step ahead in this evolution. This company is quick to point out that it doesn’t monetize the information stored on its customers’ iPhones and iClouds. For Apple, privacy protection is the future of technology.

Others agree. Pew’s report on the future of Internet privacy cites experts who predict that an increasing number of people will pay for services that provide privacy. This pay model will in turn create a new economic divide, between privacy rich and privacy poor.

Luxury brands today are outcompeting one another in creating tailored, handmade, personal experiences that their customers will find easy to identify and identify with.

Fast growth and quick success of luxury startups led us to believe that the future of these unique, individual experiences intrinsically involves relinquishing privacy. It made us think that the only way to access a unique and coveted lifestyle is to trade in our information.

The opposite is true. We should look for the future of luxury in its past.

The world of old luxury involved an actual person delivering impeccable service, and modern luxury should take a cue. This means making the “last mile” as human as possible.

The ultimate luxury of both the past and the future is human interaction and all the professional secrecy that goes with it.