Innovation, alongside disruption are two of the most overused words in business at the moment. Like obscenity, many people have their own idea of what innovation is.
Judy Estrin wrote one of the best books about the subject and describes it in terms of hard and soft innovation.
Hard innovation is companies like Intel or Qualcomm at the cutting edge of computer science, materials science and physics
Soft innovation would be companies like Facebook or Yahoo!. Companies that might create new software but didn’t really add to the corpus of innovation
Silicon Valley has moved from hard to soft innovation as it moved away from actually making things. Santa Clara country no longer deserves its Silicon Valley appellation any more than it deserved the previous ‘garden of delights’ as the apricot orchards turned into factories, office campus buildings and suburbs. It’s probably no coincidence that that expertise has moved east to Taiwan due to globalisation.
It can also be more process orientated shaking up an industry. Years ago I worked at an agency at the time of writing is now called WE Worldwide. At the time the client base was predominantly in business technology, consumer technology and pharmaceutical clients.
The company was looking to build a dedicated presence in consumer marketing. One of the business executives brings along a new business opportunity. The company made fancy crisps (chips in the American parlance). They did so using a virtual model. Having private label manufacturers make to the snacks to their recipe and specification. This went down badly with one of the agency’s founders saying ‘I don’t see what’s innovative about that’. She’d worked exclusively in the IT space and thought any software widget was an innovation. She couldn’t appreciate how this start-ups approach challenged the likes of P&G or Kraft Foods.
The story Dogfight tells feels much more recent than it now is almost two decades on, and yet so far away as smartphones are central to our lives. Back in the mid and late 2000s Silicon Valley based journalist Fred Vogelstein was writing for publications like Wired and Fortune at the time Apple launched the iPhone and Google launched Android. He had a front-row seat to the rivalry between the two brands.
And being on the ground in Silicon Valley would have meant that he would have had access to scuttlebutt given in confidence of anonymity as well as official media access.
But he’s probably best known for being part of the story itself: Fred Vogelstein wrote about his experiences with Microsoft’s PR machine for Wired back in 2007.
The fight
The Motorola ROKR E1 I was given, but eventually threw out.
Dogfight starts some time after Apple had withdrawn support for Motorola’s ROKR phone, which was able to sync with iTunes for music downloads. This particular track of Apple’s history isn’t really documented in Dogfight.
The book goes through two separate but entangled story strands. The first is Apple’s development of the Apple iPhone and iPad. At that time Apple in the space of a decade had gone from almost going under, to having the iPod and iTunes music store, together with a resuscitated computer range thanks to the iMac and Mac OS X.
The Google of this era was at its peak, search had become a monopoly and the company was overflowing with wondrous and useful web services from Google Earth to Google Reader. What was less apparent was that inside Google was chaos due to internal politics and massive expansion. Into this walked Andy Rubin who had built and designed the Danger Hiptop, sold exclusively on T-Mobile as the Sidekick.
https://flic.kr/p/ApZu
The Sidekick had been a text optimised mobile device. It featured email, instant messaging and SMS text messages. His new company Android had been acquired by Google to build a new type of smartphone that would continue to provide a mobile audience for Google services.
Dogfight’s style
Dogfight is undemanding to read but doesn’t give insight in the way that other works likeInsanely Great, Where Wizards Stay Up Late and Accidental Empires did. Part of this might be down to the highly orchestrated public relations campaigns happening at the time.
Instead Vogelstein documents developments, from video recordings, marketing materials and court documents. Some of the things covered were items that I had largely forgotten about like music labels launching albums as multimedia apps on the new iPhone ecosystem. This was doing in software with what the Claudia Schiffer Palm Vx or the U2 autograph edition iPod had previously done in hardware.
Google’s decision to ‘acquihire’ the Android team to build their mobile operating system, wasn’t examined in depth. Yet there are clear parallels with the Boca Raton team in IBM which came up with the IBM PC a quarter of a century earlier. Vogelstein kept to the facts.
It’s a workman-like if uninspiring document. And that mattered deeply to me. Part of the reason why I went into agency life was because I was inspired about the possibility of working the technology sector. This inspiration had been fired up by the chutzpah and pioneering spirit portrayed in older technology of history books. Some of them were flawed characters, but all of them had an energy and vibrancy to make the world a better place.
Wired magazine issues had a similar effect. Yet in Dogfight Vogelstein brought neither of those influences to the table, instead he was writing an account that will probably only read by academics citing his material as a contemporary account in a future thesis.
Dogfight isn’t the Liar’s Poker of the smartphone world, it isn’t even that illuminating about the nature of Silicon Valley.
This is probably why Vogelstein hasn’t had a book published since Dogfight – he’s a reporter, not a writer. You can find more book reviews here.
The IT director is seeing a return to power and its thanks to the power of hackers and AI. The smartphone, the resurgence of Apple and SaaS saw IT decisions become more organic thanks to increased access to online services that provided better features than traditional enterprise software companies and the rise of knowledge working. IT teams found management of mobile devices onerous and faced hostile users.
https://flic.kr/p/NGnpqN
Michiko Fukahori of the Japanese National Institute of Information and Communications Technology at ITU TSB – 8th Chief Technology Officers (CTO) Meeting
This meant that the IT director became less important in software marketing. A decade ago marketing had pivoted to a bottom up approach of ‘land and expand’. This drove the sales of Slack, Monday.com and MongoDB.
Two things impacted this bottom up approach to enterprise innovation:
Cybercrime: ransomware and supply chain attacks. Both are not new, ransomware can be traced back to 1989, with malware known as the AIDS trojan (this had much cultural resonance back then as a name). Supply chain attacks started happening in the 2010s with the Target data breach and by 2011, US politicians were considering it a security issue. Over COVID with the rise of remote working, the attacks increased. The risk put the IT director back in the firing line.
AI governance: generative AI systems learn from their training models and from user inputs, this led to a wide range of concerns from company intellectual property leaving via the AI system, or AI outputs based on intellectual property theft.
The most immediate impact of this is that the IT director is becoming a prized target on more technology marketers agendas again. This takes IT director focused marketing from back in the 1980s and the early 2000s with a top-down c-suite focus including the IT director. This implies that established brands like Microsoft and IBM will do better than buzzier startups. It also means I am less likely to see adverts for Monday.com in my YouTube feed over time.
This doesn’t mean that the IT director won’t be disrupted in other parts of his role as machine learning facilitates process automation in ways that are continuing to evolve.
Brands plan for a quiet Pride Month | News | Campaign Asia – The hesitation around Pride may also be related to executives’ increasing reluctance to speak out on social issues more broadly. Wolff pointed to Edelman’s Trust Barometer, which found that 87% of executives think taking a public stance on a social issue is riskier than staying silent. “Essentially, nine out of every 10 executives believe that the return on investment for their careers is not worth the support during this turbulent time,” said (Kate) Wolff. “This is clearly problematic for both the community and the progress we have made in recent years.”
Chinese Firms Are Investing Heavily in Whisky Market | Yicai Global – Although international liquor giants have developed the local whisky consumption market for many years, the market penetration rate of overseas spirits in China, including whisky, is only about 3 percent. This means domestic whisky producers will need to develop new consumption scenarios, Yang said. Whisky consumption in China centers mainly around nightclubs, gift-giving and tasting events held by affluent consumers, Yang noted, but in these scenarios, imported whisky brands with a long history tend to be more popularly accepted,, so it will be difficult for domestic rivals to compete. According to the latest report from alcohol market analysts IWSR, China’s whisky market was worth CNY5.5 billion (USD758 million) last year, having grown more than fourfold over the past 10 years. It is expected to reach CNY50 billion (USD6.9 billion) in the next five to 10 years.
Yoox Net-a-Porter exits China to focus on more profitable markets – Multi-brand luxury clothing sales platform Yoox Net-a-Porter is closing its China operations, this against a backdrop of other brands also pulling out of Chinese e-commerce including Marc Jacobs fragrances. The corporate line from Richemont was “in the context of a global Yoox Net-a-Porter plan aimed at focusing investments and resources on its core and more profitable geographies”.
Ignite the Scent: The Effectiveness of Implied Explosion in Perfume Ads | the Journal of Advertising Research – Scent is an important product attribute and an integral component of the consumption experience as consumers often want to perceive a product’s smell to make a well-informed purchase decision. It is difficult, however, to communicate the properties of a scent without the physical presence of odorants. Through five experiments conducted in a perfume-advertising context, our research shows that implied explosion, whether visually (e.g., a spritz blast) or semantically created, can increase perceived scent intensity, subsequently enhancing perceived scent persistence. It also found a positive effect of perceived scent persistence on purchase intention. In conclusion, the research suggests that implied explosion can be a powerful tool for advertisers to enhance scent perception, consequently boosting purchase intention.
Mat Baxter’s Huge turnaround job | Contagious – interesting perspective on his time at Huge. What I can’t square it all with is what we know about marketing science and declining effectiveness across digital media
On my LinkedIn, I couldn’t escape from the Cannes festival of advertising. Partly because one of the projects I had been involved in was a shortlisted entry. One of the most prominent films was Dramamine’s ‘The Last Barf Bag: A Tribute to a Cultural Icon’. It was notable because of its humour, which was part of this years theme across categories.
震災復興から生まれた刺し子プロジェクトをブランドに！ 15人のお母さんの挑戦！ – CAMPFIRE (キャンプファイヤー) – ancient Japanese craft – KUON and Sashiko Gals are part of a new generation of designers keeping the traditional Japanese technique of sashiko alive. And together, they are bringing the decorative style of stitching to our favorite sneakers (including techy Salomons!). Sashiko is a type of simple running stitch used in Japan for over a thousand years to reinforce fabrics. It’s typically done with a thick white thread on indigo fabric and made into intricate patterns.
Nationalism in Online Games During War by Eren Bilen, Nino Doghonadze, Robizon Khubulashvili, David Smerdon :: SSRN – We investigate how international conflicts impact the behavior of hostile nationals in online games. Utilizing data from the largest online chess platform, where players can see their opponents’ country flags, we observed behavioral responses based on the opponents’ nationality. Specifically, there is a notable decrease in the share of games played against hostile nationals, indicating a reluctance to engage. Additionally, players show different strategic adjustments: they opt for safer opening moves and exhibit higher persistence in games, evidenced by longer game durations and fewer resignations. This study provides unique insights into the impact of geopolitical conflicts on strategic interactions in an online setting, offering contributions to further understanding human behavior during international conflicts.
The West Coast’s Fanciest Stolen Bikes Are Getting Trafficked by One Mastermind in Jalisco, Mexico | WIRED – “Not so long ago, bike theft was a crime of opportunity—a snatch-and-grab, or someone applying a screwdriver to a flimsy lock. Those quaint days are over. Thieves now are more talented and brazen and prolific. They wield portable angle grinders and high-powered cordless screwdrivers. They scope neighborhoods in trucks equipped with ladders, to pluck fine bikes from second-story balconies. They’ll use your Strava feed to shadow you and your nice bike back to your home.” – not terribly surprising, you’ve seen the professionalisation and industrialisation in theft across sectors from shoplifting, car theft and watch thefts so this is continuing the trend.
OpenAI Just Gave Away the Entire Game – The Atlantic – The Scarlett Johansson debacle is a microcosm of AI’s raw deal: It’s happening, and you can’t stop it. This is important not from a technology point of view, but from the mindset of systemic sociopathy that now pervades Silicon Valley.
Apple Intelligence is Right On Time – Stratechery by Ben Thompson – Apple’s orientation towards prioritizing users over developers aligns nicely with its brand promise of privacy and security: Apple would prefer to deliver new features in an integrated fashion as a matter of course; making AI not just compelling but societally acceptable may require exactly that, which means that Apple is arriving on the AI scene just in time.
‘Rare, vintage, Y2K’: Online thrifters are flipping fast fashion. How long can it last? | Vogue Business – as secondhand shopping becomes increasingly commonplace, this latest outburst brings to light the subjectivity of resale. What determines an item’s worth, especially in an age of viral micro-trends and heavy nostalgia? Is it ethically moral to set an item that’s the product of fast fashion — long criticised for not paying workers fairly — at such a steep upcharge, and making profit from it? If someone is willing to pay, does any of it matter?
Perhaps due to the febrile nature of the times we live in, the tech-savvy community seems to have become aware of various trends, leading them to conclude that #theinternetisdying. This term itself is imprecise. The internet is a series of abstractions, ranging from physical infrastructure to software and functions upon which communication, messaging, video streaming, app data, transactions, and web pages operate.
https://flic.kr/p/2o6ZWYo
So technically, #theinternetisdying is actually #thewebisdying.
So why now?
I believe the most intriguing question regarding #theinternetisdying is this: why now? What has occurred is more about internet users awakening from their ‘comfort zone’ and abruptly realising how rapidly things have evolved? I believe that a number of inciting incidents are the cause of this sudden wakefulness:
Google as regressive ‘tax’ rather than marketing channel exposed.
Continued deterioration of Google web search.
Link rot.
Online media businesses look to make money by selling proprietary and user-generated content to LLMs as a revenue stream.
Realisation that a lot of web content is adapted or created using LLMs. The non-English web has been expanded by machine translation of English language content. Secondly, LLMs have been used to create a lot of good enough content in English for publications like Sports Illustrated.
The reality
In reality, what’s happened to the web as netizens knew it has happened over time. To use a vintage web phenomenon as an analogy. It’s like the vintage Joe Cartoon interactive Adobe Flash animation Frog in a Blender from the late 1990s.
A cartoon frog sits in a blender and admonishes the viewer, claiming that they wouldn’t dare to to blend him. The blender has settings from 1 to 10. 1 is mildly agitated water, 10 is instant blended frog. Silicon Valley has slowly upped the power of the blender and netizens realise that things have got weird.
Google tax bias
Google search has been on the shit list of websites as engineering documents from inside Google were leaked. They revealed some aspects about how search actually worked that Google had been denying for decades. A few of the key findings were:
Google search learns from ‘external devices’, so things like Chromecast dongles. Data from the Chrome browser is used in a similar manner, despite Google repeatedly claiming that it wasn’t in the past.
Google values quality, relevant sites, BUT, that value is caveated by restrictions it puts on small quality sites and the benefits it provides to large platforms detailed below.
Popular sites receive higher search levels through the ‘Navboost’ system. This reinforces platforms and established sites. Smaller sites would need to spend proportionately more on Google advertising to match their larger competitors traffic funnel. This designed imbalance is the digital equivalent of John Pierpoint Morgan’s nefarious involvement in railroad transportation, or the Vanderbilt and Rockefeller agreement on oil transport in the 19th century, which drove much of the subsequent anti-trust regulation in the US – this is the Google tax. It’s a regressive tax that is levied on smaller businesses and the ‘free web’.
It is deliberately set up to hold back small sites, many of whom have seen their traffic drop by up to 91 percent. This adversely affects sights that might have deep domain knowledge, specialist retailers and netizens who host personal sites and blogs like this one.
Google has even lied in court and in parliaments to hide these facts. Disclosure of these details have rippled through the search engine marketing industry and strongly discouraged numerous web businesses once the truth came out – for a lot of businesses #theinternetisdying.
For Google the timing couldn’t be worse:
It is seen to have dropped the ball on LLMs, despite having developed most of the key technology powering the likes of OpenAI and Anthrophic.
Google’s local business advertising for the likes of coffee shops or nail clinics have suffered due to the cost-of-living crisis post-COVID and consumer behaviour changes in various countries.
Traditional Google search advertisements for e-commerce are being rapidly eroded by retail media. That is ‘search style’ adverts on the likes of Amazon, Tesco and eBay.
Google is perceived as having set itself up as the ‘start page’ to the open web, while all the time sticking the proverbial knife in all of which adds an inevitability of the feeling of #theinternetisdying.
Decline of Google search
Back in June 2022, The Atlantic complained about the declining utility of Google. This echoed similar themes on discussions that had happened earlier in the year on Hacker News and Reddit. The consensus was that they searched Reddit, StackOverflow, Hacker News or StackExchange as it provided a richer, more relevant base of search results.
I have been using social bookmarking service Pinboard and photo service flickr for search for similar reasons for the past few decades.
Pinboard allows me to search 65,000+ web pages that I have found over that time for something that might be useful. My act of saving the page link in pinboard allowed me to categorise the page saved and implied a certain ‘good enough’ quality to it. I also get to search the public links of other netizens that do a similar thing. Pinboard is insufficiently popular to reward spammers, so the quality quotient is relatively high. Reddit offers a more expansive corpus of links and information, without the same level of quality control.
The reason why Google’s web search has degraded has its roots in Google’s pivot to mobile two decades ago. Google abandoned key areas of interest to web users:
Boolean search terms, which would have been harder to do on early mobile devices.
Blog search because it was non-mobile content.
Google News and RSS, in favour of nascent mobile social platforms that it lost out to.
And the list goes on, I am less sure why it has suddenly surfaced into the public consciousness now?
Link rot
A month or so go my friend Matt in his newsletter recommended a website that allowed you to search Google to find out the oldest mention of a term. So I put my own name in, and nothing came up prior to 2004.
https://flic.kr/p/9zYaf8
That meant all records of my early agency work had been expunged from the web. Work that included big brands:
BHP-Billiton
Ericsson
MTV Networks
Palm
Sony
Verizon
Alongside startup brands that fizzled out almost as quickly as they had started. Maybe there is still some traces locked somewhere in behind LexisNexis or Haymarket Media paywalled databases.
Author and veteran member of the digerati Cory Doctorow wrote about link rot this year, partly prompted by research from the Pew Research Center. Pew found that 38 percent of content surveyed disappeared over a ten-year period.
https://flic.kr/p/2pVpCmA
But link rot isn’t a new concern. Interest in link rot seems to have peaked 20 years ago.
https://flic.kr/p/2pVtKYk
Link rot is a subset of a wider concern called bit rot, where digital media degrades over time, or can no longer be read due to issues with software file compatibility. Bit rot as an issue was explored in a series of short stories by Canadian author Douglas Coupland in a book of the same name back in 2016.
Web of data to walled gardens
Of all #internetisdying factors, this one surprised me as much as link rot. Closing of Twitter API access was considered to be a defining moment for #theinternetisdying. However it fails to acknowledge that the high point of the web of data was web 2.0 and the comparatively free access to APIs. Facebook with its closed wall by design set the standard for subsequent services like TikTok and Instagram. Like link rot, the awareness timeline feels a decade too late. The closure of Google Reader is an equally big impact back in 2013, stopping mainstream adoption of RSS in its tracks.
LLMs
Journalist Steven Levy has been chronicling Silicon Valley for decades. He wrote a few of my favourite non-fiction books includingInsanely Great, Crypto and Hackers. In the summer of 2023, he wrote an article for Wired magazine: What OpenAI wants. This became a cover story for the September 2023 issue of the magazine under the header ‘Dear AI Overlords, Don’t Fuck This Up’. Less than a year later, the consensus from netizens seems to be that they already have.
https://flic.kr/p/2p8nXXY
Several things have happened, here are three of them:
Imitation became mainstreamed. OpenAI used a female voice that was apparently a copy of Scarlett Johansson’s voice due to Sam Altman’s infatuation with the premise of the Spike Jonze film Her. A Ukrainian YouTuber found her likeness being used as an avatar to sell Russian goods to Chinese consumers.
Misinformation had everything from the Pope wearing a designer down jacket and fake black supporters for presidential candidate Donald Trump.
Scott Galloway talked about ‘corporate ozempic’ where AI being good enough to reduce human tasks allowing for corporate headcounts to disappear. The CEO of Klarna freely admitted that they used AI to replace 700 employees in customer service roles. AdVon was used to write articles for SportsIllustrated driving anger and anxiety in readers and journalists.
Automation has eaten blue collar roles for decades, but it has taken the automation of white collar roles to create the panic and sense that #theinternetisdying and AI is killing it.
The Sky Is Falling In
As a child I fell in love the Asterix The Gaul books. In them was the Gaulish village chief Vitalstatistix – who is portrayed as mostly reasonable, well-informed, fearless, (comparatively) even-tempered and unambitious. Vitalstatistix was known for his irrational fear that the sky may fall on his head tomorrow. I was thinking about Vitalstatistix as I wrote this post on #theinternetisdying.
Back in the late 2000s, Dr Ira Wolfe wrote a book that discussed how online behaviour and Google services were creating irreparable damage in the workplace and beyond. His book was merely the latest in a series of panics about societal destruction:
Emmanuel Macron’s ‘decivilisation‘ facilitated through social media connections and content.
Video gaming had some negative effects associated with it in the 2010s according to academic research.
Television faced similar accusations, but there was only evidence of eye strain with long watching sessions.
Back in March 1997, Wired magazine had their own version of the #theinternetisdying, they believed that web browsing (or web surfing as it was termed back then) was about to be killed off by ‘push technology‘. This episode of The Computer Chronicles gives a good overview of push technology at the time.
You may already be using push technology without realising it, such as receiving mobile notifications for breaking news or localised weather alerts.
In conclusion, #theinternetisdying? really?
Previous technological shifts introduced new challenges, but we adapted and progressed. There’s no reason to think the current ‘#theinternetisdying’ phase is any different from those before. Perhaps in 15 years, I’ll be writing about how people feel the ‘metaverse’ has become closed or some other futuristic concern.
Mobilizing for Monuments is an interesting brand collaboration. Flickr was a natural partner for the the environmental charities due to it being the destination community for serious photographers. Rivian also makes sense, given that they make electric all-wheel drive vehicles – which presumably have a lower carbon footprint.
The Mobilizing for Monuments road trip film that highlights the benefits of the brands involved as well as the conservation messaging. Rivian gets to showcase its vehicles at a time when Tesla’s Cybertruck has a reputation that’s gone from a must-have vehicle to a dog’s dinner. The thing that I am most curious about Mobilizing for Monuments is where Flickr takes it next? Test
Ray Kurzweil expands on his idea of The Singularity
This MIT Initiative on the Digital Economy talk is very pertinent given the current debates that copywriters seem to be having around automation and LLMs. Mina Lee takes a social science approach to her investigation to LLMs including an evaluation model.
Reinvent the model
Swedish fashion retailer Lindex has looked at diversifying its models across its advertising and marketing materials. It is also re-examining beauty standards and the related pressures that its customers face. This a long term process that they have described as ‘Reinvent the Model‘.
Spotify (at least in the UK) have done a great job supporting strategists and planners with case studies and research reports over the years. This time they have collected a selection of UK-specific campaigns on their platform demonstrating its strengths.
Channel 4 Streamland—an in-app experience, which personalised show recommendations for Spotify users based on their listening habits.
Hyundai did a video takeover for their campaign to get consumers to pronounce their name authentically.
As a trend omakase has expanded geographically with Japanese cuisine. But it has also expanded in terms of categories covered.
Koreans have taken omakase and pushed it into other areas:
Coffee
Dessert tasting
Barbecue restaurants which are normally a local neighbourhood staple
Wine and champagne-tasting
So how can omakase and luxury come together in the future?
In order to understand how omakase and luxury in the future it is worthwhile paying a good deal of attention to the pressures that the luxury industry is currently under.
Luxury is under pressure
Undoing the mistakes of the past
Luxury has expanded to be the size of industry it currently is due to ‘massification’ by most of the maisons. The exceptions to this would be the likes of Hermés.
Massification
Massification means lowering quality, using globalisation in the supply chain as well as the retail network to manufacture products cheaper. Massification occurred over a three decade period and was covered extensively by former fashion editor Dana Thomas in her book Deluxe.
Around about 2014, Gucci led the way for luxury brands to do streetwear, leading to a more accessible luxury product. Louis Vuitton did the archetypical collection with its 2017 Supreme collaboration.
Contrary to what most people believe luxury is aimed at the middle classes rather than the wealthy. But targeting middle class customers rather than the wealthy poses a number of problems:
Increased capital outlay due to the scale required.
Scale brings challenges in terms of supply chain management and consistency of customer experience. Greater control can be obtained by vertical integration within the supply chain and owning the retail channels. But all of this requires greater expertise and management oversight.
Increased economic sensitivity to shocks such as interest rate and cost of living rises.
Increased risk of devalued stock during an economic downturn. Gucci earnings were down 20 percent alone in Q1, 2024.
Bigger might not always be better over a longer view.
Secondary markets
Secondary markets have been both a boon and a bane for the luxury sector. At one time pre-owned was seen as an ‘entry-level’ product. I bought my first nice watch secondhand once it had depreciated. It was often said that the best entry-level Porsche was a secondhand one.
But gone are the days when you may buy a pre-owned Louis Vuitton purse on a second hand market stall in Paris. Now that will be on Vinted, Vestaire or some other platform.
Secondary market inflated pricing affected luxury businesses in a number of ways
You would be interviewed to go on the waiting list for a Porsche or a Rolex.
Authorised dealers became order takers and dealer customer service slipped.
Your purchasing history would acquire you the rights to buy a Hermés bag over time.
Luxury groups extended their businesses into the pre-owned market. LVMH owned part of secondhand watch retailer Hodinkee. Richemont owned Watchfinder and Yoox-Net-a-Porter who sold a mix of new lines and vintage preowned items. Rolex rolled out its ‘CPO’ programme selling inspected pre-owned Rolex watches through its authorised dealer network.
Things looked really good for the luxury industry, they managed to managed to scale, to a point that LVMH is one of the largest companies in the world:
Massification through global manufacturing supply chains.
Keeping margins high, while letting quality go low.
Address a rising middle class in China, Korea, Japan, the Gulf countries and Russia to counteract the hollowing out of the middle class in the US and western Europe.
Maximising margins through controlling costs via vertical integration up and down the supply chain, from raw materials to retail.
Market change
A few things underpinned the craziness of COVID:
Money was put in consumer pockets, for which they had few outlets.
Supply chains were disrupted as factories closed down or pivoted to manufacturing essential products. For instances Perfums Christian Dior made hand sanitiser for hospitals for free.
A Forrester effect (also known as a bull whip effect) resulted, driving inflation that the world’s economies are coming to terms with now. Secondary effects of this event were the increased interest rates used to reduce demand driven inflation.
Other secondary effects include increased crime levels. London has gone from a luxury shoppers paradise, to having a global reputation amongst elites of being plagued by violent watch and bag robberies. COVID-19 isn’t the only driver of this crime wave, but is a contributing factor.
It has also had a catalysing effect on reducing globalisation to increase national resilience.
Consumers know that a good deal of luxury goods don’t match up with the European artisan heritage story that brands try to sell them. Experts like William Lasry has made public which brands make what kind of products where. Luxury brands often make in places like China due to capability and scale – similar reasons to why Apple products are designed in California and assembled in China. (Seriously, check out William Lasry’s channels, I love some of his visits to high-end Japanese manufacturers).
China
China has been a key focus for luxury brand, but it has changed in a number of different ways:
Chinese consumers have changed in their confidence of native brands and have a lower opinion of many foreign brands. This is partly down to a change in attitudes called guo chao. Guo chao can be traced back to the increased confidence in the run up to the 2008 olympics in Beijing. This was partly fuelled by a series of essays published in 1996 by the likes of academic Wang Xiaodong called China Can Say Now which advocated a modern robust form of Chinese nationalism, which was in stark contrast to the Deng-era vision of globalisation and biding one’s time. In the April before the olympics Chinese consumers boycotted French supermarket brand Carrefour. Over time the negativity of these boycotts have become more-and-more performative and extra-territorial in nature. The current Xi administration has seen fit to weaponise this nationalist sentiment by directing (wrangling is a more accurate term, like cowboys with a cattle train in the Old West) public opinion to further its own ends. A more positive aspect of it has been a more open market for domestic ateliers and brands than had been seen previously. Since before 2019, there have been Chinese efforts to build a rival luxury groups to LVMH and Kering and this fits in with Xi’s distaste for irrational worship of the west.
Xi-era growth. China under Xi Jinping faces multiple challenges around growth. The population is aging and in decline which has implications for declining consumption. Secondly economic growth has slowed compared to the double digit annual economic growth of the Deng, Jiang and Hu administrations. Foreign direct investment in China has declined for a mix of reasons including unattractive Chinese government policies, decline in China’s country brand and long term economic growth forecasts.
Regulatory change
I know what you’re thinking ok, this is very well Ged, but what does it have to do with omakase and luxury futures? Give me a little bit more time and all will be revealed.
While China is an economic superpower with a desire to export its world view and the United States is a hard and soft power super power; the European Union’s super power is legislative in nature.
European regulation drove the globalisation of the GSM mobile telephony standards during the 1990s and 2000s. They have also driven increasing internet privacy standards on web services, much to the chagrin of Alphabet, Meta and Twitter.
Now they are driving environmental standards across a range of areas including:
A carbon tax to take into account the use of fossil fuels in extraction of raw materials, transportation, energy as an input to manufacturing and processing materials.
Product passports from raw materials to product end-of-life encouraging a circular economy and sustainable manufacturing.
This means that the luxury sector has new restrictions on how it operates in the future.
In summary:
We’ve likely reached peak massification due to economic and trade changes.
Market share in China looks uncertain due to changes in consumer sentiment and tastes, meaning, a more local approach might be required or a strategic withdrawal.
Secondary markets show that consumers are open to ownership beyond pristine new products.
Product passports and European legislation means re-examining the whole supply chain and the data to better control it through an entire product life.
Finally, omakase and luxury futures!
Omakase and luxury look like a happy meeting in the future. Think about the tenets of omakase.
An expert provides a personalised experience that is about quality, ceremony and theatre.
The expert decides what you will have and prepares it for you. You are there from selection to the provision of the item.
The ingredients are of fine quality (and often locally sourced).
Going back to go forward.
The future of luxury is about looking back. Tailors who suited generations of families and made alterations to Grandfather’s suit that the son is now wearing. The shirt maker replacing the collars and cuffs. The shoe-maker who refurbishes your shoes and has a set of lasts with your name on, for when he has to make a new set. Getting measured, having your foot cast for a last or getting your watch could be memorable events once again. So there this a precedence for expertise and service levels. But it implies a retail experience that will change dramatically.
New techniques and questions.
Previously with the exception of measuring sessions, these processes were largely concealed from the consumer and were difficult to scale. So it’s worthwhile thinking about how luxury’s omakase future could be extended with modern technology? We have some experiments that might give us some ideas. First up, L’Oreal has showcased bespoke make-up manufacture for a while.
How could high-end perfume makers adapt for products beyond make-up? Improved analysis equipment from the likes of Oxford Nanopore could facilitate individually formulated fragrance products based on skin chemistry.
Adidas experimented with its Speedfactory concept that blended the retail and shoe assembly together.
Technologically there is a lot of promising ideas. Adidas have worked with up-cycled plastics retrieved from the debris brought together by an ocean gyre made into 3d printed soles and fibres. (Look for the Parley label, who Adidas partnered with on this.)
How can additive or automated manufacturing and other processes feel luxe? In what way could they add to the theatre?
This hybridisation of retail and manufacturing changes the nature of both offline and online retail completely. Would even the largest concession in Selfridges or a shopping mall be big enough, or would fashion houses need a single purpose brand experience?
Given that there is likely to be a bit more time between manufacture and presentation of the product than there would be in a sashimi restaurant, what else would go into the maison experience? LVMH is already investing in hotels and resorts like Cheval Blanc which gives it a better understanding of more areas in luxury experience and service.
Localisation would likely to be needed to handle omakase and luxury due to culture and the need for local materials. This might include new materials, such as fungus-derived leather. Of course, this might have negative implications for luxury house supply chains, whether it’s Louis Vuitton’s iconic plastic coated leather, or the Hermés crocodile farm.
Which means that product line-ups could no longer be global in nature. So luxury companies may revisit that the creative process looks like. Should there be a single global vision anymore? Luxury maisons instincts would be to say yes, but could this be an opportunity to own local ateliers in markets like China or the US?
Will there be more local brands instead?
What will a maison’s heritage mean in the future? A luxury maison is about what remains the same as much as what changes. What will happen to long-standing motifs?
Will there be a greater opportunity for more auteurs who are closer to the customers?
How to bridge the tension in terms of choosing for the customer and creativity as well as quality?
We’re talking a very different profile of creative in terms of thinking, attitudes and skills compared to the present.
Service, repair and reuse could learn a lot lessons from traditional tailors and the service networks of watchmakers like Rolex or luggage maker Rimowa.
I could not think of a more exciting or scary time to be setting the brand direction for a luxury maison, let alone the overall direction or the likes of LVMH. But by wrapping local materials, expertise, ritual and a bit of theatre the future could look like a fusion of omakase and luxury.
