President of New-York-City-based ALTR Created Diamonds, entrepreneur, and third-generation diamantaire.
Technological innovation has disrupted (and continues to disrupt) many legacy industries in many ways, whether by disintermediating manufacturing processes, simplifying everyday tasks, truncating supply chains, or reducing time and cost. It has also made technological advances widely available, like inexpensive smartphones and cheap, fast internet.
However, the way technology has democratized luxury is a case worth studying, as it can upend titans of industry. The value of luxury products and services have always relied on the concepts of exclusivity and rarity. The luxury industry was made to be exclusive and to create a market of goods accessible, or seemingly accessible, to wealthier members of society.
But innovation in technology has enabled new players in the luxury industry to offer consumers choices of the same goods and comforts previously only afforded by the wealthy at reasonable and competitive pricing, thus democratizing the luxury industry as never before predicted.
As the president of a company that produces lab-grown diamonds, I believe some of the biggest business avenues that have felt the change are on-demand transportation, hospitality and fine jewelry, which now have choices for a new group of consumers to participate and create demand in markets that were previously perceived as out of their price range.
That’s because the technology did here what it has always done: enter a category, modify a product, connect with consumers, and offer another choice to the consumer. In this way, not only did technology democratize luxury in the transportation, hospitality, and fine jewelry industries, but it also forced the improvement of existing choices for consumers. Here is how:
Transportation might not be considered a traditional luxury, but this is a broad industry with numerous options. Here, we are discussing on-demand transportation like car services and taxis, which are modes of transportation that were not financially viable or available for many people. Technology has completely changed that.
Ridesharing has shifted to a billion-dollar industry with the introduction of car services, such as Uber and Lyft. Both companies offer transportation services at a variety of price levels designed to suit consumers from varying financial backgrounds. Users can choose to rideshare, which is essentially the new carpool at a cheaper cost, order a car for themselves, or even order a black car for those seeking higher luxury.
From my perspective, these companies have forced the established taxi industries to compete for both technologically — by developing apps and credit card payment options — as well as by offering better service. The addition of new players like Uber and Lyft have made safe and comfortable transportation affordable to a much larger group of consumers, which made what some might have considered a luxury a now viable option. But further, the expansion of the industry drove taxis to improve their own model to compete and improve the existing service choices.
When it comes to hotels, until a few years ago, it could be one of the most difficult parts of travel to book in terms of assuring quality associated with price. But Airbnb created a platform that served as the middleman between consumers and property hosts to ensure safe transactions that allow for more authentic travel experiences without having to overspend. So, hotels had to revamp their approach to try to match Airbnb's lower rates.
Basic economics shows us that increasing consumer confidence increases consumption. While the hospitality industry might have initially seen this disruption as stealing value from the market, in truth, I believe Airbnb democratizing travel was (and is) a good thing for travelers overall.
Nowhere is the disruption and democratization of luxury most obvious as in the jewelry industry. Consider, for instance, the idea that diamonds are a rare status symbol, while more people in the U.S. are buying diamonds than ever before. I believe the myth of rarity has been shattered. This could partly be due to the emergence of technology enabling larger diamonds to be grown in labs, which the BBC reported is making the acquisition of diamonds more aligned with growing consumer sentiment toward a more ethically sourced diamond and a piece of jewelry more attuned to environmental sensitivities.
A number of companies (my own included) specialize in creating lab-grown diamonds, so I am seeing the democratization of luxury jewelry playing out on multiple stages now that technology has enabled consumer choice and emerging brands are educating consumers accordingly. Meanwhile, the earth-mined diamond companies that have traditionally controlled the industry and pricing model are backtracking to respond to consumer demand rather than determining the market.
These companies are only now conceding to the overwhelming consumer demand for authenticity that is presenting across many industries. The primary authenticity challenges a consumer has always faced while purchasing a diamond is achieving transparency in where it came from, the environmental impact of sourcing it, how many hands was changed in its journey, and whether it's the quality gem they were being told it is. Technology has revolutionized this acquisition process.
Specifically, technology has enabled consumers to achieve transparency of the supply chain for the diamonds and gold used in their fine jewelry and thereby removing the skepticism they've had about their jewelry. Now, they can access data about where their diamond and gold came from, thus enabling them to understand their purchase's impact on the earth and on society.
Authenticity and transparency about ethical consumption and environmental sustainability are core to many consumers' choices. From my perspective, technology is the emerging answer to addressing these values and, most importantly, educating consumers about the choices that affirm what they care about and need.
Of all the industry disruptions that technology has enabled, to me, the luxury market phenomenon is perhaps the most curious, and perhaps the most impactful, as it relies upon legacies and brands that are bewildered when a David outpaces their Goliath. Ultimately, the lesson to be learned here is that the disruption of luxury is not destruction; in fact, technology can add value by forcing improvements and enabling consumer choice.