Exclusive report by Patrizia Musso and Gabriella Vivaldi, Brandforum.it
In the previous reports the complexity of managing the luxury world became evident. Also if the concept of luxury is the center of many debates, it is certain we are experiencing a new map of luxury consumers, which we will now analyze in its various sections.
In the previous reports, aimed to closely analyze the luxury world, the complexity of managing this market became evident: and at the same time, positive strategies have emerged which can be implemented by luxury brands.
What is very clear is that the definition of “luxury” isn’t easy to define, especially after the introduction of the term “accessible luxury”. We had a chance to explore the main traits of “luxury” brands (v. puntata I , v puntata II ), recognizing two fundamental elements, the importance of protecting the historical background and the high quality level of manufacturing.
As a matter of fact, just a few months ago, Brunello Cucinelli during the 4th Luxury Summit organized by Il Sole24Ore, emphasized the value of artisanship and high quality, together with the relevance of the company’s DNA (underlining in relation to this point the importance of Made in Italy) in the luxury market.
More and more often we hear about “accessible luxury”, a concept that carries paradox traits compared to the previous definition, which keeps into consideration the delicate subject of democratization, especially in the fashion market. A solution, clearly exemplified by the H&M case study, which offers two possible actions:
– Since 2000 famous brands and designers (Marni, Karl Lagerfeld, Lanvin, Stella McCartney, Versace, Jimmy Choo) put their names on “capsule collections” for the well-known Swedish brand, at a lower price range aiming towards lower market (cfr. http://www.brandforum.it/papers/783/h-m-e-la-moda-del-luxury-co-branding-da-oggi-la-collezione-firmata-marni );
– H&M creates a luxury collection COS (Collection Of Style) offering garments made of organic cotton, recycler polyester and biological hemp, with a higher price range than usual; this initiates an upscale movement of the brand towards a high level, still maintaining a mid-range price. It is important to observe that in Milan the COS store has opened in a very central shopping area replacing an Armani retail point.
As Marie Pierre-Schickel, Director of the Master in “Marketing of Luxury Goods”, (v. http://www.domusacademy.com/lp/luxury-en/) explains: “the decision to make a luxury dream accessible can be risky both for H&M and the true (and various) luxury players involved. The usual H&M audience might not relate in appositive way to the chance of entering a world that is (only) exclusive on the exterior. Luxury brands, instead, run into the risk of betraying the expectations of their loyal con summers implementing “accessible luxury” strategies”.
Also if the concept of luxury is the center of many debates, it is certain we are experiencing a new map of luxury consumers, which we will now analyze in its various sections.
1. The new geography of luxury consumers
There are two levels of to define the new geographical scenery, a macro and micro level:
– Macro Level: new countries have entered the luxury market.
As shown in the research of Merrill Lynch and Capgemini “Worlds Wealth Report 2011”, in the Asian Pacific area resides the 6th most fast growing population of HNWI (High Net Worth Individuals*), led by Hong Kong (33.3%) and Vietnam (33.1%); in Latin America, where the HNWI population is still limited, there is a notable number of Ultra-HNWI who contribute to increase the overall wealth level on this area. For example, in Brazil, where it is possible to find the Quadrilàtero do luxo (comprised of the malls of Iguatemi, Cidade Jardim, Morumbi Shopping, Rua Oscar Freire); only in this country – as shown in the research of Fondazione Altagamma (2011) – it is possible to count 155thousand millionaires (more than in India and Russia) and 5thousand ultra-millionaires (individuals with assets of 30million in cash).
– Micro Level: luxury brands are facing a new consumer profile: younger than usual, and with an increase in females as the top spenders.
In Brazil this female predominance (almost 75% of top spenders, says Fondazione Altagamma 2011), reflect in the sales of jewelry and diamonds.
A new target that is also looking for “new luxury”, in markets like personal goods, art and travel. China is the perfect example of this transformation, with its “new rich” (v. III puntata ) , who seem to need a “custom luxury”. For this reason LVMH opened in Shanghai in the prestigious area of Plaza 66 (here is the video) a retail point with four floors: offering an architecturally unexpected experience and a merchandise and services selection that aims to recuperate the brands image and exclusivity that has been declining among Chinese consumers. Yves Carcell (CEO of Louis Vuitton) told media during the opening of the store: “the made-to-order concept is the ultimate luxury”, adding “It’s the same with art. If you are interested in art, the ultimate is to commission an artist rather than buy a piece that is already done”. A private salon located on the first floor, welcomes only invited guests for a hair do while they are waiting for their custom made purse.
We spoke about this aspect with Doc. Schickel who underlined how “luxury brands are exposed to multiple tensions: first of all, geographical tensions ( Chinese consumers want object of very large dimensions, extremely expensive, while the Brazilian consumer, wants to shop in malls, that by definition aren’t the preferred format of luxury brands, who are trying to adapt to this new idea); secondly, there is an age tension (younger consumers), that include new purchasing habits which overlap transversely on the geographical differences. Ad hoc strategies are developed to attract the new generation towards the brand”.
It is relevant to talk about the solutions adopted by the high end wine company Pommery in 1999 with the launch of a “POP” size: small bottles of 20cl thought to relive the pioneering spirit of Madame Pommery, who always desired to translate the champagne tradition to the modern lifestyle. In those years, the new size, now used by many brands, helped position Pommery in balance with emerging new consumer and lifestyles.
Next to this complex geography made of new targets, which we analyzed also in the previous reports, we identified concrete solutions designed to answer the different tensions that luxury brands are facing.
2. Solutions (management, communication and marketing) to face the new trends
Among the strategies being implemented by the luxury markets to deal with the new trends is interesting to take a look at how they impact production and management of the brands: luxury brand s, more than others, have new targets to manage, with growing and diverse needs, driven by their social and cultural background and by the numerical traits that define the various BRIC countries. To satisfy a client from China to Brazil (and often with custom solutions) means to own a creative and production capacity that is out of the ordinary.
From the creative aspect, we can think of the automotive industry: what is considered real luxury in Europe (speed) isn’t in other markets (in China for example luxury in this sector is having a driver).
From a production aspect, decisions made in high end wine companies are very important. According to the last Vinexpo data, Asia will become the second largest wine market in the world by 2015; and the main target for this move are the numerous new Chinese rich (this will be an increase of more than 50% by that year). Château Lafite is among the brands favored by these consumers, at a point that the demand is much higher than the existing offer: this will lead in 2014 to the production of the wine in the center of Shandong, the most ancients and vast wine region in China, incorporating the basic wine blends from France. It is also interesting to understand the conclusion of Guillaume d’Angerville of the famous Domaine Marquis d’Angerville (producer of the prestigious Volnay, Meursault, Pommard), on how the requests from China and Hong Kong will increase for wines from Bourgogne more than the traditional markets (France, UK and USA), pushing the brand to export less wine in some of these countries in order to fulfill the needs of the Chinese market.
Another important aspect in the approach to the new consumers is maintaining the fundamental traits of the DNA of the original brand: changes are required, but they can create a bigger problem than a simple restyling, impacting the core of the brand. And, it is never said that changes can offer a happy ending. We will analyze a few cases where the tension for new trends hit:
– Communication dynamics. The corporate identity is among the first elements to be restyled and impacted by the needs of the new multi-ethnic targets.
A first recent example of rebranding that made the news also on social networks is the case of Yves Saint Laurent, who changed its name globally (maintaining the logo YSL) to Saint Laurent Paris. A decision that will be implemented with the spring/summer 2013 collections and that has already received extensive criticism. Hedi Slimane, new creative director and mind behind this partial restyling, explained to press how the origin – not understood by the public – of the new naming is as matter of fact a recovery of the historical brand used by the founder in 1966 for the first pret-a-porter collection called Saint Laurent Rive Gauche. The words “Rive Gauche” have been substituted by the more modern and international “Paris”, symbol in the entire world of style and fashion. The intention was – as Slimane explained – “restoring the house to its truth, purity and essence — and taking it into a new era” while “respecting the original principles and ideals and recuperating the font and naming.” A return to the past that will respect all the traits of what we defined as Brand Reloading of luxury.
The changes, especially when the concern a well know brand, are never easy. Loyal consumers need to learn how relate themselves with the new image of their lovemarks.
The wine industry in Italy has tried to reach out on the communication side to the Asian market: for example Super Tuscan Ornellaia who used a tag designed by the Chinese artist Shang Huan for its limited 2009 edition (called “Art Harvest”), incorporating designs inspired by Confucio on 9l bottles. This venture socially moved the visual traits of the brand (v. Pinterest http://pinterest.com/pin/110830840800794410/).
– There are also marketing dynamics that drive to unusual brand diversification strategies, capable of expanding the opportunities on existing targets, but also capable of answering the new geographies ( in order to reach out to the new rich consumers).
Exemplar cases of Armani and Missoni contemplate both dimensions, showing how famous luxury brands can increase their business cope, margins and prestige through a strategic product and market diversification. Both companies, strong of their heritage and style expanded first in the home section creating signature collections that represented their values and design. This move established both companies as strong brands in the furnishing world developing long lasting collaborations with major design firms and developers. Armani Hotels and Resorts can be found in Dubai and Milan reflecting the company’s dark colors and elegant lines, while Missoni’s colorful patterns can be seen in Kuwait and in Edinburgh. The experience that is offered when staying in one of these hotels is not only a luxurious one, but it touches the consumer’s core, fast-forwarding Proust’s vision of reve to a more tangible souvenir that the new generation of rich can hold on to and relive as often as they can.
In the same direction we can find the case of Quatar Holding, which after purchasing Harrods department store, announced its intention of expanding the brand by opening a series of hotels in London, Kuala Lumpur, Sardinia and Malaysia. This diversification opens the doors to an entire new luxury hospitality development strategy that will answer the needs of both mature luxury consumers but also the younger ones. A brand stretch move that still leaves many doubts.
There are then examples that clearly demonstrate the need to be up to date with the ever changing tastes of the new multiethnic consumers.
The Ritz Carlton in Paris will undergo a two year refurbishing project under the expert hands of Thierry Despont, who doesn’t want to reveal what the “new” hotel will look like. The goal is to shift and entice not only the regal families but a younger crowd of rich consumers who are looking for a posh experience and a unique venue. The historical legacy of this hotel has deep roots that go back in time and define the brand. There are few places in the world where a hotel room is registered as a national monument. Such is the case with the 13,900 euro-per-night Imperial Suite overlooking Place Vendome.
Also a relevant example is the case of Hilton China, who locally adapted its international quality standards to meet the Chinese culture: all alcoholic beverages were removed and the ritual was put in place, with the ad hoc training of all staff.
We asked Doc. Schickel how the curricula of her Master program in “Marketing of Luxury Goods” will concretely face these tensions, which are becoming more and more tangible: “more than case histories, that certainly are numerous, the main part of the classes will be held around workshops. Real projects create by students throughout the program, starting with a brief outlined with our partner companies. With Maison Pommery and Cartier, we will ask students to think of innovation concepts that will bring closer the brands to the new consumers. With them, but also with Zagliani and Castel Monastero, we will face the difficulty so fully expressing the brand experience for luxury brands, how to bring together young consumer with historical brands, how a true luxury brand can effectively face the digital world. As you demonstrated in your reports on Brandforum.it, there is a lot of criticism also if the sector is strong and growing”.
The new target of the luxury world appears to be harder to pinpoint: aspirations, needs but also tastes are extremely fragmented, also because of the multiethnic aspect we depicted. As Doc. Schickel explains:” with today’s complexity, luxury is living a different time and less defined way that in the past. The concept of global brand won’t last for the luxury world”.
The downside for luxury brands is that they have to adapt their DNA in order to be accepted by the young and divers targets. The global/local tensions for luxury become very delicate: one thing is to adapt locally, with elements that don’t impact the soul of the brand, but another is to change its roots, putting in the hands of the new rich the managing power of the brand.
What will become of the historic luxury targets extra-BRIC: are they destined to disappear? According to the Merryll Lynch and Capgemini research, “the dimension and the wealth of the population of the HNWI in Europe have grown in 2010, also if this growth has been the lowest of all regions”. We can then speculate there will be a transversal break between rich how know luxury brands (those how are educated about the brands and its products, are also more inclined to experiment new ways, new materials, including the BRIC countries), and rich who own luxury goods (those how buy in an old-luxury way aimed to show their buying power). This scenery will entail a complex and delicate balance for luxury brands: the capacity of holding on to their values and roots, and a push towards innovation aimed to reach out to the new trends (on and off line).
*HNWI (High Net Worth Individuals): Individuals with financial assets over 1 million dollars.
Mirko Olivieri, Junior Editor di Brandforum.it
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