Dossier curated by Patrizia Musso and Gabriella Vivaldi, Brandforum.it
Despite the economic crisis, the luxury market is showing a strong character and endurance: the forecasts for 2012 are extremely positive. We are now able to design a new geography of luxury; in this first part, we identify some of the coordinates that define four new territories for luxury brands.
Despite the economic crisis, the luxury market is showing a strong character and endurance: the forecasts for 2012 are extremely positive.
In Europe, the luxury industry accounts for 440 billion euros (almost 3% of EU’s GDP) and is in constant growth (between 7 and 9% per year), giving jobs to more than 1.5 million people.
The studies published in the last months by the Boston Consulting Group, show that globally, the numbers (on a sample of 1000 wealthy people from 8 mature markets – France, Germany, Italy, Japan, South Korea, Spain, UK and US – and in 4 emerging countries BRIC – Brazil, Russia, India and China) – show that the combined values of the annual expenses of the luxury market are about 1.400billion dollars.
A research by Bain & Company shows that also if China is the engine behind this constant growth in the consumption of luxury goods around the world, India isn’t falling behind, with a growth of 15-20% forecasted for the current year, it is becoming the most valuable market opportunity for this sector. Among the new markets an interesting addition is South Africa, which shows to host the same numbers of potential luxury consumers as Russia.
But what are the turn keys that brands can utilize in order to stand out and emerge from the complexity that now marks this market? On one side the definition of luxury continues to evolve, together with social/cultural aspects, on the other side communications, with the help of the digital world, are re-designing in a fast pass all the known luxury stereotypes and that values associated with them. Not only: the materials used to manufacture luxury goods are experiencing dramatic changes.
We are now able to design a new geography of luxury; in this first part, we identify some of the coordinates that define four new territories for luxury brands.
1. The new concept of luxury: from flaunting to experiencing
The first new territory that needs to be taken into consideration is the definition of luxury. If once, this word was being automatically associated with the purchase of objects that held an untouchable price, or as a social status, today, the possibility of experiencing luxury is what determines it, thanks to services that can satisfy all our senses (for example: taste, smell and site thanks to dishes prepared by famous chefs directly in our homes, the mind with a virtual voyage to the Moon, the ultimate high-tech products, the body with a spa…).
According to researches, almost 55% of global expenses in the luxury market are happening in the “experiential luxury” sector, which, in the last years has grown rapidly compared to personal goods. (v. http://pinterest.com/pin/110830840800412643/ )
One of the main pushes, according to BCG, came from some obvious social demographic changes. Consumers from developed economies (like Europe, United States and Japan) who have lived through the luxury boom of the 90’s, are now experiencing a delicate life phase: “They don’t need and don’t want to own new “things”, they are consumers of luxury experiences”, states the research.
A study by Unity Marketing reveals how contemporary luxury consumers are, instead, looking for a more personal satisfactory experience, that can gratify them also socially though the possibility of sharing experiences with family members and friends: “I’m less materialist now. My family is the most important thing to me”. The old concept of luxury struggles to survive also in the BRIC countries: family values and health are the winners.
It is possible to talk about “experiential luxury” in two ways:
– Consumer aspect: it entails “living the brand” through new luxury places cleverly branded and with a high emotional impact able to convey a unique experience (and product);
– Brand aspect: it’s all about testing coherently and passionately new business territories.
For the first aspect an interesting example is IWC Schaffhausen, famous Swiss watch maker, who inaugurated its flagship store in New York City. The 3,000 sq. ft. bi-level space includes a tufted leather chair club and a flight simulator that transports the customers directly into the context the watches are meant to be used in. The store is divided in six vignettes that embody the lifestyle of each watch collection. Airplane enthusiasts can try out a $39,000 flight simulator near the Pilot collection. Next to the sporty Ingenieur timepieces sits a Storck racing bicycle, and a pair of IWC limited edition sunglasses accompanies the Da Vinci collection. The Portofinos, for example, are displayed among richly decorated Italian accents: Santoni loafers, leather picture frames and a chocolate brown and white armoire. “The opening of this flagship boutique in New York marks a major milestone for IWC Schaffhausen,” says Georges Kern, the company’s CEO. “It not only reflects the success of the brand but pays tribute to our American heritage.” IWC’s founder, Florentine Ariosto Jones, grew up in Boston 140 years ago.
For the second aspect, it is interesting to analyze the strategy of the LVMH group, led by Bernard Arnault, who owns more than 60 different luxury brands that belong to the most diverse sectors among which Wines & Spirits, Fashion & Leather Goods, Perfumes & Cosmetics, Watches & Jewelry (http://pinterest.com/pin/110830840800412660/)
The famous brand is entering the luxury tourism market with various business solutions. Starting with a highly branded quintessential luxury hotel, LVMH created a seasonal hotel in Maison Blanche, a mansion in Place del Lices in Saint Tropez: the White 1921, named after the special vintage Moet & Chandon champagne. The hotel is quite petite, with only eight rooms but it offers the ultimate luxury experience with detailed suites and an exceptional garden bar designed by architect Jean-Michel Wilmotte. The hotel will remain open only until October 7th making it a must-destination for luxury aficionados looking for a story to tell and a prestigious vacation. On the same strategy wave it is possible to encounter the luxurious mountain retreat Le Cheval Blanc, in Courchevel (in the Trois Vallees of France), which is named after one of the most famous Bordeaux wines of the group. The emphasize on exclusivity goes beyond the services and accessories, thanks to the interiors decorated by designer Sybille de Margerie who chose iconic photography by Karl Lagerfeld (shoot on site) to embellish the walls. As Philippe Gorgaud, Hotel Manager, declared: “For us luxury is a natural experience. Recession hasn’t entered our rooms”.
The second move is a series of temporary LVMH stores in high trafficked travel destinations like Mykonos, in the Enoplon Dynameon, the main shopping avenue of the island.
The impact and visibility of these new territories (both locations and businesses) are strengthened by the consumer’s experience which initiates a natural word of mouth communication.
2. The new communication of luxury: from status to basic values
A second territory of luxury is given by the use of highly differential communication channels, which aim to strengthen the gap between the brand messages and anything that concerns the concept of status, and all the related excessive and imperial tones.
New values become the main focus in luxury’s communication strategies, like historical background, cultural values , know-how, the importance of simplicity, all researching the utmost authenticity.
The need to focus on these core concepts is double: on one side there is the need to tell the story of the brands heritage to new clients in emerging markets, who desire to learn about the cultural background of the western brands; on the other, in an unsecure moment like this, it is fundamental to reassure clients of mature markets reminding them of the authenticity and relevance of the history of the brand. In both cases, the main character becomes the significance of the luxury brand, which opens the doors to a communication territory that has an impact also on the value for money element.
These arguments, which we will explore further in the next chapters, help clarify the complexity of this market, where there are many actors that call themselves “luxury” also if they aren’t.
3. Luxury products: from consolidation to innovative materials
The third territory of luxury concerns products. The luxury market has attempted various routes trying to insure a creative stability during the recent crisis. Among the sectors that have prominently demonstrated the ability to reposition themselves utilizing their internal resources are jewelry, spot, design and fashion.
A first interesting case is Tiffany, who in occasion of its 175th anniversary, launched a collection of jewelry made of a “new” metal called Rubedo (in Latin it means red), because of its reddish color given by the combination of gold, silver and bronze. The collection, on sale only for the year 2012, presents itself with the incision “Charles Lewis Tiffany 1837”, name of the founder and year of the first Tiffany story opening. The use of new materials and the restyling of existing materials used in an unexpected way is a strategy that not only positions the brand as innovative but creates in the consumer an emotional connection that strengthens its link to the brand.
A striking example in the sports industry is the case of Zai, famous ski manufacturer in Switzerland, who uses unexpected materials in the manufacturing process of its skies, like stone, wood, carbon fibers, synthetic (like dyneema) and naturals. Combing high quality manufacturing techniques with unusual materials, Zai offers an innovative experience that satisfies the consumers looking for unique sport products.
The design world has also done its part. There are more and more companies that attempt to diversify their offering through new materials and technologies. An important example is Altreforme, part of Fontana Group, who uses aluminum sheets, typical of the industrial field, to create elegant décor pieces with a strong personality. The lightness and the malleable nature of the materials insure the creation of high quality and style furniture pieces.
Also the fashion world has widened its horizons implementing unorthodox materials. After a series of somber catwalks that depicted the uncertain feelings of designer, buyers and consumers, fashion shows have revamped their styles and showcased innovative new designs. The trend that has emerged is the use of advanced materials which demonstrate the importance of offering consumers something unique and diverse that makes them passionate and emotionally connected to. Badgley Mischka used metallic tweed, Amy Smilovic for Tibi used polyurethane coated rubber and plastic made in Italy, Iris van Harpen employed metallic and rhodoid strips, Prabal Gurung used neoprene combined with patent leather. These are just a few examples of how fashion’s creativity has broadened its horizons by implementing materials that go beyond the usual and expected. Testing the craftsmanship of his seamstresses Alexander Wang incorporated custom made laminated tweed, lacquered merino wool, waxed suede and shrink-wrapped jacquard knits in his fall collection, which garnered much enthusiasm from critics and fashionistas.
The use of innovative materials is applied also in high end home décor and the automotive market. These advanced material choices allow designers to play with texture, architectural lines and performance, conveying a sophisticated and edgy look to their products. Selected for their sculptural applications and intricate looks, these innovative materials also offer an additional advantage in discouraging knockoffs.*
4. Luxury: from original to fake
Another territory to guard attentively is the one of counterfeit goods and the related strategies implemented to control and repress it.
Counterfeit luxury goods are easy to find, cheap and most of all so perfect they are hard to detect. So much so, that in Shanghai and many other metropolitan areas young luxury consumers like to mix original and knockoff items from clothing to accessories and play a guessing game of who can identify the fake product.
But not only China is affected by this problem, all age groups, countries and wealth structures are involved. The main concern is to identify who is to blame: the consumers or the supply chain?
Governments are collaborating more and more with luxury brands to fight manufacturing, distribution and sales of counterfeit goods, but not all countries are working at the same speed. France has in place a law that can send any end user to jail if found with a knockoff product, while other countries like Italy, Spain or the United States haven’t yet approved such legislation.
The most efficient way to fight this issue is for brands to work closely with governments and police authorities establishing a detailed legislation that includes penalties and keeps in mind the importance of trademarks.
Educating consumers is also fundamental in this battle, since they are the main target of the production chain of fakes. Educating and demonstrating, for example with the use of advertising campaigns and guerilla PR strategies, what is really hidden behind the production of a fake can become an effective strategy to emphasize the value of the brand, directing the consumer to invest in the original product. A solution in the education process could also be to involve famous spokespeople, in order to avoid, what recently happened in Bangkok, where a global star like Lady Gaga tweeted about her intention of purchasing a fake watch while visiting the city for her tour. The reaction of the Thai authorities was very unforgiving and determined to defend the image of the country.
Given the complexity of the current territories of luxury it becomes imperative to focus on the trends of the moment, both for who is already a veteran of this sector and for those who are interested in building their own professional future in the luxury business.
In this respect, Marie-Pierre Schickel, director of the Master in Marketing of Luxury Goods http://www.domusacademy.com/site/home/master-programs/marketing-of-luxury-goods/intro.html) has no doubts: “In order to choose and maximize the opportunities that derive from the recent evolutions, the luxury brands, small or large, need to evolve and to rethink their business models, to answer the needs of consumers that are becoming more and more demanding. They need to hire managers with perfect mix of capabilities”. It’s from these thoughts that her Masters program initiated:” acquiring an eclectic professional background, that combines managerial capabilities, organization, creativity, multidisciplinary is the key to success for operating in a highly competitive sector like the luxury market”.
Our dossier will continue in the upcoming weeks, analyzing the world of luxury and its constant evolution, through national and international case studies.
*Ref. article “Material Catwalk”, Matter Magazine 9.1 The Design Issue, 2012 Material ConneXion
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