From Cultural Revolution to Luxury Revolution: The Transformation of the Luxury Brand Experience

When thinking about luxury, the first question that comes to mind is, what is a luxury brand? I am sure there are thousands of brands that would be quick to think of themselves as luxury brands but are they right? Many so-called luxury goods fall into the category of ‘nouveau luxe’ or afforded luxury – premium products with a certain glamour quotient. Luxury used to be closely associated with expense and prestige, ultimately something that can only be had by a few. The past 10 years has seen explosive growth in what is being called the “massification of luxury goods.” Luxury has gone mainstream but does this still make them luxury brands?

Coach literally reinvented itself in 2001 as a fashion-forward producer of mass luxury goods to better compete against stronger luxury brands. They have been incredibly successful and other brands are doing the same thing. H&M had haute couture designers, Stella McCartney, Roberto Cavalli and Karl Lagerfeld design pieces for their retail stores that literally sold out in less than an hour. This is actually a good thing for the luxury market, providing an entry point for consumers into the luxury world.

Luxury brand leaders are trying to find ways to distinguish themselves from other premium brands and some are now pushing prices up to an unprecedented level to maintain their luxury positioning. Can being expensive alone maintain this positioning? Louis Vuitton, Chanel and Hermès are all testing the limit of what they can ask for. The question is how high can you go? And how do you justify that cost to consumers?

Louis Vuitton is maintaining prestige while selling to the masses without ever having an end of season sale. Burberry is doing a phenom- enal job transforming itself into a luxury brand. Chanel is making sure style never goes out of fashion and is never affordable. Tiffany & Co. is still making sure everyone understands what the little blue box means. Hermès offers a true luxury experience with only a limited number of bags to sell each season. Just like a high-end restaurant that holds a table or two for those important guests that drop in without a reservation, a few distinguished customers can purchase a bag in-store, but generally, if you want to buy a Hermès bag, you have to order it. Most bags in the store are just for display. You choose the material: cowhide, ostrich or canvas, and the color of the hardware: silver, gold or diamond-encrusted. As you wait the 6-8 months for your bag, you can excitedly tell your friends what you’ve ordered. They are the masters in making their products desirable.

The key success factor for luxury brands is still quality. It takes three years to train a leather goods craftsman and two years to train retail personnel. If we continue with Hermès as an example, for the past 20 years their craftsmen have grown from approximately 300 to over 2,000. A Hermès bag is going to last a customer 30 years – it isn’t a product, it’s an investment.

In 2010 the total consumption in the Chinese mainland luxury market reached USD10.7 billion, excluding private jets, yachts and luxury cars, making China the world’s second largest consumer of luxury goods following Japan. Roughly 73% of China’s luxury shoppers are under 45, compared with just over 50% in the US, according to McKinsey & Co., as many as 45% of China’s high-end buyers are under 35, compared with 28% in Western Europe. It is not difficult to see where the opportunities are.

If you spend an hour in Shanghai or Beijing you will find plenty of pseudo luxury brands that are working hard to position themselves as true luxury brands using Italian or French names to lure the unsophisticated Chinese consumers. But as Chinese consumers travel overseas, these pseudo luxury brands need to invest in overseas retail to maintain their image. The cost of entry is raised.

If the largest luxury market decides they needed change, or if they take the lead in luxury consumption, China may initiate a powerful shift. The1960s marked a Cultural Revolution in China; the 2010s may just be the Luxury Revolution. The Chinese consumer may acquire and develop their appreciation for luxury and 50% of so-called luxury brands may not pass the test. Shanghai and Beijing have a higher concentration of luxury watch outlets than any other major city in the world. In China, the ‘luxurification’ of everyday life is the new normal. They have a very different definition of luxury and are fast evolving.

Conspicuous consumption is prominent in China – consumers are willing to pay more for publicly displayed possessions to signify wealth, meaning price will be an indicator of exclusivity. This is good news for luxury goods. Luxury consumption always operates at a level of aspiration and imagination, but it can have real effects in facilitating the construction of self-identity. While luxury shoppers are being led by the rational desire to purchase items that are of high style and craftsmanship, eight of the ten top purchase motivators are emotionally driven. Luxury marketers must be reminded that it is vital to tap into deep consumers’ desires for social status and indulgence. In the context of Chinese consumers, marketers need to consider the implications of the needs of national identity and how they construct and maintain social meanings among the emerging upper-middle class. As luxury goods attempt satisfy a social need to project success, we enter the realm of the symbolic, and it is symbolic meaning that is used in the search for the meaning of existence.

 

Idris Mootee is the publisher and editor-in-chief of M/I/S/C/, a published author, speaker and CEO of Idea Couture, a global strategic innovation and experience design firm. He spends his time between, London, New York, Toronto, San Francisco and Shanghai.

This Article has been taken from The Customer Experience Issue (Issue #3, Fall 2011) of M/I/S/C/ Magazine – a magazine dedicated to design thinking and innovation available in over 25 countries. To purchase a digital copy of the full issue and for other issues please click HERE.

Join the conversation