Janus Thinking

The increasing purchasing power of a certain class of consumer in the developing world has enticed many Western luxury brands to set up shop there, particularly in the fast-developing economies of China and India. This phenomenon has led to sales in Asia surpassing the West and increased concentration of marketing activity outside these brands’ traditional markets.

But what will happen when these emerging markets develop to the point when their local brands press to compete for a share of the luxury market, both at home or abroad? And what if these same brands become rich enough and global enough to seek buy-out opportunities of established Western luxury brands? In other words, will the forces of globalisation be allowed to flow in both directions?

In an article in the Financial Times from 11 January, the authors argue that:

companies from the developing world fight against entrenched perceptions when they attempt to buy high-end western names.

They point to recent examples of the Indian hotel group Taj indicating interest in acquiring Orient Express Hotels, Trains & Cruises and Tata Motors bidding for the Jaguar and Land Rover brands.

As luxury products are often associated with their provenance, the next wave of acquisitions will test emerging market-based multinationals’ ability to finesse their way through luxury brand retailing.

Oceanaut, the California-based watch manufacturer, has launched its luxury range for 2008.

Luxury is always in the eye of the beholder, and something need not be expensive to be luxurious, but these classic chronographs and unique divers are certainly made with fine parts: precision gears from Switzerland, hand stitched leather straps from Italy, French alligator straps, precious metals from the United States, Swiss manufacturing and conflict-free diamonds from Africa are all combined to create the watches.

Selling from select Nordstrom stores in the US, the range features models with Latin-based names such as Cortez Limited Edition, Carrero, Baltica, Baccara, Acquatico and Conquistador; they retail for up to $14,500.

That the watches have fallen in with the celeb set hasn’t hurt Oceanaut’s profile. The company supplied celebrity newlyweds Eva Longoria and Tony Parker with matching Oceanaut Pacha Cobra diamond watches, and have a celebrity following that includes Kevin Connolly, Teri Hatcher, Courtney Cox and Venus and Serena Williams.

In its latest promotions, Lexus is moving further into the market for hybrid vehicles by linking its reputation as a luxury car manufacturer with the eco-friendly merits of hybrids.  Lexus claims to be the first carmaker to focus on this relationship between luxury and environmentalism and in its ads (seen online on various websites), the company talks about how:

One should not have to choose between luxury and social conscience.

Lexus is positioning itself to the luxury car buyer who is not willing to sacrifice design and performance in order to be environmentally aware (sort of like die-hard coffee fans who are unwilling to sacrifice taste but want to buy fairly traded products). Lexus’ tag line argues that it gives more to the driver and takes less from the world. This may be true, but it’s a little hard to swallow when its most expensive hybrid only gets 20 miles per gallon in city driving. Nevertheless, the company is engaging with issues that many other luxury companies aren’t. Just this week Lexus launched an online forum to discuss the impact of hybrid cars on society.

Leading Kuwaiti-based developer Al Osaimi Group has recently appointed firms to develop a prestigious seven star luxury hotel in the United Arab Emirates. Located on the Crescent of The Palm Jumeirah, the AED 1 billion project consists of the flagship hotel as well as a five star family resort, 178 lavish residences and spas.

The project will seek to combine Indian and Moroccan architecture and design with themed landscaping and sophisticated conference and catering facilities. The Deverana Spa, a signature of upmarket Thai hotel chain Dusit International will also provide authentic Thai-inspired rejuvenation experiences for hotel guests.

Targeted for completion in 2010, the project will be managed by Dusit, with the official launch of the project scheduled for early 2008. The unveiling of another seven star project in the Gulf region challenges the benchmark-setting Burj Al Arab in Dubai, and cements the region’s reputation for pushing the boundaries of luxury hotels.

El Paso’s Dos Lunas is launching a luxury brand of tequila which the company believes sets new ground in the market for premium spirits. Dos Lunas Grand Reserve is a10-year-old tequila served in 1,000 hand-blown Baccarat decanters, which the company plans to market at $2,500 per bottle.

Dos Lunas owner Richard C. Poe II already produces high-end silver, reposado and, soon, añejo tequilas, but wanted to create something even more extravagant. Poe explains, “We set out to create the world’s best tequila and that goal informed every decision that was made, from growth through production to packaging”.

The launch fits a trend in the US market for fast-growth in super-premium brands. Figures for the Distilled Spirits Council of the United States show sales in high-end spirits grew by 23 percent in revenue to $566 million in 2005, a trend which New York consulting firm The Beverage Marketing Corp has labelled the “premiumisation” of tequila. Indeed in 2006 a one-litre bottle of premium tequila in a two-kilo platinum and gold bottle was sold for $225,000, demonstrating a demand for luxury tequila.

Cunard Line has launched what it claims is the most luxurious cruise ship ever. The £300 million Queen Victoria will be officially named by the Duchess of Cornwall in Southampton before a fireworks display marks her departure on her maiden voyage around northern Europe.

Built at the Fincantieri shipyard near Venice, the ship features three swimming pools, 4,000 sq ft of shops, seven restaurants, a casino, theatre and library spread across her 18 decks. Weighing 90,000 tons Queen Victoria is capable carrying over 2,000 passengers and will meet with Cunard’s two other Queens - the QE2 and the Queen Mary 2 – in New York in January.

Cunard claim that despite not being the biggest of the Queens, Victoria is the grandest, with innovative designs and “floating firsts” such as West-End style boxes in the 830-seat theatre. The opulence is however reflected in pricing, with the cheapest rooms starting at £11,000 and grand suites complete with 24 hour butler service ranging up to £210,000.

Dove is asking America to help define luxury during the Oscars as part of their Dove Supreme Cream Oil Body Wash Ad Contest.

Dove wants real women to record their own 30 second TV ad at www.dovecreamoil.com, defining their conception of luxury and how they shower themselves in it. Semi-finalists will be chosen to travel to Los Angeles for the annual Academy Awards, with the finalists having their ads unveiled to America during the commercial break in the ceremony. Viewers will be asked to vote for their favourite either by text or online, with the winner unveiled during the Oscars.

The contest seeks to build on last year’s successful real-women ad, where Lindsay Miller of California won by telling viewers her shower was her concert hall. The contest not only proved commercially successful for Dove, but also landed Miller a prestigious job at a US production company.

When Mercedes-Benz and McLaren launched the SLR Coupe in 2005 they sought to set new benchmarks in motoring by incorporating Formula 1 racing performance in a Mercedes road car. Technology that was previously the exclusive preserve of a professional motor racing class and restricted to the racetrack was now available to normal (albeit extremely wealthy) consumers.

The Coupe has now been joined by a GT Roadster, which uses an AMG V8 engine to achieve 617 horsepower and 575 pound-feet of torque, resulting in a 3.8 second 0-60 and a top speed of 206 mph. US models rest on 19-inch turbine-style nine-spoke alloy wheels, and the engines even come signed by the engineer who hand-made them.

With supply strictly limited and even the base model costing $495,000 the GT Roadster is a luxurious toy attainable only to a seriously wealthy and patient clientele. However while the Roadster’s race-track performance may receiving positive reviews, it remains to be seen whether this translates to the less suitable environment of public roads, where the 206 mph top speed may be a luxury unobtainable even to those prepared to spend half a million dollars.

Rapid property inflation has removed the prestige of the formerly exclusive million-dollar home according to Canadian estate agents Royal LePage Real Estate Services Ltd.

Seven-figure properties are increasingly being snapped-up by the middle-classes, spawning a new benchmark for luxury as the rich seek ways to distinguish themselves from their neighbours. Royal LePage have published a top ten ‘must have’ feature list for any truly luxury home, which could cost as much as $400,000 to install. LePage agents defined the new yardsticks of exclusivity as follows:

1. A car lift for the garage with an indoor car wash. Car lift is $2,500 to $6,500 while car wash is $30,000.
2. Walk-in refrigerator. Cost $7,000 to $20,000.
3. Spa, gym or yoga studio. Cost $50,000.
4. Wine Cellar. Starts at $60,000 and can go to $150,000.
5. Concierge Services. Rate of $50 to $75 per hour with a minimum purchase of 50 hours.
6. Media room. Starts at $50,000.
7. Wrapping or sewing rooms. Starts at $5,000.
8. A wired home. Cost $25,000.
9. Home elevator. Cost is $30,000 for equipment and installation with construction extra.
10. Heated driveway. Starts at $5,000 for 600 square foot driveway.

The list shows how changes in lifestyle and technology in particular are influencing the property market and the demand for new luxuries, with time saved by concierge services spent on personal indulgence such as spas whilst technology is harnessed not only to do chores such as washing the car but also to set new standards for entertainment facilities.

Elite travel operators are increasingly seeking to combine the opulence of traditional safari travel with the experience of poverty more typically associated with charitable ‘gap-years’, creating a new range of range philanthropic yet luxurious holiday packages.

New York-based Artisans of Leisure have reported a 15% rise in requests to combine luxurious African trips with charitable visits to underprivileged health clinics, schools and orphanages in packages that can cost in excess of $50,000 per week.

The explicit purpose of twinning luxury with poverty is to solicit donations for the communities involved, whilst still providing the travel experience wealthy donors are accustomed to. Indeed the not-for-profit sector is increasingly seeking to muscle in on a market previously dominated by exclusive travel agents, recognising that big donations are easier to acquire from those that experience development issues first hand.

The increasing popularity of the packages has been linked to the role of celebrity campaigners such as actress Angelina Jolie and US singer Bono in raising awareness of development issues, a trend which is helping to fuel the rapid expansion of luxurious charitable travel.

This week Tiffany and the Swatch Group announced a new partnership lasting at least 20 years that will expand Tiffany’s small watch business into “one of the most important watchmakers in the world in the next five to 10 years,” according to Nicolas G. Hayek, Sr., Swatch Group chairman and co-founder.

Tiffany will continue its current lines and expand them in a new company, Tiffany Watches, which will be entirely owned by Swatch. Both companies will share their expertise to collaborate on design, engineering, manufacturing, marketing, distribution and service. Tiffany will have a seat on the company’s five-member board of directors, product design and marketing committees, and will get a share of the new company’s profits.

Many consumers associate Tiffany with fine diamonds and Swatch with cheap watches (even though Swatch does own several luxury timepiece brands, including Breguet, Blancpain, Glasshütte Original, and Omega). Tiffany will have to be careful so as not to pull a ‘DaimlerChrysler’—tarnishing the brand image of both companies (bringing the Tiffany brand ‘down’ to Swatch) and losing a great deal of money in the process (when expected synergies don’t actually happen). It sounds like Tiffany and Swatch are on the right track though, as they’ve already said distribution will be “selective” through the Swatch Group global network, Tiffany stores, and areas where rivals like Bulgari watches are sold.

With Thanksgiving behind us and the holiday season in full swing, it’s time for the pundits to start guessing whether overall holiday spending will be lavish or more measured given recent difficulties in the mortgage and housing markets. Recent research from Deloitte in the UK suggests that consumers are going to still spend, especially on luxury goods, but may pay for it (metaphorically and actually) in the new year. According to this FT report, in a survey of 1000 adults in the UK, Deloitte found:

• Consumers intend to spend 7% more this year on Christmas gifts, socializing and food and drink than last year.
• 19% of consumers intend to purchase a designer handbag or shoes.
• Price is a less important consideration for shoppers; only 20% of consumers listed price as a main reason for choosing a particular store (it was 37% in 2005 and 23% in 2006); “value for money” also declined.
• 62% of shoppers choose a store based on “convenience” (from 50% in 2005)

Deloitte says this is evidence of our so-called “cash rich, time poor” society, and I have to agree.

But back in the US, willingness to spend might not be as great. Despite reports of decent Black Friday earnings, this week NPR reported that the Consumer Confidence Index dropped to 87.3, down from 95.2 in October and the lowest since October 2005 (following Hurricane Katrina and rising gas and oil prices).

Rosalind Wells, chief economist for the National Retail Foundation, said:

With the weak housing market and current credit crunch, consumers will be forced to be more prudent with their holiday spending.

Even with the credit crunch, I’m not so sure people will actually be more prudent—if they have a line of credit they’ll use it to purchase expensive gifts they don’t see as optional.

We’ve seen it in cars and resorts; now ethical, sustainable luxury is playing a larger role in other aspects of peoples’ luxury consumption (according to this article in the International Herald Tribune from this past weekend). Ethical living has hit the media, through film (An Inconvenient Truth, Blood Diamond) and and in print (in glossy magazines like Vanity Fair and Vogue), and people are generally becoming more aware and more willing to spend on ethically produced products. Milton Pedraza from the Luxury Institute of New York said:

Our research shows that if wealthy consumers know that a luxury brand is socially responsible they will give that brand greater purchase consideration over a brand with similar quality and service.

Of course there is a worry for luxury brands that becoming sustainable and ethical will take away some of the aloofness and elitism that give them cachet, but if the move towards green living continues, companies will have no choice but become more accountable and transparent.

Knowing the provenance of an ethically-sourced item gives people something to talk about and makes them more involved in their luxury. So says Vivien Johnston, the founder of Fifi Bijoux, a British-based ethical jewelry company:

One of the key luxury elements is knowledge of provenance. It’s the value that really separates you. With Fair Trade, it’s not just a diamond: I can show you pictures of the miners, the mountains, the cooperative projects and the people that produced it, that’s a real element that you don’t get from most products and I think that people appreciate the story.

Whether ethical luxury is a fad that will pass or a truly revolutionary step for the market remains to be seen, but for now I don’t see any luxury companies becoming less green.

A hotel in Sri Lanka is offering a luxury dessert for its luxury clientele—for $14,500. Is offering the dessert simply a publicity stunt to build awareness of the hotel, or is the dessert worthy of such a price on its own merit? It does include an 80 carat aquamarine stone, which has about the same diameter as the head of a soup spoon.

Of course if someone is willing to pay the price (which one person apparently already has), he or she believes the dessert will provide a worthwhile amount of pleasure and enjoyment.

But is it in bad taste, given the amount of poverty in Sri Lanka and the fact that this chocolate, champagne and caramelized sugar confection costs about seven times the average Sri Lankan national income? Not according to the general manager of the hotel:

We have had a positive reaction both locally and internationally to the dessert which we don’t think is out of place, even in a country where there is considerable poverty… We felt that there has been so much negative news emerging from Sri Lanka in recent months in relation to the war, and wanted to come up with something that was upbeat and fun.

Upbeat and fun indeed.

[via BBC News]

Two articles worth sharing from the Sunday Times of London this past weekend; they both concern the idea of “buying status” through the purchase of expensive spirits and handbags.

Ordering a spirit and mixer at a bar in posh places throughout the world is increasingly becoming an exercise in name-dropping: “I’ll have a [Grey Goose or Zubrowka or Stolichnaya or any number of “prestige” vodka brands] and Coke.” This is happening for two reasons—(1) in many places (in the US certainly) house spirits can be of a decidedly dubious quality, and (2) a nice spirit is one of those affordable, aspirational luxuries that people feel can enhance their status (without necessarily enhancing their status). This name-dropping is welcomed by spirits manufacturers, because while you can’t tell a vodka by looking at the glass (unlike the immediate recognition that a handbag commands), people tend to be very loyal to their chosen spirit (unlike how a handbag might be switched by season).

Speaking of vodka and handbags—in addition to owning brands like Louis Vuitton and Dior, LVMH also owns Belvedere vodka. The other article discusses how handbags are increasingly important to luxury companies—they can be purchased easily, without the need for sizing, and net profits up to 13 times their production costs. There’s a great quote from fashion designer Miuccia Prada:

With the bag … there are no left-overs because there are no sizes, unlike shoes or clothes. It’s easier to choose a bag than a dress because you don’t have to face the age, the weight, all the problems. And there is a kind of an obsession with bags. It’s so easy to make money. The bag is the miracle of the company.

You can read the whole spirits article here and the whole handbags article here.

Will handbags remain so popular? Probably. The question is whether luxury brands can maintain their high class image while they face a threefold attack: from smaller new brands that can seem more exclusive and hip, from counterfeit bags that celebrities are starting to not mind carrying, and from the ‘unwashed masses’ who carry their bags but don’t make good brand ambassadors.

While many items or experiences considered luxurious are scarce or rare, a new class of ‘sustainable luxury’ items and experiences aims to be as exclusive as traditional luxury while preserving and respecting the environment. We’ve already seen hybrid cars—now entire resorts are being designed in an eco-friendly way. Last week marked the launch of Revolution Places, a new sustainable luxury resort company that is currently developing an $800 million 650 acre resort in Costa Rica.

According to the Revolution Places vice chairman Philippe Bourguignon:

“We are creating an environment that departs from the gated and manicured environment of conventional developments. Cacique, Costa Rica preserves the essence of the local culture and natural beauty, while offering luxury and wellness. This is a place where people are not only guests, but participants in a uniquely authentic experience.”

The company has several noteworthy initiatives planned:

• The resort design uses wind and solar patterns for optimal ventilation, shade and daylight, reducing energy and water demand
• A comprehensive recycling and solid waste management strategy is being developed that incorporates the use of renewable energy and an on-site treatment facility to re-use wastewater.
• Planned donations to local charities include one million trees, hydro-geological studies of the Panama aquifer and watershed, and computer learning centers

These are certainly worthy and responsible initiatives. But do they provide Revolution Places with a competitive advantage? Or will luxury consumers believe that Revolution Places is compromising the luxury experience to be green? We’ll find out in 2010 after Revolution Places opens.

From the International Herald Tribune this week: Louis Vuitton took part in its first “film collaboration” this year by giving director Wong Kar-wai carte blanche to use its products however he wanted in his new film “My Blueberry Nights,” which debuted at the Cannes Film Festival two weeks ago. Louis Vuitton participated (at the request of the director) because the road film matched brand values. LV president Yves Carcelle said, “The greatest voyage in life is one of self-discovery, and we wanted to be a part of that. It fit well with the identity of our brand.”

Subtlety is the key for successful film branding. The film uses Louis Vuitton apparel and accessories (including a LV key chain, blueberry-colored dress and luggage) in pivotal scenes, but it’s never actually about the products.

According to Leeza-Maria el Khazen, the founder of Reelbranding, a product placement firm: “The worst thing that can happen is that the audience feels like it is watching a commercial. It can have a very negative effect on the film and the brand because it draws the audience out of the movie. Sometimes it’s kind of shocking.”

The article mentions several successful efforts in film branding, including Armani’s dressing of Richard Gere in the 1980 film “American Gigolo” and Daniel Craig’s wearing (but never mentioning by name) Brioni suits in the latest Bond film “Casino Royale.”

In discussing “Casino Royale,” the article doesn’t mention Sony, by whom I personally felt offended while watching the film. Sure, Sony owns the movie studio so you might expect some “synergies”—but the blatant and constant use of Sony computers and Sony-Ericsson phones in the film, along with product tie-ins outside of the film, really did draw me out of the movie and make me resent the company behind it.

The lesson: content producers, if you’re going to place products at all, keep it subtle and don’t compromise your artistic integrity!

CNBC’s Margaret Brennan made a few interesting observations about luxury this week, triggered by the proposed purchase of Valentino by private equity firm Permira Advisors. This buyout is an example of a private equity firm paying a great deal (€2.6 billion) for a brand itself—past private equity purchases in the luxury / fashion retail space (such as Texas Pacific’s purchase of Neiman Marcus) had a great deal to do with the value of the retailer’s real estate.

Valentino is interesting because as Brennan notes, unlike other luxury brands it hasn’t made a masstige push and licensed out its name into high margin accessories. In Brennan’s opinion licensing brands “commoditizes them in a way that undermines the value of the name.”

This topic is no stranger to Janus Thinking. I’m of the opinion that when pursuing the masstige option, it’s a matter of keeping enough exclusives at the high end to keep buyers feeling special, and educating them that the difference at the high end is worth the price premium (without alienating the buyers of the less expensive goods who are really helping the bottom line). It will be interesting to see, if the purchase goes through, whether Permira will force Valentino to license its name.

This week Toyota announced a new luxury performance sedan, the Lexus LS600h L. At $104,000, it’s the most expensive car ever offered by the company. Decked out in leather and high-tech amenities, the car goes from zero to 60 miles per hour in 5.5 seconds and has 438 horsepower. It’s also “green”—its hybrid gasoline-electric engine gets it better gas mileage than a gasoline engine alone.

But is it really the perfect car for the rich but environmentally-conscious consumer? I can’t say I think so.

I don’t want to go so far as to call putting a hybrid engine into the car a gimmick, as it’s surely a well-engineered, luxurious vehicle (and admittedly it does emit less pollution), but the car only gets 20 miles per gallon in city driving. That’s less than many non-hybrid sedans and only a third of the city mileage that Toyota’s first hybrid, the Prius, gets. The Prius is also a quarter of the LS600h’s cost.

You don’t exactly scream environmentally-friendly when you’re using more petrol than many non-hybrid cars. Are consumers wealthy enough to spend six figures on a car are concerned about this? For now it’s unclear, but car makers and other luxury businesses are increasingly offering green choices.

The fruits of green technology should themselves be green, but this Lexus isn’t (or at least isn’t as green as it could be). As consumers become more aware and discerning of green choices, they may want a car with four times the gas mileage of the Prius if they’re spending four times as much.

When items that were once exclusive, sought after and expensive become commodities, branding suffers. 2 examples:

The Wall Street Journal had an interesting report this week about the recent pet food contamination incident in the US. A bad batch of wheat gluten caused more than 60 million cans of pet food to be recalled.

Pet owners were surprised to learn that a single company, Menu Foods Inc., manufactured all this pet food for dozens of competing brands. While the recipes (and supposed quality) differed, the contaminated wheat gluten did not.

“The sheer magnitude of how many branded products come from one source erodes the whole basic premise of what branding is in the eyes of the consumer — they feel duped,” says Eli Portnoy, who heads Portnoy Group Inc., a Los Angeles-based brand-strategy firm.

Pet food is especially interesting because its purchase plays upon the emotions of pet owners—no pet owner wants to “mistreat” his or her pet by giving them bog-standard pet food. Jack Trout, president of a marketing strategy firm in Connecticut said:

If the public begins to get the perception that there’s not much difference, then you can’t hold your prices — that’s the bottom line of the whole [pet food] scandal. Commoditization is the real enemy of branding.

Commoditization is also happening in electronics. Wal-Mart, with its extraordinarily efficient supply chain, got the ball rolling towards making flat screen televisions commodities by offering 42–inch sets for less than a thousand dollars during the past holiday season. This significantly undercut “big-box” retailers such as Circuit City and Best Buy; they had lousy first quarters because demand for their more expensive TVs dropped.

Wal-Mart offered both little known brands (Viore) as well as mainstream brands (Panasonic) for significantly less than competitors. I can imagine two things going through customers’ heads as they’re staring at TVs in a Wal-Mart: (1) there’s no reason to pay more for this well-known brand at another retailer and (2) the difference between this well-known brand and this unknown brand is pretty small—let’s get the cheap one.

Effective marketing can combat these sorts of thoughts and bring luxury back into the equation. However, this is difficult when people are reminded by things like the pet food scare that the products they select might not be as different as they seem.

Yesterday the New York Times published a revealing review of Tom Ford’s much ballyhooed new men’s store in New York City.

The reviewer, Horacio Silva, walked in to the store one day expecting massive amounts of attention to match the massive amounts of money that Ford wants for his designs (day shirts from $350 to $795, off-the-rack suits starting at $3,000, silk pajamas $1,900, monogram not included). The store offers a ridiculous amounts of choice, so much that shoppers almost require a steward or guide to help them find things in “unwelcoming,” “border[ing] on claustrophobic” areas of the store.

But Silva was offered no assistance, and gruffly informed by a security guard that he couldn’t go upstairs to the “appointments only” part of the store. When he made an appointment for the next day (and the staff found out that he was a Times reporter), the store and staff were welcoming and pleasant—”Champagne and smiles all around.”

Tom Ford has spoken a great deal about wanting to redefine luxury and create a truly sumptuous store. But the exclusivity he’s trying to cultivate depends upon treating everyone like a VIP. The store may drip luxury, but “Brand Ford” will suffer it doesn’t back up the luxury idea of the brand that Tom Ford has worked hard to create.

Today I came across an interesting commentary item from Unbound Edition, a publication by marketing consulting firm Patrick Davis Partners. Last month Bulgari announced that they are overhauling their business starting with their flagship New York boutique. The reason? They’re being left behind as Gucci, Louis Vuitton and other luxury companies actively court a broader (i.e. less wealthy) range of buyers. Bulgari’s plan is to focus less on the fine art gems they’re known for and more on relatively affordable accessories such as watches and handbags.

We’ve discussed the dilemma of keeping the brand exclusive while also bringing in new buyers on Janus Thinking before. Patrick Davis frames it in an interesting way in the article:

Once one can afford anything – a jet, a six-figure watch, the walled spread on Anguilla – luxury transforms into something shaped by knowledge and access, not acquisitive binge. … Buying luxury is no longer about money; the currency of knowledge is more powerful. In other words, the driver of luxury markets is not price, ubiquity, inventory availability or distribution, yet that all seems to be part of Bulgari’s move.

Knowledge worth paying for is certainly a phenomenon that’s picking up steam—greater interest in things from online review sites to concierge services reveals this to be the case. Would Bulgari be smarter to keep their exclusivity and do a better job of getting the knowledge out rather than going down-market with accessories? We’ll find out after their revamp.

Interesting story in the Wall Street Journal today—Wall Street firms including Merrill Lynch and Goldman Sachs are launching indexes that measure the “separate economy” of the rich, tracking some of the most famous brands in the world.

“The common denominator for all the stocks selected in our sample is they benefit from the increasingly hedonistic and eclectic consumption patterns,” says Antoine Colonna, the Paris-based research analyst at Merrill who helped create the company’s ML LifeStyle Index. … Merrill’s index, a group of between 15 stocks and 50 stocks, includes car makers BMW and Porsche; luxury conglomerate LVMH; fashion brands Bulgari, Coach and Burberry; jeweler Tiffany; auctioneer Sotheby’s; and private-banking firm Julius Baer. The index increased 23% in 2005 and 12.5% in 2006 — above the 14% and 7% posted for the Morgan Stanley’s MSCI World Consumer Discretionary Index, a widely used measure for global consumer stocks.

These luxury stocks are outperforming regular consumer stocks; spending on high-end goods has far outpaced the expansion of the overall consumer economy. But the WSJ does warn that this might be a bad sign:

Granted, investing in the upper class could turn out to be a poor strategy. Wall Street is notorious for launching sector funds at the peak of a sector’s growth. (Think health-care funds and tech funds in the 1990s and commodity funds last year.) The launch of the luxury indexes could be seen as the top of this market. In the wake of the latest upscale-buying binge, many luxury stocks have soared and have price tags as rich as their products.

For now though, people continue to spend and the introduction of the indexes is yet another sign that more people are interested in luxury.

But should they be? Today the Dalai Lama, the Tibetan spiritual leader, made a statement urging people to take a step back from the “mindless” pursuit of luxury because of the frustration and tension that such a pursuit can cause:

“In the era of globalisation and modernisation people are forgetting their real goal which is causing frustration and tension in their day-to-day lives… The objective of the people is confined to earning money and power by any means to enjoy luxuries and they are becoming selfish and self-centred in this mad run.”

He instead advocated more dedication to service to humanity.

It probably wouldn’t hurt Wall Street to hear the Dalai Lama’s different perspective. But I think if his advice were to reach them, it would probably fall on deaf ears—well, at least until the next bubble bursts.

This week Echelon Marketing Group released a study about marketing luxury items. I haven’t had the chance to review their data in depth (so I don’t know the size of their sample or whom they were talking to), but on the surface they seem to have found several interesting things:

- Luxury marketers need to better understand whom they’re going after

Echelon President Don Neal:

“Marketers rely primarily on four categories of data—demographic, geographic, behavioral and attitudinal—however, luxury marketers not so much. To understand who can afford expensive products and the impact of money on their attitudes and behaviors, they also need to consider a fifth category based on economic insights.”

- Luxury marketers aren’t that great on focused consumer messaging; only half of luxury marketers engage in one-on-one luxury marketing (though 85% say they want to).

- Email is the least effective vehicle for presenting a luxury brand image. Direct mail, catalogs, telephone calls and special events involving consumers are more effective.

Neal:

“When invitations are sent to a select group to test drive cars during a special event, research shows six out of 10 of them wind up buying a car.”

These findings suggest that there’s a lot of room for luxury marketers to become more effective. A recent Jupiter report suggested that affluent people spend more time online—but perhaps the ‘cheapness’ of email and its association with unsolicited spam (or a deluge of work from the office) keeps it from being useful.

It’s all about real luxury experiences—when marketers can truly engage potential buyers with their products, their efforts translate into sales.

Today the Times of London made an interesting note of luxury goods and services online. Janus Thinking has known and read mentioned sites Born Rich and Luxist for quite a while now, but we hadn’t yet heard of two other sites, 20Ltd and the Real Estalker.

Launching this coming Monday, 20Ltd will sell only 20 uber-exclusive luxury goods online at a time. The article notes three items soon to be sold that might strike a connoisseur’s fancy (or lead someone on the road to connoisseurship). The first is a four-piece coffee and tea set by Zaha Hadid for Alessi (pictured above) selling for 20,000 GBP. The second is an aluminum shell chair by Edward Barber and Jay Osgerby for 8,225 pounds, and the third is a set of 3 wallpapers, the “Devil Damask” by Timorous Beasties, for 666 pounds. Each of these items is very exclusive (only 100 or less available). It will be interesting to follow the success of 20Ltd, to see if the research suggesting that affluent people are more active online holds true.

The other site worth noting, the Real Estalker, provides a (somewhat voyeuristic) look into the properties of the rich and famous. Design ideas, anyone?

What happens when you put together a $1.5 Ferrari Enzo (one of 400 made) and a comedian more adept at one-liners than staying within the lines? Click on the video below to find out (from a charity fundraising event on March 26):

The comedian, Eddie Griffin, was okay. The owner of the Ferrari, however, was not.

We at Janus Thinking are always on the lookout for new luxury blogs, so we were very excited to see the L-List, a list of luxury blogs that Paul Johnson over at A Luxury Travel Blog has compiled. So, if you’re a luxury blogger and want to share, follow his instructions:

- Write a post.
- Copy/paste the link list (and these instructions!) from the post you’ve discovered the L-List into it.
- Make sure the links are active and correct.
- If your blog is on the list, remove it… it’s not a self-promotion post. As Tim Fehlman (Z-List) said : “Don’t worry, because if your name is on mine, it’s on others and will spread.”
- Add your favourite luxury blogs on to the list.
- Add the URL of the blog where you’ve discovered the L-List as well.
- Publish the post.
- People will notice the L-List and continue it.

We’ve added a few we like: Born Rich, I Love Bling, Glenn O’Brien’s Style and the Wine Camp Blog:

A Luxury Travel Blog
B Glam
blavish
Blog-Tique
Born Rich
Deluxe Blog.it
DiamondVues
Foodaholic
Glenn O’Brien’s Style
Good Luck Deluxe
GourmetStation
High Chic
I Love Bling
Living the Luxe Life
Lussorian
Luxist
Luxury Home Digest
Luxury Housing Trends
Luxury Portfolio
Luxury Reviewer
Luxus.fr
Restaurant Girl
Social Diva
Sybarites
Tango Diva
The Delicious Life
The Informed Traveler
The Lobby
Vagablond
Vinography
Wine Camp Blog
Wine Goddess

Any others we’re missing? Let us know in the comments.

Recently I was able to review a Jupiter Research report about the behavior and habits of wealthy people online. ‘Demographic Profile: Affluents Online’ (released March 1) describes the types of activities affluent people do online, how many hours per week they devote to media, and what types of online content they trust. The data comes from a recent survey Jupiter Research conducted in 2006.

It’s a pretty interesting report, though not very surprising. Without revealing too much of the report (you can purchase it online here), affluent people (defined as those with incomes of $100,000 or more) have greater activity in every online category Jupiter identified except for adult content and gaming. The gap between affluents and nonaffluents was particularly large with regard to financial services (understandably) and engagement to social media (i.e. instant messaging, reading/writing blogs).

Affluent people spend more time engaged with media compared with nonaffluent people, especially with regard to listening to music (5 more hours per week than nonaffluents) and going online (3 more hours per week). Affluent people are also generally more skeptical of online advertising, though 70% trust product reviews and other opinion on companies’ websites (compared to a 66% trust level from nonaffluent people).

Knowing what affluent people do online certainly helps luxury brands and retailers know where to direct their marketing efforts. That affluent people trust product reviews on company websites is interesting; perhaps it shows that the money luxury brands spend to develop interactive websites is money well spent.