A recent article on Wall Street Journal talks about a surprising new trend picking up speed in China – creating fake bags. Nothing new here, you might think, but these bags are not made of fabrics or leather, but rather are fake brand carrier bags.

Image from Bloomberg news

The article says

“The ability to flaunt Gucci and Chanel shopping bags has long drawn Chinese shoppers to luxury labels. But now China’s high-end showoffs are figuring out that there’s no need to spend thousands of yuan for a bag that’s available online for a mere fraction of the price.”

This clearly shows something about the value that is placed on luxury items in the country.

However, according to this Financial Times article, brands are becoming more cautious after a prolonged period of agressive expansion in the country.

The article reports:

“Some brands are making conscious decisions to reduce the pace of expansion and focus more on store performance improvement,” said Bain&Company in its latest report on China’s luxury market. The management consultants say growth gradually softened in the fourth quarter and quote luxury brand company executives as saying they are only “cautiously optimistic” for next year as they “don’t have enough visibility”.”

However, this is not because Chinese consumers are not buying luxury goods – the article goes on to say that Chinese consumers are still buying, but are choosing to do so abroad as it gives them better value for money.

It will be interesting to watch what happens to the luxury market in Asia as it goes seemingly from strength to strength.

A recent article on Triple Pundit talks about the definition of luxury changing, both for affluents and non-affluents, due to the current economic climate.

The article quotes an Advertising Age report, saying

“The desire for luxury experiences has not disappeared, but has been redefined for a new era… expressions of luxury have become smaller, more personal and intimate.”

I have written about this previously, arguing that luxury marketers need to focus on getting to know their consumers and on encouraging them to behave according to their own personal values, not simply acting as a sales person but rather as a trusted advisor.

In order to better understand consumers, I have developed a simple characterisation consisting of two personality types – Theta and Lambda.

The Theta personality seeks affiliation and control as an ultimate life purpose, so they loom to fit in within a desired group and use socially-derived understandings of product characteristics as a basis for their consumption.

Lambdas, on the other hand, seek achievement and uniqueness as an ultimate end goal, and so are more likely to interpret products based on their individual responses to the product, how it helps/prevents them to stand out, and how the product benchmarks against their regular consumptive patterns.

I was interested to read this article on the definition of luxury and how brands are managing dual expectations of exclusivity and creating a dialogue with consumers.

The article says that luxury is “more than ‘something adding to pleasure or comfort but not absolutely necessary’… to be truly luxury you have to have an element of exclusivity.”

I have previously written on the importance of exclusivity for luxury brands in my articles on the recent trend towards exclusive experiences such as ice sailing, and the rise of ‘no-logo’ luxury.

The article raises the point that brands are trapped between investing in social tools – important to not get left behind, but counter-intuitively making the brand more accessible – and trying to maintain exclusivity.

According to a new study on ‘New Affluents’, the qualities that they value in brands are quality, aesthetics, uniqueness and authenticity, not necessarily a high price tag. They are looking for more brand interaction, and for brands to in a dialogue with them – even to be part of the product development process.

This, I suspect, is why we are seeing more luxury brands than ever throwing themselves into the digital media space, with brands like Oscar de la Renta using platforms such as Facebook to sell exclusive products. But they are also offering tailored services, with Burberry offering a bespoke trench coat service for $9,000 – exclusive, with an element of personalisation.

It is important for luxury brands to connect with their current and prospective consumers, and it is interesting to watch the different ways that brands are going about doing this. Kahro, (the Raleigh NC jewlery store that I founded) for example, differentiates itself by providing consultancy on what kind of diamond would best suit each individual, enabling the customer to make a choice which is both personal and which they are deeply involved in.

Luxury may mean different thing to different people, but if a luxury brand can differentiate itself by both remaining exclusive and interacting with its consumers, it will surely do better than those brands that refuse to change.

Luxury brand Marc Jacobs is connecting with consumers through a campaign which encourages sharing images and videos, for the chance to receive branded prize.

Marc Jacobs MarcFam

The MarcFam campaign sees both brand and user created content sitting side by side on the website, which is released into social media, email and web outlets. Consumers can add images with the hashtag #MarcFam to Twitter or Instagram posts for the chance of winning Marc Jacobs goods.

The campaign sees branded videos of Marc Jacobs employees exchanging and opening gifts, such as sunglasses.

Marc Jacobs employee receives sunglasses

Each product is then labelled with its price and name, so consumers can go and buy it.

Marc Jacobs sunglasses

A Marc Jacobs spokesperson said:

“Marc Jacobs Intl. is a brand full of eccentricities. Through our social channels, our fans reach out to us in ways that reflect our own eccentricities. We wanted to hear their stories and see their photos that illustrate those stories. We love integrating social media into our business as a way of fostering relationships with our customers online. In this case, #MarcFam takes those online relationships offline and into the real world.”

I have written previously about the need for luxury marketers to develop relationships with their customers and encouraging consumers to behave according to their own personal values. This campaign is a good example of a luxury brand taking insights about its consumers and using them to develop a two-way dialogue with them, allowing them to “add to the world of Marc Jacobs on their own terms”.

“Digital could be the differentiator for brands that become iconic, and those that become irrelevant. Establishing direct relationships with end consumers through e-commerce and social media provides an opportunity for European niche fashion brands to punch above their weight class.”

Christie's Mobile Auction application (Luxury Daily)

“Really the goal behind this is first, to enable our existing client base who are primarily on the move with a platform that allows them to experience Christie’s offerings on-the-go. The second is to introduce our brand to a new population with whom Christie’s is out of reach or not understood by. We think mobile is a good way for Christie’s to bring the brand to light for a younger generation with which I feel we are a bit out of touch with.”

With an increasingly competitive global luxury market, luxury brands are truly having to go the extra mile in order to impress and retain customers.

To this end, Louis Vuitton has announced that their new maison in Rome “will house a small cinema showcasing art films from contemporary artists“. This follows a trend that has seen cafes and restaurants in stores (Armani and Gucci), concert halls (Chanel), book stores (Marc Jacobs) and art galleries (Louis Vuitton). This announcement also follows Conde Nast’s announcement that they are starting a film and television devision to leverage their editorial products in a new medium.

As luxury blog Material World says on the matter:

“Luxury has moved beyond simply buying celebrities or dressing them, on or off screen, to thinking about how they can use their own celebrity to pull people in.”

As video content is set to make up 62 percent of internet traffic by 2015, this may well be another wise decision by LVMH.

The luxury market in China has been steadily rising, as Chinese consumers look set to create a rise in luxury goods sales of 25 percent this year.

According to a Bain & Co. study from earlier this year, as second and third tier Chinese cities become ’destinations’ for Luxury brands, China will become the third-largest luxury market in the next five years.

As reported by the Wall Street Journal,

“Bain predicts the worldwide growth trend will continue for the next few years, with sales rising between 5% and 6% each year to between 214 billion and 221 billion euros by 2014.”

This prediction is leant weight by the news of brands such as luxury hoteliers Ritz-Carlton Hotel Co. expanding their presence in China. A recent article by Luxury Daily on the Ritz’s expansion notes that this is taking place as part of a $2 billion expansion. Ritz-Carlton already has eight hotels in China, and has made the decision to expand based on there being a growing affluent population that is beginning to reward itself with luxury goods, services and travel.

A Ritz-Carlton spokesperson said:

“Given the focus on China right now, there is no small secret that China is an emerging country when it comes to lots of different things… there is a huge amount of the population that is now on the move and starting to travel. There is also an equally large population following purchasing behaviours into a luxury market.”

As each Chinese city is very different, none of the Ritz-Carlton hotels in the country are the same, but rather are “culturally relevant”, with the locale reflected in menus and services.

Alongside the news of Ritz-Carlton’s expansion, it was announced today that US luxury bag maker Coach will be listing shares in Hong  Kong as it seeks to raise its profile among Asian consumers. This follows successful flotations by luxury fashion house Prada, and luggage provider Samsonite.

After two years of lobbying, the European Cultural and Creative Industries Alliance – the overarching European luxury organisation – has finally got the attention of the European Commission (EC) according to this blog post in the Financial Times.

The article notes that it is surprising that this has taken so long, as of the top 25 worldwide luxury companies 17 are from the EU, and Europe is responsible for 75 per cent of the global luxury market, more than €170bn of the worldwide luxury goods consumption and employed in 2010 up to 1 million people in the sector.

Until now, luxury items were classified by the EC under sectors such as ‘fashion’, or ‘textiles’ which does not seem to recognise that luxury is a powerful industry in and of itself – and one which is, for now, growing at a rate which other sectors can but admire, with brands such as LVMH and Hermes posting strong quarterly results.

Hermes Bag

Luxury brands have a history of being innovative – either through their products, stores or, more recently, their digital brand building. This innovation is something which I believe organisations at all levels can learn something from, and I hope that the EC will encourage this innovation and growth as much as possible.

I have recently written on the link between luxury brands and Corporate Social Responsibility, or CSR, so it was with interest that I read the Financial Times blog post “Luxury conquers its CSR fear” which reported that the luxury industry is slowly beginning to talk about sustainability and CSR more openly.

The article gives the example of luxury jewellery brand Tiffany & co. who have recently launched a new website dedicated to CSR. This is interesting because a few years ago the author of the Financial Times piece ‘graded ‘some public luxury companies in CSR categories, and Tiffany did particularly badly, in part due to a lack of public information.

Tiffany & Co: CSR section of the website

It looks as though, the article argued, luxury brands have realised that in an age of transparency it is better to have information out there for consumers to see, rather than hiding information behind closed doors in the fear that consumers will pick holes in it.

It is not just Tiffany that is doing well – LVMH also has a section on CSR on their corporate website, with an environmental charter.

This article illustrates that the luxury industry is beginning to change, and  I believe that sustainability and luxury are no longer mutually exclusive terms. This not only makes good sense for the long-term prospects of the brands in question, but can also be a positive attribute in luxury marketing – particularly if the brand aligns its CSR initiatives to core brand values and identity, and resonate with consumers.