Luxury brands make bad moves to garner sales

Isaac Mostovicz writes...

Does the recession we’re entering (or have been in for a long time now, depending upon whom you ask) spell the end of luxury spending? Of course not, but it has forced both luxury good makers and retailers to change their strategies, often for the worse.

Some luxury retailers, like Bergdorf Goodman, are reaching out, cold calling potential customers to personally invite them to the store. And some luxury good makers are reducing the quality of their products rather than raising their prices. Bulgari has stopped polishing the underside of a $10,000 watch and is using less expensive packaging.

I don’t think this is a sensible course of action. In my opinion, it’s more harmful to a brand to lower its quality than to raise its prices. There will always be price insensitive customers, it just becomes a little more difficult to find them during a recession. The marketing has to be better. Tarnishing the brand will make it more difficult for the brand to recover when business returns to “normal.”

Nicole says of this article...

I wholeheartedly agree with you Isaac. When you’re dealing with luxury clientèle, under no circumstance should quality be jeopardized. There will always be consumers with minimal price sensitivity. It is why luxury brands exist and continue to exist. It’s upsetting to think that a company as powerful as Bulgari wouldn’t take this deal breaking factor into consideration. Thanks for the insight.

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Luxury consumer tastes from around the world

Isaac Mostovicz writes...

TIME Style & Design has just come out with an in-depth report on affluent consumer tastes from around the world. The print edition (unfortunately not available online) delves into the appetites of European shoppers—the Spaniards, Italians, French, British, and Germans—who now are considered some of the wealthiest consumers in the world thanks to a strong euro.

Did you know that Italians own more brands than any of their counterparts and outspend them on watches and jewellery? Or that Spain has the highest percentage of “uber lux” consumers, those with high incomes and luxury-market activity?

It is fascinating to juxtapose the tastes and psychologies of EU neighbours, but TIME adds some more food for thought in its online exploration of luxury in the top emerging economies of China, India, and Russia. What does luxury mean to these three countries who for the first time in decades are finding the economic freedom to afford such indulgences?

For China, who accounts for 12% of global luxury sales, luxury is in demand. Designer watches (66% of affluent consumers bought a watch of an average $2,253 in the last 6 months) are high status symbols, as well as skin-care products. The Chinese consumer will spend up to $280 on a skin-care product, which is almost 3 times as popular as make-up.

In India, the luxury market could grow as much as 25% in the next 3 years. Menswear brands top the most well-known luxury list, which is no surprise as many women still wear saris. Interestingly, local brands, such as Park Avenue, Allen Solly, and Reid & Taylor, also rank high, but considering previous high import taxes, it’s no surprise foreign brands aren’t more prominent yet.

And for Russians, with a heightened sense of brand awareness, flaunting one’s economic status is what luxury is all about. While Russians crave luxury fragrances, it’s jewellery that really whets the appetite: Bulgari, Cartier and Tiffany & Co. top the list of most widely owned brands.

It appears as if there are ripe markets to break into and hungry consumers to feed—something luxury retails are well-ready to capitalize on.

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Real World Thetas and Lambdas’s Luxury Purchases

Isaac Mostovicz writes...


As stories continue about how much the wealthy are suffering in this economic downturn, it’s interesting to note what people are still spending on. This article from the Wall Street Journal reports that many luxury firms have so far been resilient in more difficult economic times, finding consumers at the high and low end of the luxury market who are still willing to spend. The article includes examples from three individuals:

Jordan Shapiro, a 25-year-old Wall Street recruiter, says he isn’t sure what his income will be this year, so he put his plans for an African-safari honeymoon on hold. But he splurged a few weeks ago on a $3,000 Omega watch, which he considers an investment. “I hope it’s going to retain or gain value,” he says.

Stephanie Wickouski, a 55-year-old New York attorney, walked out of an Hermès store this week with a “heart-stoppingly expensive” $950 cashmere shawl. Despite the price, she says the shawl is a good value for the money, because it has “range and permanence,” meaning it can be worn over a dress, paired with a skirt or even worn on an airplane when it gets cold.

Margaret Schwartz, a 24-year-old assistant ad-sales representative in New York, shops for clothes at cheap-chic chain H&M. Yet she recently bought a $300 pair of Bulgari sunglasses — one of the Italian jewelry label’s least-expensive items — because she figured she could afford an “investment piece.” “Aviators are always in style,” she said, strolling past Tiffany’s Wall Street store.

This small amount of information about each individual is enough to categorize them as Lambda or Theta. I would consider Mr. Shapiro and Ms. Schwartz to be Thetas. In their mid-twenties, they consider their luxury purchases as investments. I would guess that they are also using their purchases as a way to stand out among their peers (Mr. Shapiro can be seen in his watch on Wall Street, and Ms. Schwartz’s sunglasses are “always in style.”). This desire to fit in is a typical Theta characteristic.

Ms. Wickouski, on the other hand, seems to be more of a Lambda. She recognizes how expensive her new Hermès shawl is, but the pleasure and utility she derives from it makes it completely worth it to her. She interprets “range and permanence” as something highly desired; the shawl makes her unique.

An awareness of what Thetas and Lambdas are looking for, and of what products represent to them, can help marketers reach these individuals more directly.

Photo by Doozle

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A New Bulgari

Isaac Mostovicz writes...


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.

Patrick Davis says of this article...

Janus Thinking: Many thanks for the kind reference to the article on Unbound Edition. Seems we are thinking about many of the same things. Luxury is becoming evermore complex, and good dialogue like this certainly helps. Currently very interested in how luxury marketing is “less glamorous” than ever. See, for example, PlumTV ( http://www.plumtv.com ) and the brilliance of the easy / good / relaxed life in small communities. Luxury is part of the hyperlocal movement, at least in this example.

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