I found this recent article about how luxury retailers are weathering the financial crisis to be very interesting. In three different places, it describes how luxury is shifting in a Theta direction. Let me elaborate:

The author describes a shift to craftsmanship from ‘bling’–appreciating craftsmanship is something that Thetas do. On the other hand, Lambdas believe that nature creates luxury, not craftsmen.

Francois-Henri Pinault, the chairman of French group PPR was quoted as saying, “People want a return to genuine values like timelessness.” Thetas think luxury is timeless, while lambdas think that luxury requires a lot of time.

Suzy Menkes, fashion editor of the International Herald Tribune, said that luxury consumers are looking for designer goods “that can be passed on to the next generation.” This characteristic of luxury holding its value over time is another Theta mark, whereas Lambdas think that luxury holds its meaning over time.

Is the global economic crisis shifting the luxury market towards Theta? I’m not sure–I think there will always be space in the market for Thetas and Lambdas. It just takes different marketing strategies to reach them.

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.

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!

Is it connoisseurship when people overpay? Shouldn’t they know better? Or are they just putting their appreciation of the object they’re buying above all else?

I pose these questions after Sotheby’s and Christie’s held fine art auctions this week. Souren Melikian posits in yesterday’s IHT that the link between the price paid for items and the artistic achievement displayed was tenuous at best. Sure, these were one of a kind pieces from some of the masters—but if nothing else bidders were inconsistent. At Sotheby’s, a Cezanne watercolor went for an “unthinkable” $25.5 million, but was quickly followed by sketches that went for a “modest” $2.28 million and an “absurdly low” 1.27 million.

Melikian acknowledges that it is difficult to tell what the price of a very rare work of art should be, but two paintings that were certainly worthy, a “breathtaking masterpiece” by Maurice de Vlaminck and a “beautiful” painting by early Impressionist Eva Gonzales, found zero bids.

Of course the bidders were paying what they thought was a fair price for the art—but if the art lacked the quality and aesthetics expected for how much was paid (at least in the opinion of the IHT reporter)—can we consider the buyers to be connoisseurs? Maybe. Beauty remains in the eye of the beholder / holder of wealth.

Nice little article from Suzy Menkes, fashion editor of the International Herald Tribune, about her idea of luxury, recently published in Kiwi Collection, an online luxury travel magazine.

For me, luxury is art, craft and sensory pleasure. Art is something that we understand. It may be difficult and challenging but it is at the heart of luxury.

I agree with her; part of the difficult and challenge in art (and connoisseurship and luxury) is putting in the time and effort to develop a worthy appreciation. At Janus Thinking we believe that a big part of luxury is understanding yourself and what you want–the luxury you choose should always ‘feel’ right. Menkes concurs; she says that people long for true luxury experiences; they go out of their way to find places and things with perfect design and ambiance. You can read all of Menkes’ article here.

An article in the IHT highlights a renewed interest among manufacturers in niche market luxury handsets. Vertu, the sector heavyweight, simply can’t turn out their precious-metal phones fast enough, as they are restricted by the limited capacity of their workshop in the UK.

However, if Siemen’s venture into the luxury market can be taken as an example, evidence would suggest that mass production and (relatively) affordable pricing is not the way to go. Their Xelibri line was culled after only 18 months in the market – but the Gizmodo article doesn’t quite tell the whole story. While the Xelibri handsets were undeniably oddball, and had only a limited feature set, the same could be said for Vertu’s line-up. Less quirky, perhaps, but a far cry from today’s smartphones in terms of functionality.

Is a high price a key determinant of appeal, then? The Xelibri range retailed for hundreds of pounds, whereas Vertu’s premium range starts in the tens of thousands; had Siemens added a couple of zeros to the prices of their fledgling range, woud they have fared better?

Economists call products which exhibit this characteristic Veblen goods, after Thorsten Veblen, who was among the first to examine the purchasing of luxury items. To anyone involved in brand strategy, this concept won’t be at all unfamiliar – by pitching to a higher price bracket, the sense of exclusivity is increased.

However, all of this comes with a caveat: unless the expensive product is backed up with outstanding customer service, great packaging and comprehensive after-sales support, the appeal may quickly fade. Simply slapping a bigger price tag onto a poor product experience won’t drive new custom.