A recent survey found that half of China’s urban residents say they prefer buying luxury items online because prices are cheaper than franchised stores.

While this fact is very interesting, and suggests that more companies should make an effort to offer their wares online in China, interest in luxury in general in China is growing rapidly. The Chinese are buying more luxury cars and SUVs than ever before — 500,000 will be purchased this year, compared with 98,000 five years ago. Luxury companies are opening stores (Louis Vuitton opened two flagship stores on the same day in Shanghai earlier this year) or are thinking of opening stores (Harrod’s comes to mind), and luxury hotels (like the Waldorf Astoria Club Hotel) are popping up all over the place.

All this suggests that marketers from the west are beginning to understand how the Chinese interact with luxury, but a great deal more can be done to enhance sales and the experience of buyers. The key is understanding how individuals interpret luxury, and this often comes down to understanding culture.

Photo by gruntzooki

The new Louis Vuitton flagship store opened in London last week. Situated on Bond Street and designed by Peter Marino, the multi-million pound “boutique fantasque” seeks to be like a home to well-heeled “collectors,” which speaks to both Theta and Lambda personalities. There’s currently a special exhibition of the 24 collections Marc Jacobs has designed since he first arrived at LV. Akin to that of a fashionista’s walk down memory lane, the whole effect is ‘expensive, quirky, glamorous – and totally contemporary’, writes Hilary Alexander, Fashion Director at the Telegraph.

When asked by Alexander about possible issues concerning the economic recession on the store’s opening, Jacobs replies “I know for a fact that business is good.” He goes on to say:

Louis Vuitton is a unique organisation: the products never go on sale, nor are they sold at duty-free shops. We create what people desire. And I love that commitment to quality.

Perhaps it’s this uncompromising nature that continues to maintain the brand’s revenue, despite the state of today’s economy. However, this approach only works for truly innovative, unique and long standing brands like LV. Not all designers can be so uncompromising. As seen in a previous post of mine on designers’ optimism, fashion designer and entrepreneur Carolina Herrera talked about the difficulty of maintaining the brand and its customers with the need to cut costs. Slashing prices on luxury brands is always dangerous as you risk jeopardizing the brand’s integrity and exclusivity. There are ways around this, as proven by the likes of Tiffany and Co. who avoided slashing prices by decreasing inventory levels instead.

Describing himself as a ‘collaborator’ and not a director, Jacobs dismisses the thought of a couture collection or the possibility of designing costumes for films, stating that the “ready-to-wear [lines] is pretty much at couture level, anyway.” Clear on the direction he wishes to take the brand towards, Jacobs plans to launch the first ever Louis Vuitton fragrance.

By maintaining a high standard of quality, Louis Vuitton has managed to thrive, not just survive, during this global economic recession. As the economy improves, they’ll hopefully be able to keep it up.

Louis Vuitton is a quite a desirable luxury brand–so desirable, in fact, that its logo is often put on counterfeit goods trying to pass off as official Louis Vuitton goods. Interestingly, the logo also makes its way to goods that would never, ever be associated with the Louis Vuitton brand. The ‘Design You Trust’ blog collected several great examples; you can see the whole gallery here. Here are a few of my favorites:

It’s great to be a desirable brand, but having the LV logo on things like these could dilute its value. I wonder how Louis Vuitton balances the need to police the marketplace for counterfeit goods versus the need make real Louis Vuitton goods exceptional.

Tiffany was in the news this week, not for a new line of diamond rings or earrings but because it lost the long-running lawsuit it’s had with eBay about the sale of counterfeit Tiffany goods on the site. Tiffany maintains that eBay knowingly encouraged sellers to dilute Tiffany’s value and trademarks by not putting a stop to counterfeit Tiffany listings on the site. Rather than resting with eBay, the burden for identifying counterfeit goods rests with Tiffany, who have to report counterfeit listings to eBay and have eBay remove them. EBay argues that like YouTube it’s up to the trademark holder to report false listings, and they already take enough action against counterfeit items because these are bad for their marketplace.

This American ruling is interesting because it diverges from recent findings in European courts. In Germany a ruling for Rolex found that eBay must make greater preventative measures against the sale of counterfeit Rolexes, and in France eBay was ordered to pay Louis Vuitton 40 million euros in damages for the sale of counterfeit goods.

Counterfeit goods damage brand value–if discovered, they’ll upset people who purchase them and receive them as gifts; they mock the effort that people make to show their love and appreciation for one another. The takeaway from this case is that one needs to be careful when make purchases from a source that hasn’t been completely vetted. When a deal sounds too good to be true, it probably is.

[Photo by minxlj]

Last month a discussion at the Paris Fashion Group heralded the continuing success and integration of Fair Trade and sustainable goods into luxury products.  Comments from the panel suggested that luxury consumers are not necessarily interested in ethical considerations, but rather in finding a unique and “industrial” product.  And this new type of demand seems to be increasing; some are even calling it a “meta-trend” for this generation of luxury shoppers.

Sylvie Benard, a spokesperson from LVMH, also noted that the brands her company represents–such as Moet-Hennessy and Louis Vuitton–do not publicise the great strides they are making in their production process.  Nonetheless, they are reducing the amount of water being used to produce their champagnes, cutting the amount of electricity being used in their flagship  Louis Vuitton store in Paris, and working with producers in the developing world to build their local economies. Although they don’t talk about this, Benard noted, “To be extravagant out front you need to be impeccable out the back.”

[via AFP]

Following my post questioning whether we use luxury for the right purpose, today the Associated Press published a story about the booming luxury market and skyrocketing prices for unique luxury items.

Exclusivity is in–logos and brands are important, but not as important as the quality and uniqueness of an item. Items cited in the article include a $700,000 Montblanc pen (covered with rubies, diamonds and sapphires), a $40,000 Louis Vuitton handbag (a limited number were sold out in pre-orders) and a $10,000 Coach crocodile handbag.

Attaining the “highest” level of luxury appears to getting increasingly difficult. But should it be? It might be worthwhile for people to take a step back and remember that luxury is subjective. It doesn’t need to be a $1000 pair of shoes. And if $1000 shoes are the only or most prominent ideal of luxury, that’s “a terrible ideal for young people,” according to John Vogel, faculty director at the Allwin Initiative for Corporate Citizenship at Dartmouth.

We need luxury, but we also need to know what luxury is, for ourselves.

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!

Earlier this month the Luxury Institute released a survey that found that when buying a handbag, men in the US are more concerned with the label than with the price compared to women. 73% of men looked first to the label when buying a handbag (compared to 50% of women), and men were three times as likely to choose Chanel.

It would have been interesting if the Luxury Institute had determined (or at least released) what the actually percentage of spending on handbags is for men versus women. I have a sneaking suspicion that women purchase the vast majority of handbags for themselves and men buy only a tiny percentage as gifts. US leather goods seller Coach was the most familiar brand of designer handbags, recognized by 52% of respondents. 24% recognized Gucci, 22% Louis Vuitton and 21% Prada.

This makes sense—Coach bags are relatively mid-range (costing several hundred dollars) compared to European labels whose bags can cost in the thousands. Men may choose the fancy bags on the basis of brand but women are buying more of the cheaper Coach bags as they’re less concerned with label compared to other factors like price and quality.

If it is true that women buy the vast majority of handbags, the marketing challenge is then to get men to buy more handbags for women. This completely opposes the status quo in the jewelry industry, in which the goal is for women to buy more jewelry for themselves.

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.

Luxury brands command a premium because they infuse the act of buying with emotion. Shopping is turned into an experience. But what distinguishes a quality, luxury product from one at the mediocre end of the market range?

According to Haupt, a senior advisor at Steuben Glass in New York, the product has to ‘speak for itself’. A luxury item is not dependent on cost. ‘Throwing money around … just creates a lot of noise’ (David Birnbaum). Rather, the creation of a luxury product is dependent on quality.

Today, it seems that a whole range of products, including Costa Coffee, Lindt chocolate, and Haagen Dazs ice-cream, have been elevated to the pinnacle of connoisseurship. It is about creating an experience that enables the customer to develop a particularly personal relationship with the item. In February 2004, Louis Vuitton opened a four-storey boutique on Fifth Avenue, detailing flashing LED screens and a staircase made of bronze and chestnut. The idea was to produce a sensory journey through the store using light, colour and texture. Sensory experiences such as this, as opposed to discrimination are of primary importance.

And by discrimination, I mean class divisions. A tub of Ben & Jerry’s often costs 100% more than a store’s own brand ice-cream, but it is nevertheless accessible to the ordinary buyer. As Michael J Silverstein, SVP at the Boston Consulting Group has indicated, old luxury revolved around aristocracy and high prices. Today, luxury is tailored to the requirements of the vast middle income market. It is the result of higher incomes, rising home values and a self-permission that has given to the ordinary consumer a taste for fineness, distinction and sophistication. It is quality rather than price that identifies a luxury item. A palate for quality can only be a good thing.