Counterfeit goods are a major problem for luxury brands. They remove the exclusivity that luxury brands carefully cultivate and in many cases take the place of goods that affluent people would otherwise purchase. It feels like a victimless crime to purchasers–they might think that with these these goods so in demand and these companies so rich, a single purchase won’t make a difference. But enough people around the world are thinking this way that it is affecting the bottom lines of luxury companies. Authenticity is changing from necessary to optional, and two items in the media this month highlighted this fact.

The first is an article in the UK’s Independent about the fakery related to luxury goods, enhanced physical appearance (via surgery, botox or Photoshop), and ‘reality’ television. For decades celebrities have had a symbiotic relationship with fashion houses–the houses provide clothing and jewelry to make celebrities look beautiful on the red carpet, and the celebrities in turn mention who made their dresses, earrings and other ephemera. But recently a few celebrities (Renee Zellwegger, Courtney Love and Britney Spears are named in the article) have been photographed with counterfeit handbags or dresses, sending the message to the public that it isn’t just legitimate to purchase counterfeit goods, it’s glamorous too. Read the article here.

Earlier this month the BBC Radio 4 consumer affairs program You and Yours ran a similar story, about how the Italian government is cracking down on counterfeit goods. The government believes such goods are costing the country nearly $10 million a year, so it’s taking action by putting tougher customs controls in place and going after wholesalers and importers (rather than the street vendors at the bottom of the chain). You can listen to the whole interview with Silvio Paschi from Indicam, an Italian industry group against counterfeiting, here.

What can turn the tide to make authenticity absolutely necessary again? It’s a similar proposition to keeping luxury brands exclusive as they expand their masstige lines–luxury companies need get the message across that the luxury they offer is incomparable and inexorable–people need to know that the experience and prestige that true luxury offers can’t be matched anywhere.

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.

Luxury can no longer be defined along the same lines as we grew up with, or whatever we learned at business school. Before the Rolls-Royce motor car brand fell into BMW hands, annual sales had dwindled: Bentley, once the poor brother of Rolls-Royce, was much more PC and less ostentatious. Even today, HM the Queen’s official car is a hand-made Bentley, an unforeseeable event at the time of her Silver Jubilee.

But in the travel market, I have noticed an opening up at the very top end. To date I still have not heard of a six-star hotel, but I have heard of seven-star ones.

So is this just the changing of the guard?

It can’t be that simple. Recessionary environments do cause a rejection of some luxury brands, but others preserve their niche, comfortably. Yet others extend downward in order to keep sales up.

But at the other end, what were everyday brands have acquired an air of luxury themselves. Levi’s was made for gold prospecting, not posing, at least not initially. Volkswagen was the People’s Car of the Third Reich, not the archetypal “quality” European automobile by which everyone, even Toyota, judges its small hatchbacks.

We have Hennes & Mauritz selling clothes in collaboration with Stella McCartney, then Viktor and Rolf, and now Madonna, just to make the old segments irrelevant, or at best, muddled.

Other forces at work have included the democratization of experiences: the James Bond lifestyle, once the stuff of fantasy, is no longer out of reach. Jet travel itself, indulged by millionaires once upon a time, can cost as little as £1 through some of Britain’s cheapest airlines.

It was in this world that Lucire branched into print in 2004, after seven years, having secured by the end of 2003 the position of the world’s leading online-only fashion magazine. The first problem was: if segmentation as we knew it was dead, then where on earth would this magazine fit?

And the second problem: even if we figured it out, and even if the customer knew, would the channels understand?

One reason I always felt at home in Scandinavia is the whole idea that luxury, or at least design excellence, should be available to all. It is a familiar principle to anyone who had studied the history of the Bauhaus Design School in Weimar; fortunately for the Swedes, they managed to keep those principles going in a fairly uninterrupted fashion through World War II.

Lucire was born in 1997, at a time when the notion of democratization was stronger than that of snobbery. It did not matter if a web site was made by a one-man band or if it were created under the auspices of Condé Nast; anyone, with the smoke-and-mirrors knowledge provided by design and typography, could play the luxury game. And so we did, with one eye remaining on the way consumers were changing.

And they were, rapidly. Luxury was about accessibility, not exclusivity. Premium is the new mainstream. Those words remained with us as 2003 became 2004, and Lucire’s future as a multi-media (the hyphen is intentional) property unfolded.

I still believe this. Quality can be had for $9.95 or $99.50, and in the fashion business, these sorts of differences are not unrealistic. We decided that Lucire’s price had to undercut some of the existing magazines, even though we were printing on a larger format page, based on the idea that consumers were moving away from the old divisions. We had to bring some of the internet principles into print.

We priced Lucire above the popular Australian-owned competitor, Fashion Quarterly, not to be confused with the same magazine from Canada. We would tread the middle of the road, for our own readers had told us that that was where their incomes lay. But we would spoil them with premium products, which many would buy, if some sales’ improvement figures of some of our clients are to be believed.

When the United States’ richest man, William Gates III, drove a Lexus, this strategy did not seem to be foolhardy. Rich people could buy us because rich people, as Mr Gates showed, like good value, too. Everyday people could buy us because we weren’t ripping them off.

Yet some channels in New Zealand, our first market, were still stuck in the marketing school world of the 1950s. Rich and poor. Premium and poverty. Hardly reflective of a nation that prides itself on being nationally middle-class, where tipping is unheard of and considered the province of less civilized nations that still looked at the world through master-and-servant eyes.

Lucire found itself in the nicest suburbs like Merivale, Christchurch, where it sold out in its first week; but equally, it would sell out in the student bookstores nationally. But we were not finding ourselves in the middle among retailers, where our readers were, and we were failing to crack the sales’ figures of our major competitors. That much I admit, publicly. Those middle-of-the-road retailers who stuck with us find we sell reasonably well and we were all rewarded.

My idea of luxury is probably in line with the consumers’. It is about accessibility, design excellence, and quality, but it is not about exclusivity. Everyone deserves to be spoiled from time to time. A luxury brand, and I do count Lucire as one, need not be so narrowly focused that only the rich buy into its world. Nor does it need to have every channel member indulging at the top end of the income spectrum. Luxury, ultimately, is a state of being, and that can be done at a variety of prices.

But try telling that to retailers, who have not branched out from their bimodal reckoning of the market-place.

The ideas of accessible luxury is not totally foreign in other regions, otherwise H&M would not even dare try its M by Madonna line. However, they do own their own stores, which should perhaps be our next move…

Jack Yan’s website is here.

Connoisseurship is not a closed product area. Increasingly, everyday items consumed by ordinary individuals are making their way into the realms of mass-market connoisseurship. Luxury has opened its gates, paving the way for items such as fine cheeses, chocolate and coffee to enter.

Taking the example of Starbucks, its stellar performance in the coffee industry is set to expand, and is based on the accessibility of the positive lifestyle that is associated with its brand. Content Research forecasts predict that Starbucks may overtake McDonalds as the world’s largest fast-food brand. The company has turned a staple beverage into an indulgence associated with connoisseurship. Or has it?

From the point of view of indie coffee houses, vast companies such as Starbucks have replaced skillful barristas with the cold rattle of the automatic machine, drenching its espressos in a milk and syrup mix, thereby driving smaller shops out of business.

But simultaneously and somewhat paradoxically, Starbucks is promoting cafe culture and generating a new generation of coffee drinkers. Tully’s, a small chain admits to locating new stores within the vicinity of existing Starbucks locations. People are given a taste of what they like, the gourmet coffee experience, after which they can venture beyond the land of the big green giant.

The growth of masstige products is a well attested phenomenon–bringing luxury goods within reach of the hoi poloi. Porsche boxter, mercedes c class, jaguar x-type… the list is endless.

Edwin Collyer makes a really good summary of the phenomenon, over at brandchannel quoting a variety of experts….

Robin Koval says:
bq. There always has to be some sense of scarcity and being out of reach. Yes, you can buy a Mercedes for $30,000 or so, but the really cool one that you dream about is there next to it on the floor for $100,000…. It depends how well you can tier your offerings and reserve a special place for the true luxury consumer.

This is a typical problem with all masstige conversations. They tend to focus obsessively on the price of an item at the lever of luxuriousness, when price is just one facet of their exclusivity (you can add scarcity, sparse distribution, sourcing difficulty to this list). Exclusivity itself is just a tiny facet of luxury, and is primarily appealing to challenge-seekers, who find self-esteem in achieving their goals.

This sort of price-centred analysis fails on two levels. At a basic level it fails to acknowledge the alternative unity-seeking motivation of luxury, but also, at a much deeper level, it fails to recognise that ALL luxury is personal and relative. The masstige conversation falls headlong into the trap of seller-centric thinking, believing that producers can be manufactured.

Koval does clarify his point later in the article, when he says:
“Luxury is now more about emotion than price points. I think it will be more about mindset than wallet size or class. There will always be people for whom certain indulgences provide great meaning—whether for their badge value or intrinsic reward. And there will always be the millionaire bargain hunter as well. It’s all a matter of where your own definition of pleasure comes from.”

As Collyer says, Luxury can be a cream cake instead of a sponge.

Luxury can be a single chocolate with your evening coffee…

But the same chocolate can be emergency rations in the jungle…

The critical point is the brand owner does not determine luxury, the luxury is determined through the personal moments of intention, choice and consumption and remembrance…

Luxury starts well before the purchase, and ends only when memory fails.

The paradox here is that luxury is both utterly universal and entirely individual.

Experian’s annual poll of shoppers reveals that residents of Barnes, a leafy London inner suburb, now spend an average of £150 a year on mail order goods.

From a Press Association article:

Experian said the typical home shopper was now a wealthy, busy consumer who liked the convenience of buying “aspirational, lifestyle” items from mail order catalogues.

Shoppers in Barnes fell into the “cultural leadership” group of consumers who were mainly well-to-do professionals living in exclusive suburbs in traditional family units, the report said.

Described as “assured, secure and very discriminating”, they spent their wealth carefully on understated, classic goods and services and had little interest in the “brasher aspects of contemporary consumer culture”.

As home shopping has moved upmarket, wealthy consumers have flocked to internet and catalogue shops in order to avoid having to prolong their working day by spending time shopping. As commuters, they prefer not to stay in central London after work to shop, and, given their professional status, are unlikely to take formal lunch breaks.

Of course, this scenario isn’t unique to London, and so we can ask the more general question – how can the luxury retailer reach the people who don’t shop during the week, and who would probably prefer to stay at home at the weekend? Online and catalogue shopping might seem the obvious answer, but the Experian report implies that luxury items aren’t in the average Barnes resident’s online shopping basket.

So much of the luxury purchasing experience depends on touch, taste and smell – olifactory components simply impossible to recreate outside of a physical shop – that it is questionable whether online shopping will replace the high street as the preferred purchasing mode entirely. Nevertheless, the growing demand for ‘masstige’ products means that consumers will increasingly turn to the internet in search of lower prices.

The dilemma for luxury retailers, then, is this – do I sacrifice some of my physical customer experience in order to better serve the distance buyers? Or am I confident that my customers appreciate being able to touch, taste or smell my products, and so will always come to see me, even if it means getting a later train home or skipping lunch?