Luxury is the most emotional consumer product class. Its success is based on appealing to our desires, fantasies, ambitions and aspirations. So when we talk about luxury, more than any other business sector, we are talking about people. And when we talk about people we are talking about society. Luxury is also at the top of consumer product hierarchies, in price and in quality. So luxury is not about all emotions and all of society. Individually, it is about getting to something better – about leading us to progress, to success to a more comfortable and rewarding lifestyle. And collectively, luxury is what we associate with those who have attained that success – CEO’s, heads of state, celebrities – in other words: with role models and with leaders. So the role of luxury in society is a question of leadership.
History doesn’t repeat itself, but it does rhyme. Mark Twain
Apresentador
Notas de apresentação
When discussing luxury brands, we talk a lot about history: traditional craftsmanship, brand heritage, brand and stylistic revivals, etc. Mark Twain said…
Apresentador
Notas de apresentação
I mention Mark Twain because he also coined a phrase in the title of his novel, The Gilded Age, which described the social dynamics of the mid to late 19th century.
Apresentador
Notas de apresentação
And I bring up The Gilded Age because Thomas Piketty -- whose Capital in the 21st Century has been on required reading lists for leaders since last year -- has called the current epoch a second gilded age…
Apresentador
Notas de apresentação
…based on the conspicuous creation and concentration of wealth today, where there seems to be tremendous prosperity and advantages enjoyed by a certain layer of society.
Apresentador
Notas de apresentação
The images we retain from the gilded aged are of sumptuous luxury.
Apresentador
Notas de apresentação
But in reality, the Gilded Age was a time of great wealth inequality and a perception that the rich were gaming the system for their benefit. The elites weren’t criticized so much for the existence of inequality, but for their indifference to it. Their preference for luxury over leadership.
Apresentador
Notas de apresentação
And we are seeing similar images emerging today, highlighting not just inequality, but greed, where luxury – notice the rings, the very recognizable design (brand) of the watch – becomes a symbol of that greed. So luxury – by it’s natural association with the elites -- throughout its history has walked a fine line between being and object of desire and an object of disgust.
Apresentador
Notas de apresentação
But a big difference between the past and now in terms of luxury, is that brands did not exist during the first gilded age the way they do today.
Apresentador
Notas de apresentação
They were not nearly as big nor as visible in the popular culture. And crucially, they did not rely on the vast sea of “mass affluent” or middle-class aspirational consumers for their revenues.
Apresentador
Notas de apresentação
So they were less vulnerable to being targets of social dynamics, whether that is activists choosing high-end districts, rather than government buildings or in important civic places, as protest sites in order to get the attention of the leadership class, such as last year’s pro-democracy marches in Hong Kong.
Apresentador
Notas de apresentação
Or artist-activists trying to raise the social consciousness of luxury customers, as in this street art campaign in New York.
Apresentador
Notas de apresentação
Or demonstrators actually attacking luxury brands themselves by invading the stores.
Apresentador
Notas de apresentação
And that pressure is now being reflected in luxury consumer behavior. The received wisdom holds up that luxury brands are immune to financial crises. But they are not immune to social crises, which is what we are facing now.
Apresentador
Notas de apresentação
Even during the financial crisis, luxury brands were growing at 10-15% (up to even 30% for some brands in some markets in some quarters). Now we’re looking at 3.4% growth to 2020 (keep in mind that for the last 2 years, luxury has under-performed predictions). The Chinese economy is slowing. The Indian and Brazilian economies have slowed. Russia is contracting. Oil revenues have been cut in half. The US is growing slowly. In Europe we’re talking about deflation. Despite all the talk about Africa it’s still tiny. On top of which – barring some exceptions – traditional luxury customers are turning away from logos and conspicuous consumption, and Millennials are as, if not more, interested in new, small brands than in the established players. Across the board, people are looking for personal well-being over public displays of wealth and new forms of luxury. That is not to say the market for luxury as we know it today has gone, or will go, away, but it now has competition.
What is luxury?
Apresentador
Notas de apresentação
To respond to this, managers of luxury brands need to take a close look at what it is they’re really offering to their customers… and to society. We need to look at the essence of what is luxury, really. “Luxury” is a word that we use a lot. Because the sense of luxury is a very personal thing, the word gets applied with varying degrees of accuracy. But when we take luxury from being a sentiment, an experience to being a brand, a business, an economic sector, it becomes important to – if not define luxury – at least set some parameters around what luxury is so that we can understand how it creates and provides value. Distinguish between personal ideas around “a” luxury and luxury as a product class and as a business… and its role in society…. Which means how we see luxury and how makers of luxury see luxury, market it to us and shape our desires, behaviors and ultimately our values. Despite how individual perceptions of luxury can differ, there is a broad consensus around what luxury looks like generally – these are the images we often see in the media– whether that has to do with …
Apresentador
Notas de apresentação
… opulent objects and environments …
Apresentador
Notas de apresentação
… or with high levels of design and craftsmanship …
Apresentador
Notas de apresentação
… or with exclusivity, escapism and a bit of the exotic. The problem for makers and the consumers of luxury is that “luxury” as a concept, and as a term, is so alluring that it gets applied to any number of things. As a result we end up with luxury presented like …
Apresentador
Notas de apresentação
…this line of cookies available for sale at Tesco for a couple of pounds or...
Apresentador
Notas de apresentação
… in New York, where every building claims a piece of the luxury market. Or – my personal favorite …
Apresentador
Notas de apresentação
… in New York, where every building claims a piece of the luxury market. Or – my personal favorite …
Apresentador
Notas de apresentação
… this. I took this photo driving back to Paris from Chateau Vaux-le-Vicomte, in the men’s washroom when we stopped for gas. (I won’t tell you the looks I got…)
Apresentador
Notas de apresentação
Add to this that there has been a convergence between luxury and non-luxury. Mass market companies like Target, H&M, Zara have embraced the highly stylized, artistic look of luxury in their communications and branding, as well as their product lines, bringing high design to the masses. So even at the mass end of the market, it’s not just about filling a need, but about eliciting desire, aspiration, fantasy and so on.
Apresentador
Notas de apresentação
Sometimes this is in collaboration with luxury companies, despite the fact that luxury brands also complain that low quality, low price, design imitators like H&M copy looks of the runway and into the stores at the same time as the originals.
Apresentador
Notas de apresentação
Customers for the most part lack the knowledge and oftentimes even the desire to tell the difference and what justifies the higher price of a luxury product. One of these is an Eames chair manufactured by Vitra, which sells for about $500. The other sells at an office supply store for about $19. What high end products (luxury or design) have used to set themselves apart both in style and even in substance is getting harder and harder to defend.
+ Heritage + Craftsmanship
Apresentador
Notas de apresentação
To describe that difference and to describe themselves, luxury brands use a fairly consistent vocabulary of luxury. So consistent, in fact, that sometimes their language is hard to distinguish from one brand to another. Here we see a sample of that vocabulary, the result of a study done by Zooppa, a crowdsorcing company about global consumers’ associations with luxury. Interesting that two of the most frequently heard words in luxury – heritage and craftsmanship – are actually missing from this word cloud. We have “handmade” and, very small we have “authenticity”, which we could say are proxies for craftsmanship and heritage. But while luxury brands use those terms a lot, it seems they’re not actually at the front of customers’ minds. Notice that the biggest word here is “exclusivity”, which plays right into that very caustic social dynamic I described earlier. But there’s a bigger problem in that these are all descriptors of luxury, and to understand the mind of luxury, we need to look at what causes luxury to happen….
What is luxury, really?
Apresentador
Notas de apresentação
So what is luxury, really? What in the creation of a product causes us to perceive it as luxurious?
Real Luxury
=
Best in category
x
Out of the ordinary
=
Leadership
Apresentador
Notas de apresentação
We identified two dimensions through which to understand luxury. It must be best in category …. explain It must be out of the ordinary … explain Three things to note here: These dimensions are at once objective and subjective, so we can apply them universally to the category of luxury goods, yet still retain the individual relationship with luxury. They are multiplied. So if the “score” for either dimension is zero, the whole equation comes to zero. These dimensions of supreme competence and uniqueness are the same as those found in leadership. But how exactly does luxury enact leadership?
Apresentador
Notas de apresentação
First, historically, luxury has been the conduit for innovation in society. Exploration, discovery and the first international trade between ancient empires was driven by luxury goods like silk, spices and precious minerals.
Apresentador
Notas de apresentação
Such as Madeleine Vionnet, who was a leader in creating a socially responsible working environment for her seamstresses at a time when industrial working conditions were deplorable. She focused on the wellbeing of her workers in the design of her haute couture ateliers and through programmes such as healthcare and paid holidays, long before these were legally mandated or even standard practice. At the same time her products physically and symbolically liberated women during the first wave of feminism and the fight for women’s rights.
Apresentador
Notas de apresentação
Yves Saint Laurent dressed the more recent wave of feminism in high style, making it not just acceptable but enviable.
Apresentador
Notas de apresentação
Luxury doesn’t wait for the customer to tell it what to do.
One of today’s major challenges is protecting the environment. Tiffany & Co. uses its market muscle not just in its own interests, but also to defend fragile lands from mining.
