François-Henri Pinault, speaking at the 2012 Financial Times Business of Luxury Summit in Marrakech
For the fourth year running, Luxury Society partnered with the FT Business of Luxury Summit. Here we bring you the key insights from this year’s event in Marrakech.
“Luxury is now for the masses and the classes,” proclaimed PPR Chairman François-Henri Pinault, setting the tone for an exploration of the dichotomies that have come to define notions of luxury and lifestyle. “Exclusivity is no longer a criteria for luxury,” he continued. Perhaps testament to just how deeply luxury has changed, since the jet-set inspired Guccio Gucci to launch his eponymous label in 1921.
Initial discussions attempted to define luxury and lifestyle, and explore whether or not lifestyle extensions are appropriate for luxury brands and whether or not lifestyle brands can become luxury. “The meaning of luxury has been diffused, but lifestyle is simple,” explained Gian Giacomo Ferraris, CEO, Versace. “It’s the way in which you live your life.”
Aerin Lauder, who will launch her deliberate ‘lifestyle’ brand AERIN this coming fall, agreed that lifestyle is a world. “Lifestyle is about ‘living a brand’ or having a point of view,” she expressed.
“ Exclusivity is no longer a criteria for luxury – François-Henri Pinault, Chairman, PPR ”
Manfredi Ricca, author and managing director of Interbrand, felt apprehensive about luxury brands moving into lifestyle. “If you don’t stand for anything, you will fall for everything,” he mused. “The more a brand is about real excellence in one category, the more diversification risks brand equity.” Frédéric de Narp, CEO of Harry Winston agreed “You cannot do everything. If it’s not exceptional, why buy it?”
Conversations quickly became circular, though one thing became blisteringly apparent; panellists were going to have to agree to disagree. What has worked for Versace – diversification from couture to diffusion, from homewares to hotels and interior design – is not necessarily appropriate for Harry Winston, who wishes to cap its global presence at 50 stores.
Though the opinions of panellists often differed, they were essentially saying the same thing. If considering category extension or a move into the lifestyle space, stay true to brand DNA, don’t move into categories in which the brand lacks credibility or heritage, maintain consumer trust, preserve authenticity and above all, remain relevant.
Sidney Toledano, chairman of Christian Dior Couture
The importance of emerging markets weighed heavily on the minds of speakers, as did the habits of where these increasingly wealthy consumer groups choose to shop, both geographically and physically. Discussions surrounding the upwardly global Chinese luxury consumer were short, with panellists generally in agreement that retailing in China will need to be both local and global, online and offline to prosper.
Instead it was retailing to the Brazilian consumer that became the most contentious point of discussion, following a revelation from American Express that 70% of purchases made by Brazilians are made outside of Brazil. The remark formed part of a much larger discussion, comparing the growth of on and off-line retailing, but it sparked spirited debate as to whether or not luxury brands should bother to launch stores in emerging markets like Brazil, or continue to invest money in receiving these consumers on foreign soil.
“ Retailing in China will need to be both local and global, online and offline to prosper ”
The idea of retail stores as ‘marketing investments’ was raised, where it was suggested that brick-and-mortar spaces in emerging markets are crucial to raising brand awareness, and initially connecting with consumers. The term ‘investment’ seemed to imply a lack of belief that these stores would turn profit any time soon, as locals continue to be discouraged by higher prices and limited range selection when compared to the U.S. or Europe.
Sidney Toledano, chairman of Dior, didn’t so much agree. “Luxury is not rational,” he countered. “If a woman [in Brazil] wants to buy a dress because she has a party the same night, she is not going to take a jet to Miami, she will [buy] it immediately. If a man is in love and he is looking for a ring, he will not go to Miami and look for savings. This is part of the luxury culture. This is why we are actually doing very well in Brazil. It is not a marketing investment, our stores are profitable.”
FT Style editor Vanessa Friedman moderating The Democratisation of Luxury panel
When it came to the concept of product localisation, Sidney Toledano and Hélène Dubrule (Managing director, Hermès Maison) were in agreement that consumers buy into brands for what they are – in both of their cases, iconic French luxury brands. Hermès revealed that the one time they had created a product specifically for the Japanese market, it quickly became their worst seller.
“If you made a Chinese product for consumers in China you will fail,” conferred Harry Winston CEO Frédéric de Narp. Mr. Toledano offered the sound bite: “When I go to a Chinese restaurant in Milano, I don’t expect to eat spaghetti.”
Instead both brands focus on adjusting merchandise to various stores. In the case of Dior’s Marrakech boutique, this means speaking Arabic, observing local service customs and remaining respectful of local culture. In the case of Hermès, responsibility rests with retail managers, who select the most locally appropriate products from 30,000 SKU’s each season.
“ When I go to a Chinese restaurant in Milano, I don’t expect to eat spaghetti – Sidney Toledano, Chairman, Dior ”
For brands such as Apple and Alexander Wang, retailing has become a business of ‘experiences’ as opposed to commerce enabled luxury lodgings. “The priority for me is not about doing a massive store,” imparted Rodrigo Bazan, president of the latter.
“For me it’s about engaging people and creating a larger experience. Yes we just opened a 500sqm store in Beijing but that was because that space was available where we wanted it. We have worked hard to bring people in, and up to the first floor to have an experience.”
In the case of Apple, Ron Johnson – the man responsible for creating Apple’s retail environment – expansion meant developing destination retail. Be it the now famed Genius Bar or moving to keep the New York City store open 24 hours. “A lifestyle brand must move beyond physical accessibility,” he explained. “Apple’s New York store was most profitable between the hours of midnight and 6am.”
Luca Cordero Di Montezemolo, Chairman, Ferrari
In connection with the need to create retail experiences, was the idea that brands must continue to optimise relationships with consumer emotions. Kevin Kleinmann, an adviser to Universal Music International and Professor of Arts Management & Cultural Policy at the Sorbonne University, went so far as to identify a new paradigm for communications.
“Today the famous 4P’s that we used to talk about in marketing, have been replaced by the 4E’s; exclusivity, engagement, emotion and experience. These are the elements we believe as the merger between brands and music represents.”
“What amazes me about the way we communicate brands, is that we still communicate with logos, and logos are something that come from an old time of print media. Yet all the applications we use today allow us to put sound, movement and music into communications, into sonic branding, when brands are still acting as though they are confined to the pages of print.”
“ We are not selling a car, we are selling a dream – Luca Cordero Di Montezemolo, Chairman, Ferrari ”
It was Ferrari chairman Luca Cordero Di Montezemolo, who explained; “I tell my employees listen, be careful, we are not selling a car, we are selling a dream. Because we sell something that is not a typical car, in which lies the emotion of driving.”
And what became luminously clear over the course of the 2012 Summit, is that the brands that focus on connecting with consumer emotions and developing ways to turn transactional relationships into experiences, will be the ones best placed to attract and serve luxury clients, both online and offline, locally and globally.
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