Louis Vuitton achieved very soft growth in Q3 of 2012
Susan Kime, luxury columnist at JustLuxe.com, explains why mixed results from Burberry, Louis Vuitton, Hermès & Prada calls for new meanings in luxury fashion
There was a Financial Times article published in late December 2012, entitled Fashion: Luxury’s New Look, which discussed the new, complex nature of the state of luxury fashion.
As I read, I couldn’t help but think that some of the concepts presented go so far as to clarify the state of the U.S. economy, and how the luxury segment may be affected by the Fiscal Cliff.
The article suggests that right now, after decades of conceptualising luxury as one highly profitable sector, perceptions are changing. Many formidable brands, like Burberry, Louis Vuitton and Tiffany, achieved very soft growth in Q3 of 2012, yet Hermès and Prada posted record profits.
These and other similar data points have forced many in the luxury fashion industry to look at a more diffused, evolved meaning of ‘luxury’, and how emerging markets have significantly impacted home markets and meanings.
“ After decades of conceptualising luxury as one highly profitable sector, perceptions are changing ”
Now, say the authors, “…other characteristics appear equally significant, specifically ubiquity and rarity.” These two concepts seem like diametrical opposites, particularly in the luxury sector. Yet in the high end fashion bandwidth, they seem to have some internal symmetry.
Brands such as Ralph Lauren, Michael Kors and Calvin Klein have both extremely high end fashion dimensions, and less expensive, more accessible ones. These brands continue to live with the rare brands, like Prada and Hermes, who do not have any type of brand diffusion and keep their brands at one price, no matter what.
Yet as the FT authors noted, “HSBC issued an analyst’s note calling ubiquity ‘the new buzzword for luxury’ and ‘a major concern.’" The concern being the idea that if a product is ubiquitous and could be accessed and acquired almost anywhere, could it still be considered a luxury item?
“ If a product is ubiquitous and could be accessed and acquired almost anywhere, could it still be considered a luxury item? ”
The general thinking up to now, is that a luxury item must have some inherent quality of scarcity and rarity if it is to be considered luxurious. But now? With so many brands and brand houses advancing quickly into emerging markets like China, the question posed by the FT authors is this:
“…the need to reach new consumers is beginning to conflict with the perception among those consumers of what constitutes luxury.” So, could the diverse bedfellows of ubiquity and rarity now be separating, due to emerging market success? This question appears to move beyond the metes and bounds of luxury fashion.
If the need to reach new markets implies a brand’s need to ubiquitize the product, get it known better in emerging markets, does this leave the idea of rarity and scarcity out in the cold? Or does it matter, as long as the high end product is bought by a willing consumer?
Prada posted record profits in Q3 2012
A movement toward answering these questions came from American Affluence Research Group’s Fall Survey 2012, which looked at how and where wealthy consumers spend their money, targeting a cross-section of the 11.4 million households, making up the wealthiest 10% of U.S. households based on net worth.
The data showed an interesting result of what constitutes luxury to their research demographic, the Ultra High Net Worth population: some of the favorite purchasing brands of this sample were NOT Tiffany & Co. or Henri Bendel, but Costco, Target, Zappos, and Home Depot.
Does this mean that the concept of ubiquity – accessibility to all luxury items all the time – is more attractive? Or does it mean that Costco and Zappos have more acceptable mid-level and high end brands to choose from? And that the UHNW population likes to shop quickly and move on to other more pleasurable pursuits?
“ Research found Costco, Target, Zappos & Home Depot to be favoured brands of UHNW consumers ”
No one knows, which is one of the challenges of good market research – much of the time, it brings up more questions than answers.
Another issue concerning the ubiquity/rarity dichotomy has deeper implications, and this is how the mood of the aspirational buyer may have changed due to Fiscal Cliff economics.
Any brand – (whether it be fashion or fruit) – and its desire to reach the American aspirational consumer, also often called the High Net Worth consumer, might not have as favorable a sales volume result this year in contrast to other years.
Aspirational consumers are considered to be those, in general, who make over $250,000-$500,000 more or less, a year. And, as of this writing, due to the new tax laws passed that will save most everyone from falling over the Cliff right now, the aspirationals and UHNWs will pay more taxes – as those taxes have been raised for those with individual incomes of more than $450,000.
“ The aspirationals and UHNWs will pay more taxes. What does this mean for luxury buyers? ”
What does this mean for luxury buyers? Might they tend to spend less on some luxury items than their non cliff-hanging Chinese or Indian counterparts? A possibility, but again, no one knows yet.
What is known is the idea of the Cliff won’t go away very soon. Many pundits think there will be more Cliffs in the future, and more patchwork to come from the fall or the partial fall taken by various groups. How this will affect the luxury segment is still unknown – an issue that by itself causes concern.
The immediate lesson learned is how new a day this one actually is, one where the old Alfred North Whitehead motto, “those who are ignorant of history are doomed to repeat it,” doesn’t hold much weight in the hard light of this new economic morning.
Many thanks to the Financial Times and to the authors of the article, Luxury: Fashion’s New Look: Vanessa Friedman, Rachel Sanderson and Scheherazade Daneshkhu.
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