With the rise in digitally native brands that are winning over hordes of millennial consumers, the widespread (but late) adoption of e-commerce by even many of the market’s more stuffy and traditionally situated luxury brands, and the Apple’s milestone of hitting a market capitalization of $1 trillion (the first American public company to do so), one of the key questions debated in 2018 was this: What does it mean to be a luxury brand now?
With that in mind, here are a few of the articles we published this year that looked at the evolution of luxury – from manufacturing and marketing practices to what it is – exactly – that luxury brands are selling …
1. Where Do Fashion’s Traditional “Luxury” Brands Stand in 2018? Luxury goods in the most traditional sense “are not designed and planned according to consumer tastes and expectations.” Instead, “a luxury brand sets its own standards and does not adhere to fashions.” However, it appears that as consumers have made demands of brands, many stalwart luxury participants have altered their way of doing things in order to be meet those demands and operate in the way that is most profitable.
The bottom line: Few of the brands that are routinely characterized as luxury brands still fall within the traditional bounds of the term.
2. What Are Luxury (and High Fashion) Brands Really Selling? There are points to be made about the level of quality, and attention to detail and craftsmanship, and the consumer experience elements associated with high fashion or luxury goods. But, some of the most “common characteristics that consumers seek in luxury brands today include high perceived prestige … and their association with fashion and an affluent lifestyle.” These elements are conveyed by way of brands’ aesthetics of choice and their oft-very-elaborate marketing efforts. But they are also communicated to consumers directly with a name or logo – if brands’ creatives and business teams are doing their jobs in effectively positioning the brand.
The bottom line: Big-name brands are not really in the business of selling clothes and bags. They are more realistically in the business of selling their trademarks.
3. What Really Goes into “Made in Italy” Fashion? Because the country of origin for labeling purposes, according to the European Union’s rules of origin, is where the final production process is carried out and does not take the national origin of the craftsmen, brands are in the clear legally if manufacturing is carried out in Romania and a “Made in Milan” label is slapped on at the end.
The bottom line: Between outsourcing overseas and the continuing practice of big-name brands relying on the same hordes of immigrants from Wenzhou, China that flooded Italy’s Tuscan region in the 1990’s, the manufacturing of luxury goods is more shadowy than meets the eye.
4. What is the State of Luxury’s Hundred Million Dollar Licensing Deals? Forget the runway. What consumers across the globe are buying – and buying a lot of – you are not going to find there. Instead, you will find them coming from Coty or eyewear giant Luxottica or Interparfums. Thanks to a handful of highly lucrative licensing deals, which see luxury brands trade off the right to use their names and logos in certain goods categories in exchange for oft-hefty royalties, companies like Coty has the right to sell cosmetics bearing designer names, and to log the sales of these branded scents and beauty goods to its own books.
The bottom line: Following years of brands’ swearing off licensing deals to ensure better control of their brand name and image, if LVMH’s joint venture with eyewear manufacturer Marcolin is any indication, change is afoot … again.
5. In a Competition for the Title of “Most Authentic,” Hermès Comes Out on Top. Louis Vuitton or Hermès: Which is the more authentic luxury brand? This is the question that Forbes retail contributor Pamela N. Danziger took on recently, comparing the two French stalwarts in a battle centering on authenticity, which she says is positively “demanded” by the modern consumer, so much so that, according to a study conducted by visual content engineering firm Stackla, “an overwhelming 86 percent of consumers say brand authenticity is important when deciding which brands to support.”
The bottom line: Hermès – which strictly limits production and distribution of its products, rejects in-your-face branding, bold logos and paid-for celebrity endorsements, and maintains more close-to-home manufacturing standards – comes out on top.
6. Is Apple a Luxury Brand? That Depends on Your Definition of Luxury. The alleged shift from pure technology company to “luxury brand” has seen Apple sell not just laptops and iPhones in order to bring in $229 billion in revenue last year, but something more intangible: “An aesthetic, a design ethos.” However, while Apple’s products are priced at a premium, they are abundant in the market, accessible (if you have the cash, you can walk right into an Apple store on any day, save for the initial new iPhone drop day once very year or so, and buy an iPhone, iPad, watch, or computer), and they are churned out in factories in China.
The bottom line: Apple’s brand story-telling may aim to elicit luxury, but its daily realities – whether it be excessive scaling or the use of more affordable materials – are not.
7. Luxury Brands Tailor Their Marketing to Asian Millennial Consumers. Aside from Dolce & Gabbana, which recently alienated the Chinese market, luxury brands, seeing the goldmine that is Chinese consumers, who account for more than $7.4 billion in annual spending on luxury goods, are “tailoring their marketing to the Asian markets that drive their sales growth, using familiar faces to promote their goods to consumers who spend as much time online as they do in stores.”
The bottom line: Luxury brands are in the process of enacting a larger, more localized push and rethinking how they address Chinese luxury consumers, including the requisite move from what McKinsey calls a “sales push” model to “building long-lasting relationships at home.”
8. Luxury Sector, Including Louis Vuitton, Gucci & Chanel, Growing Faster Than Others. “The luxury sector was the top-performing category this year with 42 percent growth. Despite the shifting expectations of luxury, leading luxury brands have continued to show significant growth. Undoubtedly, luxury today is defined as both products and experiences, but each provides a sense of exclusiveness that comes from a unique or personalized service, or a premium experience that delivers an emotional reward at every touchpoint, and exceeds customer expectations to surprise and delight.”
The bottom line: Luxury brands have been so successful because of their ability to anticipate and respond to these shifting cultural trends. They have managed to immerse themselves into street culture and provide levels of access that, while retaining their authenticity and a level of exclusivity, have made their brands more desirable to more customers.
9. Another Court Allows Luxury Brands to Ban Sales by Unauthorized Retailers. Luxury brands are notoriously controlling. On the heels of a landmark ruling from the European Union’s highest court late last year, which held that U.S. cosmetics company Coty Inc. may legally block retailers from selling its products on online platforms, such as Amazon and eBay, the Düsseldorf Higher Regional Court held that Japanese luxury cosmetics company Kanebo may limit where its beauty products are sold.
The bottom line: Luxury brands are going to great lengths to to hold on to their carefully crafted auras of exclusivity.
10. Fashion Brands (and Investors) are Looking to $25 Billion Second-Hand Luxury Market. While Chanel may be vehemently opposed to luxury resale, most other market participants, including no small number of the once-notoriously-exclusionary purveyors of luxury goods, are looking to the budding pioneers of online-sold second-hand wares for opportunities in light of the growing trend of “second-hand fashion outstripping sales growth in the primary luxury goods sector.”
The bottom line: High-end brands like Louis Vuitton parent LVMH and Gucci owner Kering are finding ways to capitalize on the $25 billion pre-owned sector.