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2 of the top 5 richest men in EUR are luxury billionaires - Bernard Arnault (+70bn) and Francois Pinault (+30bn).
Given the work done by @BillBrewsterSCG on $RH and @GWInvestors on $PTON I decided to check out The Luxury Strategy to figure out what makes luxury so unique.
Given the work done by @BillBrewsterSCG on $RH and @GWInvestors on $PTON I decided to check out The Luxury Strategy to figure out what makes luxury so unique.
Firstly, luxury is not a product or a brand. It's a culture, it's a language. It's been around since history began. The Egyptians had luxury products and services.
But it's in the 20th century that luxury has really became prevalent for 3 big reasons:
But it's in the 20th century that luxury has really became prevalent for 3 big reasons:
1. Democratization
2. Increase in spending power
3. Globalization
These three forces have driven luxury to be much more powerful than it was in prior centuries....and that power will grow, because luxury allows for increased:
social stratification
hedonistic & Intrinsic pleasure
2. Increase in spending power
3. Globalization
These three forces have driven luxury to be much more powerful than it was in prior centuries....and that power will grow, because luxury allows for increased:
social stratification
hedonistic & Intrinsic pleasure
This is because while money is uni-dimensional and exists on one scale (less to more) - and how do we measure it anyway....luxury exists on multiple-dimensions.
So luxury is about how I make you feel and how it makes me feel.
So luxury is about how I make you feel and how it makes me feel.
In fact, it's probably time to discuss the difference between luxury, fashion and premium....
Luxury is about social elevation and selling a dream.
Luxury is about social elevation and selling a dream.
Luxury is different from any other product...
The basic product corresponds to a need. The need must be met as quickly as possible. The role of the product is to do this at the lowest cost possible.
The basic product corresponds to a need. The need must be met as quickly as possible. The role of the product is to do this at the lowest cost possible.
The branded product corresponds to a desire or wish. Desire is artificial so doesn’t need to immediately sated. Since desire can both fade and is substitutable, it must be maintained with advertising.
The luxury product corresponds To a dream. Dreams are an integral part of human beings. They don’t need to be satisfied, sometimes their existence alone makes us happy.
So at it's core luxury is a dream, a promise.
So at it's core luxury is a dream, a promise.
There are some rules to being a luxury brand or product, these include: When it comes to luxury, being unique is what counts, not any comparisons with a competitor.
Luxury is 'superlative' and not 'comparative'.
Luxury is 'superlative' and not 'comparative'.
Luxury products are the opposite of traditional products, not only do we not listen to our customers wishes, we actually want to keep most potential customers out.
Which means not only do we not respond to rising demand but we also make it difficult for people to buy.
Which means not only do we not respond to rising demand but we also make it difficult for people to buy.
The role of advertising isn’t to sell but to make the customer dream. The question isn’t whether the product is good enough but whether you are good enough.
And because it’s about making the customer dream, its critical to communicate to those whom you are not targeting.
And because it’s about making the customer dream, its critical to communicate to those whom you are not targeting.
Luxury doesn’t obey the laws of supply and demand. Falling prices do not increase demand. In fact, when it comes to luxury, price is a technical detail. To be a luxury product is to be unreasonable, to be above reason.
Ever noticed, the Louis Vuitton sales people don't try to sell you a product, it's because the job of the sales staff isn’t to sell. It is to help people understand, share the mystery, the spirit of places and objects, and the time invested in each item.
It's about the dream !
It's about the dream !
So what exactly defines luxury ? Consumers seem to have four concepts of luxury:
- Authenticity of the experience
- Creative niche
- Values & Prestige
- Outstanding badges (think logos)
- Authenticity of the experience
- Creative niche
- Values & Prestige
- Outstanding badges (think logos)
The other unique thing about luxury is that there are two models:
The European Model: the product is on a pedestal, what matters is the history of its creation and the creator. You the consumer aren’t part of the story.
The European Model: the product is on a pedestal, what matters is the history of its creation and the creator. You the consumer aren’t part of the story.
The American Model: the story is about the people who buy the product and how they buy it. The story is about you as much as the product.
This can take us to the discussion on how different cultures perceive luxury differently. What the English need vs the Chinese vs the Russian vs the French.
Does this sound about right ?
Does this sound about right ?
Which is all to say building a luxury brand is hard work, but has enduring value.
Think brands like:
* Chivas
* Louis Vuitton
* Chanel
* Ralph Lauren
* Hermes
Think brands like:
* Chivas
* Louis Vuitton
* Chanel
* Ralph Lauren
* Hermes
Watch those businesses who are growing their luxury brand. It's a huge intangible asset you won't see right away, but provides the company with tremendous and hidden pricing power in a world where social signaling will become more important.
The ultimate inflation hedge.
The ultimate inflation hedge.
