Kapferer on Luxury

How Luxury Brands Can Grow Yet Remain Rare

Jean-Noël Kapferer

• Publisher: Kogan Page
• Year: 2015
• ISBN:
  9780749474379
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Gestión

This book addresses the No 1 challenge of all major luxury brands today: How can these brands pursue their growth yet remain luxury? How do you reconcile growth and rarity? Kapferer on Luxury offers a selection of the most recent and insightful articles and original essays on the luxury growth challenge from Jean-Noël Kapferer, a world-renowned luxury analyst. Each chapter addresses a specific issue relating to the luxury growth challenge such as sustaining the 'luxury dream', adapting the internet to luxury demands, re-widening the gap with premium brands' competition, and the importance of non-delocalization. It also explores in detail facing the demand of the Chinese clients, rising sustainable quality and experiential standards, developing real luxury services and managing luxury brands within groups without diluting their equity and more.As such, Kapferer on Luxury is the perfect and timely resource for luxury executives, communication managers, luxury observers and advanced students willing to deepen their understanding of this major luxury challenge.

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PART ONE

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How luxury is changing

01

Sustaining the luxury dream

Challenges and insights

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Luxury sells dreams. The more the luxury sector grows – as it has been doing since the mid 1990s – the more this threatens the levers of the luxury dream and the essence of what luxury evokes: the notion of rarity and of access to a privileged life, to products of exception – and to a life of exception. We review here the main facets of this market growth that challenge the luxury dream and its sustainability: the dominant weight of the Chinese consumers; the central role of the internet and social networks in consumers’ behaviour; the blurring of frontiers between luxury, fashion, premium and masstige (mass prestige) brands; the new demands of sustainable development.

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An industry like no other

Luxury sells dreams. Luxury magazines regularly feature articles citing dream places to visit, dream houses to purchase, dream yachts, dream cruises, dream cars, dream watches and so forth. Headed by CEO Bernard Arnault, the world’s leading luxury group LVMH sells billions of dollars of items that promise to ‘fulfill the hopes and dreams of consumers’ (Harvard Business Review, October 2001). As Robert Polet, former CEO of the world’s second-leading luxury group explained, ‘We are in the business of selling dreams’ (Fortune, 6 September 2007). Gian-Luigi Longinotti-Buitoni, president and CEO of Ferrari North America, co-authored the book Selling Dreams (1999). A recent article from the Wall Street Journal (11–13 July 2014) had the following headline: ‘LaFerrari Is a Million-Dollar Dream Car’. Selling dreams is indeed the core mission of the luxury sector and its brands.

The luxury industry has become a business of brands. Customers visit brands’ websites and flagship stores. They click on and search for ‘Prada’ or ‘Bottega Veneta’, not ‘leather bag’. The luxury market entails more than simply selling excellent products in excellent places with excellent service; it is the brand itself that activates and embodies the intangible element of the dream, the symbolic access to a specific universe of privilege and a measure of social stratification. Royal Salute is not simply a rare whisky that has been aged for a minimum of 21 years, unspoiled, waiting for maturity; it represents access to a highly symbolic moment and universe, the coronation day of Queen Elizabeth II, heir of a legendary dynasty. On 2 June 1953, 21 gunshots were fired by the Royal Navy and, on that day, this rare whisky was offered as a tribute to the new queen. By extension, the Royal Salute brand is a tribute to the new kings and queens of the modern day, namely, the successful entrepreneurs – particularly those from Asia – who have built new empires, companies and brands all over the world. Being a consumer of Royal Salute, then, is like being a member of an exclusive club. In short, the consumption of luxury products fulfils dreams and acts as a social stratifier. This dimension of dream fulfilment – that is, symbolic access to excellence and to a privileged life as a result of one’s efforts and choices – is what separates luxury from premium.

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There are many premium brands of cars, all of which claim to be the ‘best car’. The essence of premium brand positioning is the ability to claim being the number-one brand in a given category and to furnish various offerings of proof to sustain this assertion. Premium brands need to justify their pretension of being best in class. For example, Lancôme advertisements often offer claims that a product is the best skincare cream because it has a unique feature or ingredient or creates a unique result that the competition cannot emulate. But luxury is not simply a matter of being best in class; it embodies class itself. This is why luxury brands seem able to command any price. Premium brands cannot do this; their price level is ultimately capped by the mere rationality of their proofs. Premium cars sell ‘progress’ and, therefore, obsolescence: one version of progress will ultimately be replaced by another. Dreams, however, last a very long time.

A striking feature of the luxury industry is its constant growth despite economic crises, downturns, revolutions and wars. Bain & Company estimates that the luxury business represented €800 billion in 2013, with €319 billion spent on cars, €138 billion spent on hotels and €217 billion spent on personal luxury items (such as leather goods, clothing, watches, jewellery and fragrances). By contrast, these personal luxury items represented only €80 billion in 1995.

The source of this significant growth in the luxury sector is the world’s economic growth itself. Bernstein Research has demonstrated that luxury growth in a country is closely correlated to its gross domestic product (GDP) growth. This is to be expected because growth comes from companies creating value and distributing wages, and top managers enjoy harvesting the fruits of their efforts. Gone is the image of stingy or mean millionaires, who save money all their lives but never really enjoy their fortunes. This old type of ‘rich’, aptly described in the book The Millionaire Next Door (Stanley and Danko [1998] 2008) no longer represents the reality of consumption among the new rich, especially those from emerging countries, with China being a prominent example. In China, chief executive officers (CEOs) are younger, and there are numerous millionaires under the age of 40. They want to live as their Western counterparts do and enjoy similar expressions of wealth and happiness, such as the consumption of luxury products and brands. The luxury sector has also thrived among the upper middle class in China, who want to emulate the lifestyles of their country’s rich and famous as well as celebrities in the West. A symbolic part of such behaviour – and one that can be easily imitated – is the consumption of luxury brands. When luxury brands began being distributed in emerging countries, the luxury industry took off. In China, it is said that the luxury market started when Plaza 66, China’s first luxury shopping mall, opened on Nanjing Road in Shanghai. The dream became visible and accessible for all those ready and willing to pay the price.

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With growth from €80 billion in 1995 to €217 billion in 2013 the personal luxury market is clearly no longer the privilege of just a few. The Webster’s Dictionary definition of luxury in 1828/1913 provides an interesting reminder of how the concept has changed: ‘anything which pleases the senses … and is also costly, or difficult to obtain; an expensive rarity’ (see http://www.webster-dictionary.org/definition/luxury). Granted, only 6,922 Ferraris were sold in 2013 and 3,630 Rolls-Royces, but the Audi brand ‘[pulled] ahead of BMW worldwide to grab the lead in luxury car sales with 1.6 million cars sold’ (Independent Ireland Journal, 16 March 2014). Such statistics offer further proof that the luxury industry is no longer made up of small niche companies as it used to be. It represents a real macroeconomic sector, aiming at big numbers and under the direction of managers.

Unlike other economic sectors, however, growth creates problems for the luxury market because the luxury dream is partly based on the notion of rarity and of access to a privileged life, to products of exception and to a life of exception. These beliefs are at the core of what the luxury concept evokes among luxury consumers today. In one of our latest studies, 3,085 affluent consumers from six major countries (the United States, China, Japan, Brazil, Germany and France) were interviewed. Respondents were selected on the basis of their declared purchases of certain products above a given price and were asked to select the attributes that most defined their vision of ‘luxury’ from a list of 10 attributes. Table 1.1 shows both the convergence of clients’ definitions of what the luxury concept evokes and also some notable idiosyncratic differences between countries.

There is a striking similarity between these findings and the old Webster’s Dictionary definition, which emphasizes pleasure and costliness. Only the Chinese respondents explicitly reported that luxury evokes both the very expensive and exclusivity for a privileged minority of consumers so as to make these consumers stand out from the crowd. Among other nationalities, notions of rarity and being exclusive to a minority of the privileged few are present but not among the top four associations; instead, they are perceived as consequences or correlates of the high quality, high prestige and high cost of the luxury goods and brands.

TABLE 1.1 Meaning evoked by the word ‘luxury’ for consumers in six countries (n = 3,085)

	France	United States	China	Brazil	Germany	Japan
1	high quality	high quality	expensive	high quality	high quality	high quality
2	prestige	expensive	high quality	pleasure	expensive	prestige
3	expensive	prestige	fashion	dream	fashion	expensive
4	pleasure	pleasure	minority	expensive	dream	intemporal

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The more the luxury sector grows – as it has been doing for nearly 20 years – the more this threatens the levers of the luxury dream and the essence of what luxury evokes (Thomas, 2008). Growth of sales means growth of customers, as is evident from the long lines of Chinese clients waiting to enter the Louis Vuitton store on the Champs-Élysées in Paris or the Gucci store in London in order to buy expensive handbags for themselves and their friends. Ferdinand Porsche, son of the founder of Porsche and designer of the iconic 911, once said that he did not like it when he saw two Porsches on the same street (visiting London today would give him a heart attack!). Thus, a primary consideration for all general managers of luxury brands is how to reconcile growth and luxury. How can such a company grow while remaining true to the model of scarcity of supply that prevents growth? Can a manager adhere to the tenets of a true ‘luxury strategy’ and yet still grow?

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The Luxury Strategy (Kapferer and Bastien, 2012) reminds us that if luxury as a concept is subjective, and if the luxury sector is elastic in terms of the brands and companies that should be included, the luxury strategy is nevertheless a very precise notion and a demanding strategy – it is a unique mode of conducting brands and companies. The luxury strategy entails a certain obligation to break the rules of marketing in order to build luxury brands. We identified 24 ‘anti-laws’ of marketing that should be followed to create a successful luxury brand. They have been developed and implemented by the most successful luxury brands over time. These anti-laws have become references among luxury companies and groups.

The present book is not intended to be a substitute for The Luxury Strategy. Rather, it focuses on the main challenge of the luxury industry and brands today – namely, the challenge of growth.

The future(s) of luxury

What is the future of luxury? This question is repeatedly raised in publications and international conferences on luxury. This future is partly known – not as a result of guessing but rather as a consequence of empirical or sociological laws. In addition, will there be one single future?

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In the past, predictions about the future of luxury were based on intuition or some sort of sixth sense: this attitude is naive because it ignores the fact that luxury is not out there, waiting to be discovered in its new forms. Actually, luxury is a product of its time, epoch and the dynamics of class in specific countries: luxury fulfils social and economic goals and is more than a status or conspicuous consumption game. Luxury in the 17th century served the splendour of the Sun King, as luxury at the end of the 19th century served the splendour of the Rockefellers, the Vanderbilts and the Carnegies. Post-modern luxury is a euphoric hymn to the media power of the ‘people’; that is, the celebrities. Today, luxury is more than a macroeconomic sector; it is at the centre of society, held as its most elaborate form of cultural production. This omnipresence of luxury in modern societies cannot be separated from the hyperindustrialization of the world, which leads to the saturation of consumption. Saturation can be overcome in two ways, as exemplified by Uniqlo and Louis Vuitton. Uniqlo proposes quality and style for all through a low-cost business model. In contrast, Louis Vuitton...