Massification of luxury

Experts all over the world have been penning about luxury consumption among the Chinese customers. A Few have also discussed the issues of Chinese luxury brands aimed at worldwide customers including Shanghai Tang and LaVie. However, there is hardly any discussion on how slowly but steadily Chinese enterprises are acquiring or taking over Western luxury brands. This post is an attempt to highlight that.

In the later half of last century, a revolutionary style of luxury customers emerged. This involved successful business people, industrialists, artists and those who acquired brand-new riches in several marketplaces across the globe. This nouveau riche had little idea on how to use their new-found wealthiness and how to become stylish person. A innovative service industry emerged due to this: the fashion stylist who assisted this nouveau riche look and feel modern person.

One of the major impacts of this revolutionary luxury customer was that they made a second rung of overambitious leaders, directors and carrier go-getters at large. These materialistic customers also wanted to consume luxury however didnt have the means to purchase such goods.

To get out of this market luxury companies came up with a totally brand-new set of products which later on were defined as accessible luxury. It included bags, scarves, wallets and bags, belts and such other low-price goods. While the new marketplace was lucrative, most luxury organizations recognized that the production prices didn't provide enough margins when produced in the European factories.

To amend their financial bottom-line many luxury firms then looked for markets where these goods can be made for a cheaper cost. China was the most apparent options, still it was a unruly marketplace to establish relationships with local manufacturers. Many Hong Kong based dealers took advantage of the position and jumped opening up factories in China which developed luxury goods for many well recognized luxury houses.

As they gained knowledge and expertise in developing quality high-priced luxury goods some of his Hong Kong dealers and their Chinese counterparts realized that the greatest profit margin lies in the ownership of a luxury organization. In the early part of the brand-new millennium the Chinese encroachment in the luxury market jumped.

The most booming stories among these is the Chinese entrepreneur Silas Chou, the President and CEO of Novel Enterprises Limited, one of the worlds leading vertically-integrated textile and apparel manufacturer. In 1984, he actively helped his family in establishing Dragonair. He took over Tommy Hilfiger Corporation tacitly. Within 8 small years as a chairman he changed the luxury company from a US$25 million only America centric clothes company to a world-wide US$2 billion brand.

The above presents us a little thought of how the Chinese businessman are now stepping up in the luxury business which was predominantly European a few decades ago. As the market presence of Chinese consumers grow in the field of luxury, the other side of the movement also is going to grow only. Certainly some food for thought for the European luxury manufacturers and marketers.

Source: Massification of Luxury: the Chinese Invasion

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Luxury brands in recession: Developing a better value proposition and luxury brand strategy

Commenting on my last post on 'luxury value propositions', Mostafa Huga and Thangaraj asked a very pertinent question, 'how should managers' build a better value proposition and a marketing strategy for luxury brands in recession?' Brand management is extremely crucial for luxury industry in customer retention and keeping consumers loyal. Focusing on value propositions can help managers not only in building a better corporate branding strategy but also a good customer relationship management campaign.

As I stated in my earlier blogs (Managing luxury brands in recession) and (Gucci's response) that managers need to continuously focus on and understand customer psychology and customer engagement process to develop a better luxury marketing strategy.

With regard to consumer engagement researchers have identified that consumers focus on several important criteria when engaging with luxury brands. This criteria include:

- Status derived from the luxury brand
- Conspicuosness associated with the luxury brand
- Hedonic (pleasure seeking) orientation of the luxury brand
- Materialistic attitude of the individual
- Uniqueness of the luxury product/brand/organization
- Quality association of the luxury brand
- Functional advantages derived from the luxury brand
- Financial associations with the luxury brand (as consumers become very value conscious when economic environment is tough)

It is very important for luxury brand managers to understand how consumers areengaging with their luxury brand on each of the above mentioned dimensions. Only that understanding can help managers develop a customer oriented luxury brand strategy. For example, consumer may engage with a luxury brand as it may be associated with it a symbol of success and achievement. However, there could be some brands with which consumers associate ostentation and show-off.

Furthermore, managers should also try and profile their consumers on the basis of their personal orientation such as are these consumers predominantly hedonistic or materialists. It is important to understand the difference in this personal orientation.

Similarly many luxury brands are marketed and bought for uniqueness as well as high-quality associated with them. Consuming such goods may provide a social advantage. Moreover, in recessionary times consumers may become price conscious and that may have an increasing effect on the overall consumption decision and value proposition.

Each of these value dimensions would have a distinctly different effect on consumer engagement and resultant consumer behaviour. Managers need to understand the motives of luxury consumption. For example, an Armani suit bought by a consumer may be bought because s/he is attending an important event of importance and therefore it has more of social (status and conspicuous) aspects associated with it. On the other hand, the person may put-on a high-end luxury fregrence which may reflect more of a hedonistic attitude.

Presently we are conducting a study which focuses on the impact various consumer value perceptions (such as social, personal, functional and financial) on the overall luxury consumption. I shall surely share the results... Till then, watch this space!!!

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