Jean-Noël Kapferer, co-author of The Luxury Strategy, explains how combined economic growth and social democracy has created a boom in the luxury industry.
“I’m sure you have seen the movie The Titanic,” muses Jean-Noël Kapferer, co-author of The Luxury Strategy. "At that time, luxury was segregation. You had people at the bottom of pyramid – or the boat – and people at the top, and they didn’t mix. They were not allowed to move from one tier to another.
“Today that is finished. There are still people at the top and still people at the bottom, but they want, for maybe five minutes, ten minutes or half an hour, to go to the top of the boat and to enjoy luxury”.
And enjoy luxury they are. This new mass interest in luxury has allowed the industry to achieve record-shattering results throughout periods of economic malaise and political turmoil.
The drive of digital and social communications has brought luxury brands to a host of new, younger consumers in a truly global fashion. Emerging centres of wealth have changed the profile of ‘the affluent’, and in turn the profile of the luxury consumer.
We spoke with Jean-Noël Kapferer during the ‘Is Luxury History’ event in London, organised by creative agency Imagination, to gauge the depth and breadth of such change.
“ The new luxury is not about being accessible, but it has become a source of enjoyment for more & more people ”
What are some of the key differences in the understanding of ‘luxury’ today, when compared to more traditional definitions?
“In the year 1901, there were only 2000 people with cars in Paris. So having a car was a luxury, whatever the car. Now you have more or less 600 cars per 1000 people, so it’s no longer the car, it’s the brand. The brand is the source of luxury. This is now a heavily loaded brand business.
“And the consumer expectations are changing, everyone feels they have this right to luxury. The top-tier hotels business in particular has exploded for this reason. A lot of people will have a cup of tea in a five, six, seven star hotel, they will have a honeymoon weekend in a great hotel, and that is the new luxury.
“The new luxury is not about being accessible – it remains inaccessible – but it has become a source of enjoyment and exception for more and more people. There are people who have a room for a year in luxury hotels and that is the way they live.
“But then you have a young couple who want to have the experience of their life, to have three days in one of the best hotels in the world. So the market has exploded. People think they have a right to the dream of the rich – a small right but a right nonetheless.”
“ Once you succeed, you want to enjoy. Luxury has become the self-reward of high growth countries ”
What have been some of the key economic, political and social factors that have led to such drastic changes in the luxury industry?
“Two things have created the luxury industry boom. First is economic growth, second is democracy. What is democracy? It means equal rights for everybody, so if you have the money and you can buy it, you should buy it. Before that in aristocratic society, or in India for instance with the caste system, you have to remain within your class.
“There were strict barriers to entry for the people, similar to my Titanic example. Now if you take China, China is a communist country, but the former Prime Minister of China told the people to ‘get rich’, don’t talk politics but get rich.
“So you have millions of people who went out and said I want to be rich. And once you succeed, after all that hard work, you want to enjoy. And what do you enjoy? What is best, what is luxury is what is best on earth. You have performance, taste, excellence, time, service embedded in it. It’s almost art. So it’s your own reward.
“Luxury has become the self-reward of high growth countries and this is why in low growth countries, the luxury business is not going well. People don’t want to reward themselves.”
“ If products are discounted 50% in January, then they are managed like a fashion brand, not like a luxury brand ”
In your mind, what categorises a true luxury brand, product or service?
“I’m not in the process of deciding what is and what is not a luxury brand, this is highly subjective. However we can say are they managed like a luxury brand or are they not. That’s much more objective as you can see what they do.
“For instance if products are discounted 50% in January, then they are managed like a fashion brand and not like a luxury brand. You would never see Porsche discounting and saying ‘now we have a lot of Porsche’s so we should offer a 50% discount.’ Because the people that buy real luxury buy it because the value of the goods will always be increasing.
“But indeed, many more people should know the brand than those than can actually buy it. Consider James Bond and Aston Martin. Billions of people have seen Bond movies, disproportionate to those who could actually afford to purchase the cars. But when you see an Aston Martin on the street you understand that part of the value is ‘they know I have an Aston Martin’.
“ Billions of people have seen Bond movies, disproportionate to those who could actually afford to purchase an Aston Martin ”
In The Luxury Strategy, you explain the importance of “luxury for oneself and luxury for others”.
To sustain the latter facet it is essential that there should be many more people that are familiar with the brand than those who could possibly afford to buy it for themselves. But where is the tipping point?
“Luxury for oneself and luxury for the others are the two essential sources of pricing. If you are only luxury for yourself, okay you might like it but it doesn’t create business. And if you are only luxury for the others, then it’s fashion, then its logo. So what’s new?
“The internet is what’s new. The Internet is the biggest challenge faced by luxury, because on the one side it explodes the brand awareness and it allows people to go inside the companies, to attend a runway show, to go into the heritage of the company, to go into Mademoiselle Chanel’s own apartment.
“So it’s a fantastic kind of movie on your mobile or your tablet, but then if you put everything for sale on the Internet, via eCommerce or the likes, it’s a different story. Because what makes the reputation of the brand is what kind of people wear it.
“ The Internet is the biggest challenge faced by luxury. On one side it explodes brand awareness, on the other it opens distribution ”
“And for many years retail stores were selective in distribution, and when I say selective distribution I mean using distribution as a way to select buyers. It’s a way to say well, you, not you. Because what we like in the buyers is not only their money, but also their own status.
“On the internet anyone can buy, so there is a real danger here. There should be a strong interaction between physical retail and the Internet. For me the Internet is a way to bring people to the store, because in the store is where people actually experience the brand and where brands can decide whether to keep them as a buyer or not.
“But the paradox of this notion, having much more people that know the brand than can afford it, has been demonstrated. Some people may be surprised by what I am about to say, but I think that some counterfeiting is useful. Why?
“Because counterfeiting in the introduction of a brand in China, boosts awareness that this brand exists, so in terms of building awareness you are actually better off being somehow counterfeited, because people will ask ‘what is this new logo coming on the streets?’
“This is the paradox. But if you have too much counterfeiting, you have too many people on the streets that you don’t want to identify with the brand. Things are not straightforward.”
“ Luxury is a way to remain. When you buy a very expensive watch you expect to keep it all your life ”
How do you believe luxury will change further in the coming years?
“I don’t expect luxury to change further in the future. Luxury is a way to fight against time. Premium products don’t stay premium for a long time. This is called up cycling, your last iPhone will be obsolete in two years, the same with your Samsung tablet. So premiumness is essentially about death, fashion is also. In fashion you are fashionable and then you are unfashionable.
“Whereas luxury is a way to remain, and that is why throughout history people have invested huge amounts of money in luxury goods. When you buy a very expensive watch you expect to keep it all your life. And this is why the notion of performance is not that important, because if performance is 100% the reason to buy, then as soon as something comes along that is better, you will upgrade.
“Whereas in luxury people see something they want and they will buy it. Luxury buyers will have the whole collection, they don’t get rid of products. The next Porsche buyer already has one Porsche and he will keep it. The next Ford buyer will sell his car to have a new one, which is the big difference.”
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