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Business of luxury: emerging markets Previous page: ITH A dOUbLe-dIGIT A young woman Journeying Luxury used to be reserved W approaching US$250-billion, walks past a Louis growth and global revenues Vuitton shop in the future of luxury industries could not the emerging for a single and elite group of market nation look more promising and full to luxury’s high-end consumers; now that of opportunities. Gucci is among of Turkey. Right: In the next two years, luxury goods elite is plural, changing and the top-end revenues are expected to grow 50% brands that has global. Professor David Dubois faster than global GdP. Importantly, reacted to a new frontiers examines the evolution of luxury markets in developing countries, further upmarket changing luxury environment particularly in Asia, represent an luxury brands and the infuence by going even increasingly significant part of the of emerging markets. overall growth and development, on average, twice as fast as luxury markets in developed economies. While these figures might fill luxury brands and their managers with optimism, to access untapped markets and new they also reflect fundamental changes There are fundamental sources of revenue. that are going to break and reshape the changes in the At the heart of this challenge is the ‘frontiers’ of luxury, forcing the players extent to which luxury consumption is in the market to completely rethink frontiers of luxury ‘self-oriented’ versus ‘other-oriented’, their strategies. and how brands communicate with regard Together with Mathieu Trepanier to these two orientations. The greater from Tsquared Consulting Partners (a territories and does not share the same the individual’s need for status, the Swiss-based business advisory firm), ideal of beauty, quality and taste. more ‘other-oriented’ the consumption I have aimed over the past five years As a result, the new global elite’s pattern will be. to understand what the new frontiers common thread is the need for status In this case, luxury brands should move of luxury will be, how to predict them to showcase one’s rank in the social away from producing purely ‘individually in different markets, and what they hierarchy and, more specifically, among unique’ products – which is typically imply for effective brand building and peers. The growing importance of the what traditional luxury brands offer their communication strategy. status motive comes, in part, from the clients – and instead focus on attributes Overall, three frontiers will significantly fact that there are 10 times as many that maximise the product’s social value affect the future of any luxury brand. We so-called ‘Henry’ consumers (high (‘other-oriented’), such as how it will be call them the ‘3S’ frontiers: the Status earnings but not rich yet) than there are shown to and shared with others. frontier, the Separation frontier and ultra-affluent consumers in the world, Importantly, while this frontier the Societal frontier. They capture the according to a Unity Marketing report. represents a threat for luxury brands, it most important needs or expectations of These consumers are more likely to also represents a tremendous opportunity consumers, the general public and, more make comparative purchases to signify to for new brands eager to move up the widely, the business environment that will others they have climbed – at least partly luxury ladder and it partly explains the need to be managed to build tomorrow’s – the social ladder. success of aspirational brands like winning luxury brands. How do luxury brands respond to Couronne (a high-end fashion brand) in Here are insights on each frontier and the Status frontier? Several major South Korea, or the impressive success how to manage them. players such as Gucci and Louis Vuitton of some of diageo’s alcohol brands in have reacted by shifting upwards Asia, notably the premium Johnnie Walker not a single definition and raising their prices. While this whisky products. of luxury conservative strategy can be effective First, luxury used to be reserved for in protecting the brand, it is only one of Hidden and scarce a single elite; now the elite is plural, many possible responses. The second key insight is that luxury used changing and global. For instance, there Indeed, the Status frontier carries a to be hidden, scarce, separated from are now almost as many ultra-wealthy dilemma. On the one hand, luxury brands consumers and only accessible to those individuals in Asia (42 895) as in North should not dilute their value by becoming who ‘deserve it’. Seeing a masterpiece (a America (65 295) and europe (53 440). too conspicuous. On the other hand, it watch, an exquisite piece of jewellery, a Perhaps for the first time in history, this is difficult to resist adopting ‘premium- one-of-a-kind pen) was a chance encounter, elite group has different values in different isation’ strategies, given the opportunity as luxury had to keep its mystery. 14 strategicmarketingafrica Second quarter 2014 Second quarter 2014 strategicmarketingafrica 15