Luxury = New Definition?

 That luxury goods are enjoying a buoyant market is a given. What's harder to define is why consumers at so many different income levels are in hot pursuit of relatively expensive things they don't really need.

Luxury is being defined in new ways and that definition evolves constantly with ever-shifting demographics, socioeconomics and the geopolitical climate, luxury observers note. Furthermore, the definition of luxury is not only objective, but also subjective depending on the buyers' personal circumstances.

The cliché used to be that fragrances were the point of entry into a traditional luxury label's domain. Over the past decade or so, designer eyewear has become a luxury category with relatively easy entry prices. More recently, watches, often further up the price scale, have also gained importance as a symbol of luxury, notably in the United States, compared to Europe where watches have been a traditional form of luxury, notes Ravi Dhar.

"You can't drive your Porsche into the boardroom, but you can distinguish yourself with a watch," says Dhar. Here, there is a mix of conspicuous consumption and the feel-good factor of wearing a great watch.

One way the notion of luxury has entered people's vocabulary is via the media. The increased availability of celebrity magazines or celebrity television programming, in addition to coverage in more traditional consumer glossy publications, means that more people know what's available.

"Eighty percent of Japanese women own or have bought a Vuitton bag," says Pierre Chandon. "This is not to distinguish themselves from the rest, but to show that they are part of the group."

"The real paradigm shift occurring in the luxury market that signifies new luxury is the consumer-centric way people are defining luxury as an experience or feeling," writes Pamela Danziger.

The only way for luxury brands to survive when the very definition of luxury is constantly shifting is to be consistently innovating, observers note. This is particularly important when courting the super rich. "The super rich have always stood out from everyone else, but the distance has shrunk," notes Myers. "They want to continue to distance themselves."

Recession = Less Luxury?

Recession! What recession? This is the kind of response you might get from South Africa’s BEE individuals (Black Economic Empowerment). They are the newly found rich segment in South Africa. They are the ones who found the golden pot at the end of the rainbow after 1994 once the democratic government came into power. They are South Africa’s “black diamonds”.

And they are spending. The latest findings of the UCT Unilever Report shows that, despite the recession, this markets’ spending power has grown by 39%, from R150 billion in 2007, to R250 billion to date.

Solly is just such a guy. He is rich. He is sleek. He’s an eternal optimist. And he knows what it means to fight for what you want. So what we might call a recession, he calls a “social struggle”. An opportunity to roll with the punches and come out stronger as a result. “I grew up in the struggle, I laugh in the face of what you call a crisis”

We met him at the Radisson restaurant situated in one of South Africa’s most prestigious hotels in Sandton City. He arrived, dressed in a black shirt and sleek designer black jacket, jeans and very shiny shoes. Waving keys to a  R2,4 million Bentley, he quickly tells us that this is his new investment.  He is thinking of buying this “baby” to add on to his other high profile portfolio of cars parked in his garage. 

“I am an optimist,” he tells us “I believe that the recession is a state of mind” he says with a look of determination on his face.

The truth is that these BEE are still living quite comfortably and spending quite freely. Perhaps they feel they deserve it. Perhaps they made smart decisions. Perhaps the recession really is small when compared to a life filled with struggle.

One thing is for sure, they are tenacious and one can only be humbled by such resilience.

Opportunity: Recognize Them For Their Tenacious Spirit. 

Rich yet counting dollars

 

Palos Verdes, California. Population: Approx. 42,000. Median household income: $95,000. It's zip code, 90274, was US' 47th most expensive zip code in 2007 according to Forbes.com. To Lesley Tanchum, this was the perfect place to set up her art gallery/shop that sold/consulted/framed art affluent consumers that appreciated the value of art.

Much to her surprise, it was everything but. "The mindset of these people was far from what I expected." She described the residents of Palos Verdes to be 'avid negotiatiors' and 'conservative' with their spending, always looking for a bargain. Customers that come into her store wanting a piece of art to be framed often try and haggle the price down to a number that they can find at a mass market shop, saying things like, "wow, $100 to frame this? I was looking online and saw that you could frame this for $20 less than this amount." The irony is astonishing to her, as she quoted that it was "funny seeing how people would drive up to the store in their Ferrari's yet come in and ask to pay the lowest price for a frame."

And if anything, the recession has only made this worse. Lesley's sales are down nearly 50-80%. Residents of PV are spending less money on art. And if they are, they come to the store saying, "my husband will kill me if I spend this money..." or something of the like. 

 

By Anna L

Popular Luxury a threath for Classic Luxury?

Richad is an über wealthy Expat living in Dubai. His and his family’s wealth go back 4 generations from the time his grandfather set up their trading business in the East. Unlike many, he believes in the calculated risks and in being content with everything. That’s always been his philosophy in life and business.

There is an aura of confidence, calm and ease in his voice as he opens up to me; because at the core of it all, he’s made it. He truly believes that money doesn’t grow on trees. So although he and his family are privileged and lucky, he knows that this has come after working very hard for over 30 years in preserving and growing what wealth his father had passed on.

He is by nature a more conservative and cautious man, and he believes that with age comes the wisdom of spending lavishly because you deserve it rather than splurging for the sake of it. He has always been a moderate man except when it comes to his shoes! He feels he deserved them with his hard earned money so there is no feeling of guilt associated with the purchase at all. He loves luxurious items because they are unique. “Not everyone knows or can recognize a Berlutis, only those who know.”

Classic wealth will always exist, recession or not. Those are the true representations of the luxury industry. This industry, in the incredible boom around the world, became like all other industries, commercial and available to all. With easy credit the mass had access to luxury.

Classic Luxury is still prevailing. It’s those few, ‘in the know’, that will always seek uniqueness. One they genuinely believe they so deserve!!

The Challenge is to bring back the exclusivity of luxury brands to those privileged few. And not to fall in a New Larger Luxury Community.

Luxury and Women - New product lines?

Are women part of the New Luxury's development ?

Traditionally, the luxury market has been pitched to men. Pedraza says this will change because women are more active in the job market, launch more new businesses and graduate from college with advanced degrees in greater numbers than men. And, lest we forget, women typically outlive their husbands and inherit their wealth.

"Wealthy women have everything except the respect of luxury marketers," Pedraza says. "They're under-marketed. Banks and asset management firms largely ignore them."

But that's changing, especially in consumer goods. Companies like Coach and Gucci have long defined top-of-the line products in their sector. In the past, they've relied on a few top designers to exemplify taste. In the future, companies pitching products to the rich will depend more on feedback from their customers and design will become more of a collaborative effort, Pedraza says.

Does Luxury Have a Future?

What has made luxury a luxury will always remain true. There are elements of luxury that are foundational and have endured over time. But because we do not live in a static world, people have changed and the context for luxury has shifted. As a result, luxury expressions and manifestations will change over time. Once defined by social significance (owning a lot of expensive things), luxury has evolved to be about personal importance (creating unparalleled experiences for oneself).

Luxury consumers still want to consume; they’re just looking for ways to justify it. In turn, she infers that luxury is nuanced and multi-dimensional. Some of the new dimensions could include:

• Ethical: Luxury is less about expensive and inaccessible materials/craftsmen. It’s more about just methods of production, fairly sourced materials, and having an interesting and transparent back-story.

• Altruistic: Luxury experiences or products that give back.

• Productivity: Luxury with an element of utility that allows one to maximize their time and experiences.

Luxury has endured because it never loses sight of its foundation. But if luxury brands continue to act the same in a changed world among a changed consumer, they risk becoming irrelevant.