Something rather expected is happening in Hong Kong. The culture of new affluence is pushing the traditionally rich into a corner.
Many luxury studies across the Asia Pacific tell us that the ‘premium’ consumer continues to look for more of what originally drove luxury brands – exclusivity, rarity, uncompromising attention to detail, appeal to a personal aesthetic and an emotional fulfillment. And the combination of all these factors results in consumer value (obviously, at a much higher price point).
However, this is different from the newly affluent consumers who want to signal that they have arrived. No wonder, they yearn for a conspicuous and loud label. It is crucial to remember that these mass prestige consumers also demand that luxury brands like Louis Vuitton continue to be a source of envy to the millions who cannot afford them.
It is indeed paradoxical that these newly affluent consumers, in the luxury brands they consume, seek brand conformity and acceptance by the traditionally rich consumers. While the very same traditionally rich consumers are moving on to a more rarefied and exclusive set of products and brands.
How are luxury brands reacting to resolve this contradiction?
The ‘dyed-in-the-wool’ family held, heritage luxury brand just thumbs its nose in disdain at this noise.
For the more pragmatic (market listed?), a variant becomes an inevitable strategy. This helps the manager retain the exclusivity to attract the uber-premium consumer. While, at the same time, the variant helps the manager make the brand slightly more accessible to the mass prestige consumer. A good example of this is the relationship between Armani and Armani Exchange (AIX). The use of discounts and sales only on the mass prestige variant is a further fine-tuning of this strategy. When following a variant strategy, most brands manage careful segregation of retail and design spaces with only some hints of the relationship between the variants.
Either way, maintaining brand equity of the true luxury brand in the face of these advancing hordes of newly affluent mass premium consumers has spawned a whole new set of strategies.
Limiting the supply and using price as an indicator are some evergreen marketing tactics for niche luxury products.
Some new tactics include increased usage of corporate social responsibility (CSR) and ecology initiatives to appeal to the affluent conscience. The auction of a vintage 1958 Jaeger-LeCoultre Model E168 watch to benefit the UNESCO World Heritage Centre is an example of such CSR.
Crucially, the luxury brand lives in the store. (No surprise then, that demand for truly premium retail locations is sky-rocketing). Take a look at the Nespresso Boutiques – and how it welcomes coffee lovers into the espresso world. And this is why luxury marketers are increasing investments to convert retail into tasteful “experience zones” where the brand can be experienced at its very best.
Lastly, in the hyper-competitive world of luxury brands, front line staff may well become (if not so already) the most crucial reason for consumers to keep coming back to the brand. As in private banking, expect personal relationship managers at the store. These people customize your store experience, or indeed, bring the store to your home.
In sum, expect luxury to become even more niche, private and discreet while its louder mass premium cousin mops up volumes from the newly affluent. Who is here by invitation? Any body?
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