Profile: Jeremy Gilley

The man marketing world peace

Removing exclusive tags risks permanent damage

  • To read about how Four Seasons sees the luxury market, click here
  • For Mark Ritson’s views on top luxury brands, click here
  • For a case study on H&M and designer brands, click here

In an effort to overcome falling sales, more high-end brands are ripping up their self-imposed rule book and seeking mass appeal by embracing ecommerce and social media.

Luxury Shopping

Luxury brands are reaching out to consumers in a way they have never done before, crossing their austere retail environments to make themselves more accessible. Many high-end brands are embracing social media, launching transactional websites and creating cheaper ranges, where previously they might have stayed on their pedestals only pushing out beautiful, glossy advertising campaigns.

But what does this strategy mean for the brands that so successfully traded on being so out of reach? Cecile Simon, former head of brand communications for Jaguar and now managing director of PR firm Sidhu & Simon, says that balancing accessibility with exclusivity is now a huge issue for the luxury world.

“The biggest challenge is how to take the world of luxury and make it relevant to a much wider audience without compromising the exclusivity factor,” she says.

And Franck Sagne, LVMH’s head of digital marketing for wine and spirits - which covers brands such as Mo’t and Hennessy - agrees that this is a tough stance to take. “We can’t hide ourselves in an ivory tower but we have to remain precious and exclusive,” he says.

Avoiding selling online, overlooking the desire to become more relevant and continuing to sell an aspirational dream without resorting to celebrity endorsements are the rules of luxury branding, according to Professor Jean-No’l Kapferer and Vincent Bastien in their 2009 book The Luxury Strategy.

But the rule breakers have been coming thick and fast. Designers Jimmy Choo, Karl Lagerfeld and Matthew Williamson have all created ranges with high street retailers in an attempt to attract new audiences, although Lagerfeld has admitted to being dissatisfied with the quality of the new products.

/j/a/j/LVMH.jpg

Designer Antonio Berardi, whose dresses are worn by Hollywood stars, says behaving this way causes luxury brands to lose their prestige.

He tells Marketing Week/ “My brand is small and it’s in my control and I know everything that goes to a store or that is bought and it’s the best it possibly can be. When you lend your name to something it’s totally out of your hands and I would hate for that to happen.”

And designer Tom Ford, formerly of Gucci and now running his own label, showed his spring/summer 2011 collection to very few people at his catwalk show last year and banned photographers and video cameras. Ford, who strives to maintain desire for his brand while protecting it from exposure to the masses, explained his move by saying: “You see the clothes, within an hour or so they’re online, the world sees them. They don’t get to a store for six months. The next week, young celebrity girls are wearing them on red carpets. They’re in every magazine. The customer is bored with those clothes by the time they get to the store. They’re overexposed, they’ve lost their freshness.”

A question of balance
Some firms are getting the balance right. LVMH and Hermès are now successfully selling online, enabling them to reach customers all over the world. And according to Vadim Grigorian, marketing director of creativity and luxury at drinks business Pernod Ricard, they manage to maintain their exclusivity.

He cites LVMH’s Louis Vuitton as an example of a brand that might be adopting more practical marketing strategies, but its outlets, such as that in London’s Bond Street, are still a world of “luxury fantasy”.

“You have a [physical] separation, where this is the world of luxury for Louis Vuitton, and out there is everybody else,” he states. “That is why they can sell glasses that cost £10 to make but are sold for hundreds.”

Grigorian believes that amplifying the physical retail experience will be the next shift to almost compensate for the lack of discrimination in customer base that online distribution allows.

luxury

He says: “The industry will inevitably develop better shopping experiences, or we will be degraded to commodity level.” He cites the DFS Galleria shopping centre in Paris as a natural hub for luxury retailing. It focuses on shopping as an experience, offering a platinum club that goes as far as to reserve restaurant and theatre places for members.

“We need to participate in this movement and lead it and create the experiences for consumers,” Grigorian states. “It’s going to be the biggest paradigm shift and the ones that can do it better and faster will win the hearts of consumers.”

Grigorian says that alongside making sure flagship retail environments remain a crucial part of keeping a brand’s image aspirational, social media can reinforce a perception of rarity. For example, when brands such as Gucci go on Facebook they must try to enforce a certain desire through the content they post, he says.

Social media is a way for luxury brands to capitalise on the personal recommendation factors and emotional connections that have traditionally propelled their high-end statuses.

Sagne at LVMH agrees that luxury brands can use social media to drive aspiration over accessibility. For example, the company created an app for its champagne brand Veuve Clicquot when it sponsored the Gold Cup polo tournament last year, which featured a champagne concierge function.

Luxury consumers still make brand choices, Sagne argues, and social media can help affirm a choice, as well as helping consumers become “connoisseurs”. He acknowledges that the shift towards engagement has been a difficult one for luxury brands to accommodate, but there is a “thin line between exclusivity and frustration” that has to be managed.

Creating offerings at lower price points has traditionally been a luxury no-no but has become an increasing trend. For example, upmarket jewellers Tiffany & Co and Theo Fennell have both launched cut-price ranges. However, the latter issued a profits warning in January following a poor Christmas.

Susan Helstab, executive vice-president of marketing at Four Seasons hotels and resorts, says these “bridge” lines might alienate core, wealthy consumers.

/w/p/y/Tiffany.jpg

“Tiffany’s cheaper range may have made it more difficult for that really big diamond buyer to feel comfortable in some of its suburban stores [in the US] where they were elbowing teenagers who were interested in $125 pieces. Great care needs to be taken in how you manage the development of more affordable lines.”

Helstab adds that the growing accessibility of luxury brands means that really wealthy buyers are now looking even harder for one-of-a-kind purchases they can lay bragging rights to.

In responding to this, Gucci has arguably also strayed away from its high-end image. It ran a series of press ads last year featuring no product at all, just men with their backs to the camera standing in rows, observing pieces of leather, to focus on the craftsmanship involved in Gucci products.

But have these brands discarded the rules at the cost of their identities and what makes them luxury in the first place?

Helstab doesn’t buy the argument that luxury brands are becoming too deeply connected to the masses. She says luxury brands can champion strategies such as social media to further fuel the personalisation that their core consumers are seeking.

For example, social media initiatives such as Burberry’s The Art of the Trench website encouraged fans of the brand anywhere to express their love for the brand’s style staple.

Four Seasons is making a leap into social media with the launch of a family travel blog and a greater emphasis on original content on its sites.

“It’s particularly challenging in the case of luxury when it is now the consumer that defines your positioning and authenticity,” says Helstab.

“The trend for consumers to take charge of brands is most threatening to a luxury product because historically we have wanted to control every image and word, and the greatest risk we ever took was talking to a journalist who would take what we say and write what they wanted.

“Today, what we say about ourselves is virtually inconsequential, because people are going to believe their friends and user-generated content over everything else. We are now a facilitator of those conversations.”

/h/g/a/Gucci.jpg

PR consultant Simon singles out the luxury car industry for being quicker than most sectors at using social media to drive engagement, brand consideration and, ultimately, sales. Digital marketing director of high-end car brand Infiniti Martin Jobin says social media was a key part of the Nissan-owned brand’s launch three years ago through blogs and online videos. However, as the brand becomes more established it will be moving more towards traditional media.

Luxury brands need to accept social media and the fact that it puts the brand in touch with someone who is not necessarily the ideal consumer for them, Jobin says. Ultimately, he adds, even if millions of people are engaging with your brand online, the true purchaser of a luxury product will still be dictated by price.

“Exclusivity is about a target group and people that can afford a product. Premium brands like Mercedes-Benz and BMW have millions of visitors to their sites but it doesn’t mean all those people own a Mercedes or BMW,” he reasons.

“I can’t stop anyone in the world from creating a cheap, bad video and putting it on the internet. But when we post our own material we make sure it is of high quality so people feel the premium nature of our brand. And while lots of people might be chatting about your brand online, the exclusivity aspect is still maintained through your own site, your own advertising and in the retail experience.”

Breaking the rules of traditional luxury marketing looks like it will become the norm for brands in this sector as economic challenges have been hard to overcome. Despite various global markets seeing some upturn, the blow taken by the Japanese market as a result of the devastating events earlier this month is expected to have a significant impact on the luxury market.

Japan is the world’s biggest buyer of luxury goods, according to Reuters, and on its own represents around 11% of total global luxury sales. Almost a fifth of sales for Hermès, and 16% of sales for the PPR Group, parent of Gucci and Yves Saint Laurent come from Japan.

euters reported this month that the earthquake’s impact on the Japanese economy meant share prices for all these firms were down.

As many Japanese consumers will understandably not be purchasing Gucci handbags for some time, luxury brands will surely be looking to recoup their anticipated losses.

Social media and back to basics brand building can ease the burden of filling such a gap. But brands in this sector need to retain just the right level of exclusivity to keep to the definition of what makes them luxury in the first place.

Q&A

susan

Susan Helstab
Executive vice-president of marketing at Four Seasons hotels and resorts

Marketing Week (MW): What changes in the luxury market have you noticed?

Susan Helstab (SH): Until the economy took a downward turn, it was like an arms race as to who could get the latest thing; you had to be on a treadmill, and nobody looked at the value of things. People are now more focused on what’s important and it affects what they want to pay a lot of money for. People are looking at what justifies a price as opposed to a brand just charging a certain price. The price value equation has changed.

What then started to change is that people were looking at not just the price point to define if something was exclusive, but what is really intrinsic about a product. In fashion, for example, the craftsmanship and the heritage has lasting value that you pass on to the next generation in the way that watchmaker Patek Philip has been doing for a long time.

Another trend is around personalisation, the bespoke “just for me” element. If something can be made to be truly one of a kind, like that special handbag in the leather that you picked, then it’s worth having.

MW: How does that sentiment translate to the hotel sector?

SH: In the case of hotel experiences, how much can a hotel personalise the experience to the guest? Everything is now about getting as much information about the guest that we possibly can to be able to create that personal experience.

Consumers have more choices than ever. They are enticed by new offerings all the time. To keep them brand loyal you need to deliver on experience, service and have that love and affection. This means it’s difficult for an unknown brand to work its way in. You have to make guests feel like it’s about a relationship. Social media can be a big asset in reinforcing that relationship.

MW: Explain your social media strategy

SH: Our biggest initiative is our family travel blog. We are engaging with bloggers and Facebook advertising on this, encouraging guests to produce photo galleries of their time at the hotel. We’re building out more content that is peripheral to the hotel, which the customer can tailor to their own experience.

We have made digital our priority - it is now 50% of our marketing budget and combines PR with social media. Two years ago we launched a corporate Twitter account when no one else in the luxury hotel market was doing that. We encouraged hotels to have individual voices to engage with guests.

MW: Would Four Seasons consider developing a lower-priced hotel brand?

SH: We specialise in an affluent traveller, so we have unique insights into our guests. Commitment to that guest gives us the strength to do a number of different things in our business. If we opened a property that wasn’t purely a Four Seasons hotel it would not be successful because we would have to be a different organisation.

But we can stretch our own existing brand. Not in terms of taking it from five-star properties to three star, but in terms of design, from hotels to resorts, whether they are large or small, private islands for couples or residential.

Mark Ritson on luxury brands

The power and value of the BrandZ top luxury brands is particularly pronounced and the 2010 data provides many insights. Millward Brown interviews more than 600,000 consumers for this research each year and the results provide arguably the single most insightful peek inside the golden robes of the luxury industry.

First we must stop and marvel at the size, scale and domination of Louis Vuitton. The range of Vuitton products combined with its global appeal and strong price premium make it by far the biggest name in luxury. Its brand is worth more than Tiffany, Fendi, Cartier, Rolex and Chanel combined. It plays a near perfect game in terms of brand management with its products only being sold through its own boutiques and with a no-discounting policy that saw it last run a sale in 1986.

One of the biggest surprises is Hermès. Devotees of the brand like to portray it as small, private and extremely high end, but Hermès is in fact the second biggest brand in luxury. There is no greater skill in luxury branding than to sell in the billions but present oneself as making each product with exclusive, singular devotion.

For Chanel there is a challenge ahead. The brand is getting dusty, the average age of clients is increasing and the all-important runway collections are starting to lose their vigour and impact.

There has been a double disaster at Cartier, which is number eight on the list. First there was an unavoidable focus on watches and jewellery - the sector of the luxury market that was hit hardest by the global financial crisis. And second was the lack of progress within Cartier’s designs. In the world of luxury an inability to move on and constantly revitalise your offering is the ultimate sin.

A last observation on the top 10 is not who is there but who is not. You have to go all the way to number 10 before uncovering an American brand in Tiffany. The American dream is built from a belief that anyone can make it. It’s entirely inclusive and lends itself well to consumer goods where everyone is in the target market. But luxury celebrates an ideal that not every consumer can or should be part of a brand’s clientele. The French dominate luxury because they have a culture that is comfortable with artistic development and one entirely at ease with the idea of excluding most to include the few.

luxurybrands

To read the longer version and see the full table click here

Fashion designers reaching out to the high street cultivating new consumers or losing their edge?

Antonio Berardi

Antonio Berardi: Produced co-branded luggage with Peroni to avoid engaging with high street retailers

High street fashion retailer H&M is well known for bringing designer labels to the masses through collaborations with the likes of Jimmy Choo, Karl Lagerfeld and Stella McCartney.

While the brand kudos gained for H&M among a mainstream customer base is obvious, the benefits for the designers involved has been called into question.

Chanel and Chloe designer Karl Lagerfeld lent his name and face to H&M’s first ever designer collaboration in 2004. Costing between €5 and €150 as opposed to more than €1,000 for his ’original’ pieces, sales went up 24% for H&M in November that year, compared with the previous year.

However, Lagerfeld himself was critical of the partnership. He believed that H&M had not produced and distributed enough of his line. And he objected to the chain selling his pieces in larger sizes, controversially stating that they were designed for “slender and slim people”.

But there are clear gains to be made for designer labels in terms of widening brand awareness and gaining alternate revenue streams in economically challenging times.

An analysis of H&M’s designer collaborations by Verdict retail analyst Charlotte Woods highlights both what designers have to gain by working with high street retailers and how they can capitalise on what should be seen by many customers as a rare opportunity to buy something that would otherwise be unaffordable.

Collaborating with H&M enabled both Jimmy Choo and Matthew Williamson to extend their brands into new product lines in a less risky environment than their own stores. In a 2010 tie-up, Choo was able to move from producing shoes and handbags to making women’s clothing, while Williamson, famous for producing womenswear, was able to try his hand at menswear.

“For Matthew Williamson, the collaboration resulted in an increase in popularity for the designer, with consumers pleased that he had made his signature style affordable to the masses,” says Woods.

Stella McCartney’s H&M range in 2005 allowed the designer to spread her ethical fashion ethos, Woods also notes, by having one of her T-shirts manufactured using organic cotton and dedicating 25% of its sales to support animal welfare charities. McCartney viewed the collaboration as a “fantastic way of reaching a wider female audience” and has since engaged in collaborations with other high street retailers such as Gap.

But not all H&M partnerships have been successful. When Finnish prints designer Marimekko collaborated with H&M in April 2008, the retailer experienced a 10% decline in year on year monthly sales.

Designer Antonio Berardi, who counts Gwyneth Paltrow and Beyonce among his clients, partnered with beer brand Peroni to produce co-branded luggage in 2009. He argues the tie-up allowed him to retain more autonomy and brand integrity then a full-scale high street collaboration. “I’ve been asked many times to do things that were ’mass’. But if you could buy Berardi on the high street then you wouldn’t want to buy Berardi,” he says.

Verdict retail analyst Charlotte Woods gives the following recommendations for high-end fashion brands looking to make their presence felt on the high street

  • Make sure control is kept over the promotion and advertising of a brand so that it remains consistent with its own portrayal.
  • Avoid forming too many collaborations with high street retailers. Long term this may undermine the higher pricing strategy of its independent collections.
  • Ensure the quality and standards of garments are not cheapened for the mass market. Maintain perceptions of quality by using designs that do not rely on costly materials.

Have your say

Mandatory
Mandatory
Mandatory
Mandatory

Related images

Job of the Week

Top Jobs

social

+media Facebook Twitter LinkedIn
knowledge+bank