“Luxury” is a very ambiguous word that is used very loosely.
Merriam-Webster’s defines Luxury as: a condition of abundance or great ease and comfort: sumptuous environment luxury>3 a: something adding to pleasure or comfort but not absolutely necessary luxuries>b: an indulgence in something that provides pleasure, satisfaction, or ease.
No one would argue with the definition above, but perceptions of luxury vary by individual and by product. For some people, there is never a time not to think about luxury, because for them the line between luxury and necessity has blurred completely. For others, it may just seem in bad taste to spend at a time when so many are struggling.
None of this is new news or indicative of a new trend. But what is rapidly appearing on the horizon of change is the level of accessibility for luxury products. A recent study indicated that luxury brands have homogenized luxury to the point that 63% of wealthy consumers feel that luxury is being commoditized. According to a report conducted by the Luxury Institute, “you can walk down most high streets such as Fifth Avenue, Avenue Montaigne, and Bond Street – you see the same look and feel in store designs and products”.
This accelerating phenomenon of luxuries becoming affordable derives from multiple intersecting trends which include the emerging global marketplace, mass scalability in manufacturing, and the advent of the Internet.
Billions of New Global Consumers
The global marketplace is bringing about an increased availability of goods to a pool of consumers growing at a pace never before seen in history. Despite the recent crisis in confidence in the stock markets, the global fundamentals make it more likely that millions will continue to be lifted from poverty, and that millions more will become millionaires around the world in the next few decades. From a global or even regional perspective, a relatively new market segment called the affluent masses, has gained great significance and attention by marketers of luxury brands-all for obvious reasons.
Mass Scalability for Manufacturing
As firms discover the potential of creating and offering greater affordability for their luxury goods to the affluent masses, many luxury brands intent on joining a new class of mass ‘luxury’ brands began looking for ways to scale production by establishing global partnerships that can utilize the manufacturing capacities in Asia as well as advanced global logistics solutions.
As luxury brands join the race to make this transition, they often look to reclassify luxury in a more democratic context by repositioning themselves as affordable luxuries (a contradiction in terms), in order to satisfy this vast market segment. Additionally, chances are that you will get technical support for your computer from Manila in the Philippines, have your own built-to-order custom cabinets designed and manufactured in Beijing, China, or have your next x-ray read from Bhavya in Bangalore. In his bestselling book, ‘The World is Flat’, Thomas L. Freidman contends that while the global economic playing field is being leveled, people from far-flung places will become principal players in the marketplace. The relevancy of his point heightens as we move beyond product and great service comes to the fore.
The World Comes Together – Online!
Perhaps the most congealing factor, for any firm looking to capitalize on these intersecting trends that are leading to what the Luxury Institute calls a “Luxury Access Revolution”, is the Internet. Beginning with the dotcom boom just over a decade ago, literally a trillion dollars has been invested in fiber optic cable; and, along with the emergence of common software platforms and open source code, efficient global collaboration has been enabled. Friedman says that these flatteners converged around the year 2000, and “created a flat world: a global, web-enabled platform for multiple forms of sharing knowledge and work, irrespective of time, distance, geography and increasingly, language.”
After some resistance to change, the debate over whether they should be selling online or not is over for most luxury brands. According to Michael Baugus, CEO of Crossroads Enterprise, Inc., a firm that specializes in fine kitchen cabinets, “leaders that fully grasp how technology, globalization, and commodification are transforming our world will emerge in this new space. They will not just be online, but innovate online by creating never-before-seen products and categories that are relevant to this segment; as a result, they will revolutionize their industry.”
Opportunities abound for luxury providers for those that can intelligently leverage these market forces. At a Harvard Business School Conference last April, Nancy F Koehn, a professor of business administration at Harvard, explained the vitality of the market. She said “luxury goods were a changing space, a space with extraordinary zip and excitement; things are kicking along vigorously.” However, getting into this space and succeeding in it are far from being a given.
Today’s consumers are short on time, short on patience, and with today’s economy, short on money. For most products especially luxury items, the search has begun for affordability. Even the extremely affluent are highly discerning, educated online buyers. What this means is that at every price point on the luxury-spend spectrum, all consumers share a common interest in value for the goods and services that they purchase and their medium of choice to conduct their research and increasingly to make their purchasing decisions is on the Web, and you must be able to communicate your value amongst all the noise.
Secondly, while mass manufacturing and distribution is becoming commonplace, many firms unfortunately to their detriment, forgot to include in their new business models an emphasis on today’s consumer not being satisfied with you just stamping out more products, but also that they demand that you deliver great service. With everyone racing to take advantage of the ubiquitous, shop anywhere anytime efficiencies online, the differentiators for consumers will be great service reinforced with transparency and trust; not only on an individual experience level, but they will also rely on and trust their buying peer groups who they regularly dialogue with through their preferred online communities.
Everyone wins when great service is discovered or rediscovered by those competing in this space as it will only contribute to the experience and total value each customer receives. All in all, as higher quality goods and services become widely available and affordable for the masses, and companies seek to deliver them in means that engender loyalty and trust, the quality of life will increasingly improve for everyone.