|Title:||Global top four luxury brands by value in dollars and percent change for 2010|
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Top luxury brands 2010 Brand Brand Brand Value ($m) value change X Louis Vuitton XX,XXX X% X Hermes X,XXX X% X Gucci X,XXX X% X Chanel X,XXX -XX% X Hennessy X,XXX -X% Source: Millward Brown
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. By MaryLou Costa and Lucy Handley
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 Moet 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-Noel 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 (see Fashion designers, page XX).
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 Hermes are now successfully selling online, enabling them to reach customers all over the world (see Mark Ritson on luxury). 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 #XX 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.
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 (see Q&A).
"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 $XXX 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."
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 XX% of total global luxury sales. Almost a fifth of sales for Hermes, and XX% of sales for the PPR Group, parent of Gucci and Yves Saint Laurent come from Japan. Reuters 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.
Top luxury brands 2010 Brand Brand Brand Value ($m) value change X Louis Vuitton XX,XXX X% X Hermes X,XXX X% X Gucci X,XXX X% X Chanel X,XXX -XX% ...