LUXURY REPORT: Soft luxury faces up to hard times

The ‘hard’ luxury market, which includes jewellery and watches, is experiencing growth as increasing numbers of fashion brands diversify. This means that so-called ‘soft’ luxury specialists are having to build new positions as companies that offer a broader variety of luxury goods categories. 

Globally recognised brands such as Chanel, Dior, Gucci, Hermes and Ralph Lauren have already made this shift, while Louis Vuitton opened a dedicated jewellery boutique in Paris this year and Versace is expected to launch jewellery stores in several capital cities over the next five years, including Hong Kong.

This move by the haute couture powerhouses comes in a time of economic uncertainty, which has “lowered middle class confidence as overall spending on soft luxury naturally slows”, says Angelito Tan, co-founder of Robert, Tan & Gao Luxury Consulting. “Based on this slowing, many brands [have made] a strategic move to diversify their product offering, adding a hard luxury goods line as it appeals to the affluent consumers who tend to keep their luxury lifestyle the same.”  

Tan says in countries where key motivators for purchasing luxury goods include superior craftsmanship and quality — essentially items that stand the test of time — it is understandable that soft luxury brands create products that showcase these attri-butes. “Additionally, as consumers are increasingly bonding with a brand lifestyle rather than just a product, diversifying a product portfolio into new categories can help brands find new sources of revenue while still retaining their key consumers.” 

This article appears in the Luxury Report in the  November 2012 issue of Campaign Asia-Pacific Subscribe online or call +852 2122-5227

In status-consumption cultures such as China and India, luxury jewellery and fine timepieces are the fastest growing segments. Says Anita Nayyar, CEO for India & South Asia at Havas Media: “The luxury market is growing at 20 percent, so marketers will need to sub-segment their luxury customers to focus their activities and communication on their profile. Instead of trying to just be unique, they need to create value propositions based on multiple factors, to understand their clients’ aspirations and needs and establish a relationship.”

Therese Glennon, managing director of consumer insights for Asia-Pacific, Middle East and Africa at Nielsen, says it was observed with “overwhelming consistency” in this year’s Asia’s Top 1000 Brands study (conducted by Campaign Asia-Pacific in collaboration with Nielsen) that the most successful brands were those that had a broad reach across multiple categories. Says Glennon: “Brands which extend their reach effectively provide more ‘touch points’ for consumers and thereby increase the equity of the brand.”

The same can be applied to the luxury goods market, she says, adding however that in order to succeed, “luxury brands must ensure that extension into other categories is relevant to their positioning and that their level of quality is maintained in order to meet consumers’ expectations”.

Asked whether it is possible to maintain exclusivity while trying to market a brand in a country as large as China, Tan says it is, but adds that brands must ensure that the experience in each of their boutiques is “an experience of exclusivity”. 

Glennon agrees. “Definitely, especially amongst the more sophisticated Chinese consumers,” she says. “They do not want to be associated with the brand, they want the brand to be associated with them. Exclusivity will make products and the users [feel] unique.”

Does diversification confuse consumers and dilute brand equity? Glennon says not and maintains that it provides opportunities for luxury brands. “Many luxury brands are exploring collaborations to facilitate diversification into areas as broad as mobile phones, interior design and even automotive. The move to diversity extends the brand’s reach and positions the brand as innovative.” Where there could be a potential risk, according to Glennon, is if there is a “lack of synergy with the luxury brand’s core brand foundation” when extending into a new category or establishing a partnership with another brand.

Tan believes the challenge for brands “trading up” to hard luxury lies in its ability to persuade consumers of its know-how in areas where it has a limited heritage. He gives an example in the luxury watch sector where fashion brands such as Chanel and Dior have successfully tapped into this lucrative market by “capitalising on design innovation”.

When it comes to marketing in such a vast geographical area, you have to wonder if brands will come to rely more on online than the physical presence of a flagship own-brand store in the city centre. Anita Nayyar thinks they will have to in India: “To keep this customer coming to the Indian store, specialised CRM programmes and a comprehensive digital offering, [which are] taken lightly today, will be vital.”

However, there is still the belief that the physical presence of a flagship store is essential for any luxury brand that aims to connect with Chinese consumers. Tan believes that, although online marketing efforts are an increasingly important aspect of the marketing mix, these efforts (for the most part) have yet to communicate the exclusiveness of any hard luxury brand. He says marketing efforts (online and off) will never be a replacement for retail, especially in China where “education through experience is still paramount”. Tan says: “The ideal luxury experience engages a consumer’s five natural senses, and that can only be done offline.”