Luxury brands, those goods and services that are not considered essential and are associated with affluence, have been present in various forms since the beginning of commercial civilization. “Luxury goods” status is generally attained due to a products design, quality, durability or performance that is remarkably superior to the comparable substitutes and is represented in virtually every category of goods available on the market today. Luxury brands are synonymous with quality, status and sex appeal and despite the economic downturn, quality brands is a niche segment that continues to flourish.
Sales at Tiffany & Company are up 35.85% year-to-date while Walmart is up just 10.8% in comparison. Burberry Group on the London Stock Exchange is up over 11%. Bain forecasts global luxury goods sales would rise at a compound annual growth rate of 5% to 6%between 2013 and 2015 at constant exchange rates. The total size of the market was $273 billion in 2012 and Bain thinks it could reach $290 billion by 2015. China will account for about 20 percent of global luxury sales in 2015, according to new McKinsey research. Shifting attitudes toward the display of wealth, rapidly rising incomes and widely available luxury products is resulting in more Chinese consumers than ever to feel comfortable about buying luxury goods.
Moët Hennessy Louis Vuitton (LVMH ) announced its first quarter revenues, revealing a 25% surge powered by the company’s fashion and leather goods division. Meanwhile, shares of mid-range retailers, including Macy’s, Dillard’s and Kohl’s, have been climbing steadily recently. Macy’s is near a 52-week high, almost doubling in the past year; Dillard’s stock is up nearly 50 percent. Classic Americana designer Michael Kors, who specializes in luxury accessories and ready-to-wear, had an initial public offering that valued the company at a whopping $3.63 billion. So what strategic factors seem to be leading these fashion brands towards success?
The Internet has fundamentally transformed the way luxury brands market their products. While they may have been fashionably late to the party, luxury brands all over the world are embracing the visual, social and interactive tools that digital media provides to identify and interact more closely with their consumers, generate positive word of mouth, and launch their next limited editions. In addition, E-Commerce is providing a new and untapped channel for premium products. “Luxury marketers are really leading the way for marketers across categories, from consumer goods to big box retail, luxury brands are responding to the booming consumer trends with a significant shift in focus toward digital media,” said Kelly Hushin, author of the study and Digital Content Manager for Worldwide Business Research, parent company of the Luxury Interactive conference. “With affluent customers more likely to own smartphones and tablets and shop online across each, marketers are looking for more and more ways to effectively reach new and existing customers interested in luxury brands.”
THE OUTNET, the UK-based website was established on the pillars of distinctiveness and exceptional design and has developed a solid following of fashion-savvy customers with an average household income of over $175,000. They are able to maintain a loyal customer base not only because of its stylish offerings, but also because of a strategic web design. Managing Director of THE OUTNET, Stephanie Phair, attributes the company’s early and sustainable success to a marketing strategy designed to ensure they are providing a seamless shopping experience across all devices. The OUTNET is currently concentrating on optimizing their site for mobile, and creating their StyleCred app for the iPhone where a user can create and share fashion looks and earn store credit. Creating a robust and creative mobile devise and tablet experience is essential to success in a market where most fashion-conscious consumers browse and shop digitally.
In an industry where customers’ perceptions drive everything, one false step and the fall from the “Tech-savvy Shoppers’ List” can be swift and brutal in this competitive environment. Luxury products like clothes, handbags, shoes, and jewelry, might be well made, but they’re not difficult to make. The success of the business rests on keeping shoppers convinced that the brand name alone is worth paying extra for. The first rule is to listen to the marketplace, with a focus on what the consumers want but aren’t getting from other competitors. Customers naturally gravitate to marketers who deliver on what established competitors either cannot or will not deliver. Catering to a competitor’s weakness is opening the door of opportunity to skilled marketers and entrepreneurs.