Editorial
Editorial
Article Type: Editorial From: Journal of Fashion Marketing and Management, Volume 16, Issue 3.
This issue sees our usual wide range of topics discussed; from the journal's founding aspects of trade in a paper by Sheng Lu looking at the impact on trade between 2000 and 2009 after the elimination of world clothing trade quotas, to research concerned with the factors influencing older women when purchasing a bra by Risius et al. Unusually there are no manuscripts addressing luxury fashion goods directly in this issue, a topic area from which we have published much material since the early noughties. Nonetheless, luxury fashion proves to be a continuing area of interest due to its unique dynamic in the general fashion space. So, to stimulate further the debate around luxury fashion marketing and management our North American Regional Editor, Ian Taplin, offers his current thoughts on the subject – perhaps it is time for a Special Issue of JFMM on the topic of luxury fashion, do contact me if you are interested in guest editing such an issue.
Ian Taplin: on luxury
In the years since Veblen theorised about conspicuous consumption extensive research, as well as articles in the popular press, have focused on status goods and their defining role in the behaviour of the new rich. Concomitantly, we have witnessed the emergence of a significant luxury goods industry that is now global in scope. In recent decades, consolidation amongst firms in this sector has increased as many small family run firms found it difficult to sustain their own growth in an increasingly globalised marketplace and lacking capital for required investments sold to several key international players. The latters’(e.g. LVMH, Richemont Group) strategies have embraced diversification and the creation of a broad portfolio of signature brands, many of which are Italian,and whose own legitimacy played heavily upon long traditions of craftsmanship,quality and exclusivity. What is also notable in recent years is the increasing global nature of this industry, with the driving force switching from Japan in the 1990s to China and even other emerging economies. Sales in Europe and the USA remain important but it seems that much of the growth is coming from Asia as a new class of status conscious rich consumers has become firmly established. In fact it is in this area of the world that retail outlets are fast being established as firms seek to capitalise on the insatiable demand for such products.
As a result of this trend a number of issues merit discussion; issues that relate to the type of goods being sold, whether or not the new rich constitute a different type of consumer to their counterparts in the past; and whether previous strategies, especially those geared towards younger, aspirational consumers remain viable. All of these can be seen against the background of sustained growth despite the recent global recession. The global market for luxury goods is growing rapidly and yet will such mass marketing of luxury goods dilute the exclusivity of the products that drove demand in the past? Can luxury goods be simultaneously widely available and “rare” – the latter perhaps one of the defining features that separates luxury from “commodities”? Is the consumption of luxury part of the “trading up” phenomenon that occurs as economic growth generates a broader upper middle class but which can quickly fall out of favour when economic conditions sour?
An answer to the last question can be found in Japan – hitherto one of the driving forces in luxury goods sales during the 1990s. For many luxury goods producers already slower sales in Japan fell a further 10 per cent over the past year, with most reporting consumer surveys indicating showing off of luxury goods as being in bad taste. In the past luxury goods were de rigueur for many teenage females in that country. A contracting economy, however, together with the strong yen, has resulted in the closing of some luxury shops as consumers shift from associating high price with quality to embracing value. Fashion as thrift has now replaced high-end designer awareness. Not surprisingly what growth that has occurred has been in the area of fast fashion, with retailers such as Forever 21 and H&M benefitting from a sentiment amongst younger Japanese consumers who feel affordable brands offer good style and that they no longer need to buy luxury brands. That being said, sales of watches and jewellery remain high as weddings and engagements have increased – a trend attributed to the post-earthquake fear of being alone.
But is Japan typical of the response by a new generation of consumers confronting economic uncertainty? Apparently not. Elsewhere, the luxury goods industry appears to have been relatively impervious to the recent recession with only a small dip in sales. In fact 2011 appears to have been a blockbuster year with firms such as LVMH, Prada and Gucci owner PPR SA, respectively, reporting a 20, 33 and 22.1 per cent sales growth. Whilst much of this growth has been driven by China, other countries such as Brazil, Russia and even Indonesia have entered the picture. According to some in the industry, we are witnessing the emergence of a global luxury consumer class – individuals who are savvy shoppers and both appreciate the status value of high-end products and are immune to the market turbulence that has affected other segments of the consumer goods industry.
Store openings in China have increased dramatically in the past few years as firms vie to tap into the market of one million millionaires in that country. Admittedly, difficulties have emerged, as western marketing techniques that tend to emphasise relationship building by ingratiating oneself with consumers have not resonated with Chinese consumers who prefer a degree of anonymity. It was also assumed that men were the principal purchasers of luxury goods, albeit in the form of gifts for women, yet recent studies by McKinsey indicate that women accounted for over a half of the $15 billion in luxury sales in 2010. As a consequence, subtle targeted marketing to women has increased, including the newly rich female drivers who are now a prime source of sales for Maserati and Ferrari. Frequently such marketing is done in conjunction with luxury lingerie companies such as the Italian La Perla and Armani's cosmetics line. Given this trend, more brands that traditionally appeal to women have redoubled their effort in China, led by British company Burberry PLC and Richemont's Chloe band. Since there has been a dramatic increase in the number of young professional Chinese women, the market potential of this group is immense. Many are single,have significant discretionary income and often feel pressured to stay up to date with fashions. They are also more likely than men are to shop online,leading to experiments by many companies in e-commerce.
Notwithstanding the growth of wealthy Chinese female consumers, men worldwide– in the past the bastion of luxury goods consumption yet a group that was often underserved – continue to demonstrate an almost insatiable appetite for luxury goods. The “masculanisation” of luxury is occurring as a result of growth amongst younger males in Asia (80 per cent of male Chinese millionaires are under 45) and older similar net worth males in the west. Not only have these groups been impervious to the recession, both are becoming more assertive about fashion. They are being served by increased “boutique” space in high-end retailers as well as through e-tail web sites such as Gilt Groupe (which has seen double digit growth since its recent launch).
Men continue to drive sales in super premium, classic luxury watches and jewellery with Richemont Group reporting a 33 per cent sales increase over the previous year and most other firms indicating that 2011 was a record year. The problem that many firms now face is that of struggling to meet demand for their products. Again, young Asian consumers are becoming key players but the European and US market continues to be buoyant. The economic crisis appears to have led consumers to search for meaning and value in their purchases and the distinctive products offered by watch “houses” provides the storied history that satisfies such a need. However, this industry has been slow to embrace the internet,primarily since the products are most likely to be sold through third-party retailers who manage inventory and build relationships with the consumer. To change this would involve not only a restructuring of operations but also a fundamental rethinking of strategy – the latter not something that has necessarily been imposed on what are mainly small, family run firms even if they are part of a larger business group.
Perhaps the one area that appears to have suffered during the recession is the sales of lower priced luxury goods – so called “entry” products. In an attempt to build a new consumer base and tap into growing prosperity worldwide,many luxury goods firms introduced less expensive articles to appeal to aspirational consumers, presumably in the hope that they will one day trade up to more selective items. This policy proved successful prior to the recession and did not appear to damage the reputational quality of such firms, even though the exclusivity of their products became questionable. From a marketing and brand management perspective one might question the viability of appealing “down market” since it might jeopardise the aura associated with expensive items generally available only to a small percentage of consumers. Whilst this did not apparently occur, this segment of the market suffered following the economic downturn with firms such as Tiffanys reporting a significant decline in the sales of their cheaper products.
As one looks back over the past few years, it is quite remarkable that the luxury goods industry has remained so vibrant given the gloom and doom peddled by the naysayers in much of the retail industry. Sales in emerging economies are booming as a new “rich” class behaves in ways similar to their earlier counterparts in the west. In the more traditional markets, men have rediscovered the virtues of sartorial elegance and are consuming accordingly, whether it is in the area of bespoke suits or premium watches. In addition, whilst luxury has never been associated with value, it continues to confer a status that is ultimately valuable. Status competition appears to be alive and well. Moreover,when times become hard, more time might be spent at home. If that is the case,then it explains why women might be more inclined to splurge on small luxury items – hence the boom in luxury lingerie sales that has occurred in Britain over the past few years. In this case, the products are not about men, as a recent Financial Times columnist noted, “it's about women wanting to feel good”.
