The definition of luxury has changed. Although the term 'luxury' is a paradox in itself, the concept of fashion that is tagged 'luxury' is no longer the same as it was as recently as twenty years ago. In the last several decades, the luxury sector has undergone a significant evolution as a result of several factors, which are carefully examined in this chapter. The analysis provides a portrait of the current luxury environment and acts as a catalyst for strategy development to manage the sector's present and future.
As indicated in the earlier chapters of this book, luxury fashion has always been a fundamental part of history and society. From the beginning of the nineteenth century when modern luxury fashion began, to the middle of the twentieth century, the luxury fashion market was a small and specific niche consumer sector made up of aristocrats, celebrities and the world's royals. During this period, fashion sameness was the order of the day and luxury fashion consumers were pleased to dress the same. In the present twenty-first century environment, the story is totally different.
The transformation of the luxury scene has been due to several factors. First, a mass group of wealthy consumers has emerged throughout the world. In the last three decades, a vast amount of wealth has been amassed by individuals due to several economic, social, and technological breakthroughs. This has created a multitude of wealthy people. For example, twenty years ago China had no middle class but, presently, the growth rate of the country's upper-middle class and young urban professionals is among the highest in the world.
Secondly, the high entry barrier that the luxury sector guarded for centuries has been lowered due to advancement in business and management practices, driven by globalization and the internet. As a result of the lower entry barrier, several luxury and aspirational brands have emerged in the last few decades. In addition, 'mass' fashion brands have attuned their business strategies to resemble those of luxury brands and now offer similar goods at a lower price. These factors have also given luxury consumers more brand choices and variety than ever before, and have contributed to the changing consumer psychology.
Thirdly, the rapid growth of digital, information and communications technology has provided a completely different operational platform for both luxury brands and luxury consumers. The internet presents luxury brands the possibility to attain a global level of brand awareness within a short period of time. It also offers luxury consumers more empowerment to choose among a wide array of products, easier access to view their choices and lower switching costs. This influence has led consumers to be individualistic and experimental in their fashion choices. As a result, consumers have become self-stylists and bold enough to mix luxury and high-street fashion in one outfit; something that their mothers and grandmothers would have considered taboo in the past.
Fourthly, the luxury sector has been undergoing a deconstruction process since the 1990s as a result of changes in the investment and ownership structure of several luxury brands. As from this decade, financial institutions including investment firms, private equity holding companies and other non-luxury companies have realized the high intangible asset benefit of luxury brands. This has resulted in increased investments in the luxury sector through acquisitions, capital investments and brand portfolio development. These 'outside' companies include Italian equity funds company Charme, which owns Scottish cashmere brand Ballantyne; Equinox Holdings, which previously had a majority stake in Jimmy Choo; Starwood Capital, which owns Baccarat Crystal; Bridgepoint Capital, which recently sold Molton Brown to Kao of Japan; W Holdings, which owns Amanda Wakeley; and The Falic Group, among several others. These companies place an emphasis on return on investment and augmentation of shareholder value. As a result there has been increased pressure on luxury brands, for rapid sales and profitability. This has led to the introduction of several mass marketing strategies in the retail and brand management of luxury brands. These strategies have further led to the creation of an ambiguity in the definition of a true luxury brand. As a result, luxury brands have divided into groups of 'true luxury' and 'common luxury' or 'fashionable luxury'. Before this era, the branding and retail strategies of luxury brands were clearly different from mass fashion brands but currently, the line that differentiates strategies applied in the two sectors is a blur.
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