We recently had an internal brainstorm around the topic of luxury. One of my colleagues mentioned that they thought that Calvin Klein as a fashion brand was no longer considered luxury but was at the height of luxury in the 90’s. Alongside this, if you search for luxury brands in Google you get a list of the top brands by brand value in 2017 which includes the likes of Mulberry. If you looked at this 20 years ago, it would arguably have been different and would have included brands like Galliano or Lacroix that are less top of mind today.

Here at Kadence this got us thinking - what makes a brand ‘luxury’ and why do brands that consumers perceive as luxurious change over the years?

Looking first into what makes a brand ‘luxurious’ – we believe there are three main drivers:

  • High price: this doesn’t necessarily mean a high overall price, but a high price compared to other brands within that sector. For example, categories such as soap includes brands such as Molton Brown and L'Occitane that could be considered luxurious but may ‘only’ cost £20 compared to other categories like shoes or watches. As a side note, the quality also obviously arguably need to at least match expectations, especially if customers are spending large amounts.
  • Limited supply: luxury doesn't have to be expensive but it arguably shouldn't be easily obtainable. Sometimes a luxury brand can be one that not many people know about (like Delvaux or Serapian handbags) – adding to the feeling that you’re special and no one else really has an item like you have. Another example is the long waiting lists for Hermes Birkin bags – by limiting supply, they increase desirability.
  • Endorsement by celebrities: for some brands it is an A-list celebrity, for others a football player, but an endorsement by a celebrity can make items more appealing for consumers and potentially more ‘luxurious’ in their eyes. Brands do have to be careful though - Juicy Couture were propelled to fame by the likes of Paris Hilton, but that also put plenty of people off the brand too…

But we don’t think it stops there. Other elements can also come into play:

  • The packaging: brands are doing some really nice things with packaging nowadays. In Fall 2014, Chanel released a supermarket collection of bags – the packaging that they came in represented a supermarket carrier bag and the tag represented a barcode, all in-keeping with the overall theme of that season. And more broadly, when you buy an item of clothing from Net-a-porter they will put it in a box with a ribbon, and Christian Louboutin shoes come with a lovely red fabric bag. This makes the unboxing and unwrapping experience for the customer more memorable and special and can add that ‘luxury feel’.
  • Personalisation: customisation of a product is a great way to make the customer feel special and one of a kind. The fact that you know no one else has a product like yours makes the product a bit more luxurious. Kate Spade and Louis Vuitton are great examples of brands that have done personalisation well – allowing you to monogram your handbags or add a variety of ‘patches’ to them.

Why do brands become more or less luxurious? Michael Kors is a great example of how trying to reach the masses can arguably make you appear less luxurious – they released their ‘diffusion line’ MICHAEL Michael Kors which priced all goods to match the upper end of high street prices to cater for consumers shopping in high-street shops as well as larger department stores. This was very successful for them in terms of sales at first, but they have now slipped down to a more “casual luxury” brand forfeiting sales overall. In June 2017, Michael Kors announced that they been battling declining same-store sales for the past seven quarters with continuing decline into 2018. It was also announced that the retailer would shut more than 100 full-price retail stores in the next two years, and that their share prices are at their lowest in more than five years. In some ways they could be seen as suffering as a victim to their own success.

Brands will need to think carefully about each of these themes as the luxury sector continues to grow and develop, and these elements will differ depending on the product and category, which is where research comes in – we can actually speak to customers first-hand and unpick which elements are most important to them, uncovering brand perceptions and share of the market.