“The day we launch a fragrance, we don’t have growth any more”, Louis Vuitton executives used to say, as recalled by a former luxury executive. After shelving the idea in the past, Louis Vuitton is about to launch its own scent. Previously inconceivable, nowadays, Louis Vuitton operates an airport store (Seoul) and adapts its communications campaigns to its highest growing markets.
From the widely established product diversification into beauty products, eyewear or home collections, an increasing number of luxury fashion brands are nowadays associated with mobile phones, hotels and high end jewellery. In most cases, diversification has been made through licensing, providing a stable source of revenue for the respective fashion brands without any investments or operation hassles.
Can we speak of a natural diversification process as an extension of the lifestyle component of a luxury brand or merely a financial motivation, based on the notoriety of the brand? Is there such product extension driven by consumers who wish to have a 360 degree experience of the respective luxury brand?
I strongly believe it is a matter of positioning and expectations which the brand overtly or subtly creates but also how the brand manages these expectations in the long term. Take for instance Giorgio Armani and Missoni, two Italian fashion houses, both privately owned and run by the founders. When creating the Armani Hotels project, Giorgio Armani set up a joint venture with UAE based hotelier Emaar Hospitality, highlighting his active involvement in the actual operations and management of the hotels. Missoni also teamed up with a hotelier, this time, with international group Rezidor (Radisson), yet only being involved at the level of designing the interiors of the hotels.
Without an expertize in hospitality, Armani’s active involvement has resulted into a bumpy start for its first hotel in Dubai – in less than 2 years from opening there have been 4 different General Managers and a very high staff turnover, generating inconsistency especially at the level of service which is so vital to a successful luxury hotel project.
Italian jeweller Bulgari which has also diversified into hotels is yet another perfect example of managing expectations, but in this case, in terms of style. While both the Armani and Missoni hotel projects reflect the style they best are known for, the Bvlgari Hotels have failed to reflect the level of luxury consumers would expect from the renowned jeweller. Neither the Milan, nor the Bali properties of Bulgari Hotels have managed to establish themselves among the top three leading luxury hotels (in each destination). It remains to be seen whether Bvlgari’s newly opened hotel in London will draw on the experience of the previous properties and how it will respond to consumers’ expectations.
To understand how luxury relates to lifestyle, one has to take into consideration positioning, which derives from marketing. In an interview last year, Axel Dumas, recently named CEO of Hermes from June 2013, explained how the house of Hermes has never conducted any marketing research and has never created products to respond to specific trends. Instead, Hermes’ continued success is based on its positioning which is based on craftsmanship and consistency. Similarly, the house of Chanel has achieved desirability through unique positioning and a consistent product offering.
As for diversifcation into product categories which do not share any obvious lifestyle elements with the luxury brands, such as mobile phones, I believe it is solely for the purpose of mobile companies differentiating their products. With the exception of Dior and Tag Heur mobile phones which have been custom made in terms of design, most other luxury branded phones have been existing models of major brands such as LG, Samsung or Motorola, usually adding a different colour case and the logo (LG – Prada, Samsung – Armani, Motorola – Dolce & Gabbana etc). Although providing access to a lower priced product of a luxury brand, much like in the case of fragrances, there were no lifestyle elements consumers would be able to relate to, hence, the failure of most of these luxury mobile phone projects.
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