Appunti esame Luxury and fashion management

Luxury & fashion management

Prof.ssa Mainolfi, a.a. 2020/2021 – UNINT Università degli Studi Internazionali di Roma

Defining luxury

• Classic definition → a luxury brand is an exclusive and unique brand capable of becoming a selective symbol of rarity, sophistication, good taste, discretion and aristocracy.

However, the abovementioned definition is restrictive as we need a definition that contains the different facets of the phenomenon. Precisely, we need a definition that considers the recent evolution of luxury. Hence, according to the more contemporary meaning of luxury → “a luxury brand is an exclusive and selective brand that brings a creative and emotional value to the consumer”.

Origins of the word luxury

The word luxury (“luxe” in French and “lusso” in Italian) has been used with its contemporary meaning only since the 17th century. The word luxury originates from the Latin word luxus (meaning “exuberance of vegetation, metaphorically the “abundance of delicious things”) which is similar to the Greek word lox-os (meaning “growing in a twisted way, oblique”). It is interesting to observe that if we look at the Latin and Greek words, we can find the origins of the “negative” connotations (= something that can be considered an excess/above the necessity).

Transformation of luxury in terms of meaning

→ The French language is still a relevant reference since luxury, with its contemporary meaning, was born in France.

The Trésor de langue Française dictionary “Le Française” offers a brief overview of two centuries of use.

• 1607: Way of life characterized by large expenditures to make shows of elegance and refinement.
• 1661: Character of which is expensive, refined, luxury clothing.
• 1797: Expensive and superfluous object, pleasure.
• 1801: Excessive quantity, a luxury of vegetation.
• 1802: That which is superfluous, unnecessary.

It is interesting to observe that all these descriptions and adjectives are still present, although in different way, in the definitions of luxury presented in the dictionaries from different countries. Definitions across cultures show many commonalities, above all concerning the non-necessary nature of luxury defined as a wasteful abundance.

The important role of industrial revolution

The industrial revolution was a sort of turning point for luxury because it’s in the industrial revolution that we can observe the birth of brands and the current luxury industry (intended as the ability to sell a product not just in terms of 1 piece but replicating items). Before the industrial revolution, luxury goods were created by craftsmen and artisans and then sold in local markets. However, such items were sold without a brand (there was only the name of the creator/artisan, but not a real brand). During such a period, the connotation of luxury was related to the choices of kings and queens (aristocracy was a point of reference for customers). Indeed, the fact that a particular item (a dress for example) with some specific features was chosen by aristocrats was consequently the symbol of luxury. So, with King Louis IV of France, luxury becomes something profane, symbolic of ostentation, grandeur. From then on, luxury was connoted with the concept of unnecessary, superfluous.

Recap looking at the French dictionary

Current usages of the word luxury show evolutionary meanings:

1. Social practice characterized by lavish expenditures, the search for expensive amenities or refined goods, often motivated by a taste for, and desire of, the ostentatious.
2. Luxury (adjective). Of very high quality, sophisticated, expensive.
3. Refers to a thing, a behavior of the enjoyment it provides.
4. Qualifies a thing, a behavior valuable because of its rarity and sometimes by the fact it is devoid of utilitarian function.

From the above meanings, we can see that there is something related to the history, as well as something related to the use of luxury as something of a very high quality (positive connotation).

What follows is an analysis of a theoretical framework that includes everything that we said in terms of evolution and add something more about customers’ side. The first aim of this framework is to fill the metrics with all the classic definitions for luxury which are still working. The second aim is to combine in one metrics the customers’ side of perception and the production side of companies.

From public to individual sphere

Over the centuries the concept of luxury has evolved from a value associated with the public sphere to one more and more related to individual experiences.

→ Public sphere: looking at the original meaning of the word luxury, we know that if a customer buys a luxury item his/her aim is to create his/her personal identity to show off something (for example showing that he/she is improving his/her career). Indeed, projecting status was the original mission of luxury good.

→ Personal sphere: however, the evolution of luxury shows the concept is no longer related only to a social sphere but also to a more personal (individual) sphere. Hence, customer can buy luxury items just for inner pleasure which derives from the possession of that specific product, without necessarily showing off/projecting status.

Having in mind that we have both spheres (social and personal), now we can introduce the metrics proposed by Chevalier and Mazzalovo. The diversity of current definitions of luxury can be divided into two broad categories: those relating to the supply of products or services (production’s side/production approach) and those related to the psychological and social implications of these products or services (consumers’ side/perceptual approach).

Perceptual approach

Now we are focusing on the right side of the metrics, talking about the customers’ side.

1. Social sphere: Buying a luxury brand is a way to express a social position, luxury is defined essentially by its dimension of social communication. This is the approach of sociologists.
2. Personal sphere: a dimension of comfort and individual hedonism (= living and behaving in ways that mean you get as much pleasure out of life as possible, according to the belief that the most important thing in life is to enjoy yourself). Such a dimension is often neglected by sociologists.

Jean-Paul Sartre proposed an interesting definition of the concept of luxury embracing more the personal sphere: “Luxury does not designate a quality of the object owned, but a quality of possession”. → This is related to the personal sphere. Luxury makes us dream and we also can dream alone. Hence, luxury can be a personal dream as one can gain pleasure alone without others.

Productive approach

What is the main goal of luxury companies? The final goal is to drive luxury customers to achieve social sphere needs and personal sphere needs. However, there is also another goal that must be considered, which is that of focusing on the features of a luxury item. From the companies’ side, at the very beginning of the production of luxury items, just some features were the companies’ focus. Now, the features and the effort of companies have a completely different perspective. Indeed, the main qualities are related to excellence, design, creativity. Even for companies (just like for the customers’ side) we can trace some evolution across years. For this approach, what defines luxury is a set of qualifications embedded in the production of the object or service (quality, materials, know how).

Semantic history of luxury into the analytical scheme

There are two areas for both approaches (productive approach vs perceptual approach). In the productive approach we find brand and its manifestations, while in the perceptual approach we find social and personal sphere.

The light grey words indicate terms that have an historical connotation, the normal black words indicate modern definitions, and bold black font words refer to post-modern definitions.

Focusing on the productive approach (companies’ side):

• → Brand area: What is the aim of the brand? To gain power, to become powerful (how can a brand achieve this outcome? Through a successful brand strategy and by working on the manifestations of the brand).
• → Manifestations area: What are the main qualities that across years have been identified? Design/creativity/excellence are all post-modern terms. Indeed, they refer to the current vision of luxury in the mind of luxury brands.

How can I differentiate my luxury brand from competitors? Quality is not enough.

1. Excellence which means to be the best in terms of raw materials, human resource and in the retail system.
2. Design which refers to aesthetics.
3. Creativity, that is the ability to identify new ways of doing things. For example: creativity now can have a relevant source in collab strategy between brands with the aim of adding value and differentiating from the competitors. Creativity is something that change our perspective.

Switching to the perceptual approach (customers’ side):

• → Social area: lavish lifestyle (historical connotation); splendor/ostentation/wealth (1800 century, modern); status/seduction/elitism (post-modern connotation. Status is the first post-modern concept → my aim is to create my image in the context of reference, concerning that now I have reached a specific social sphere thanks to my work. Seduction → my aim is to use a luxury item to gain seduction and to be more attractive in comparison to others. Elitism is the most interesting meaning for the social sphere. What does it mean? What is the aim? My aim is to be different, innovative. To buy something that is very peculiar, that it is not for all because to appreciate that item you need to have a higher level of knowledge in terms of production.
• → Personal area: refinement/elegance (historical); pleasure/exception/boldness (modern, something that I can appreciate alone, without the necessity to show off); hedonism (post-modern, it is pleasure. I like the idea to gain a very attractive appearance).

!! When a customer buys a luxury item (e.g., LV bag), it does not necessarily mean that the customer wants to show off (social sphere). Indeed, the possession of a luxury item can encompass both spheres.

The study of Barnier, Falcy, and Valette-Florence

Thanks to a study of Barnier, Falcy and Vallette-Florence on a sample of over 500 people in France, the authors demonstrated that luxury cannot be reduced to the sole effects of display. Consumers think and live luxury in terms of brands.

1. Once consumers were obsessed by luxury, but brands were absent from their universe.
2. Today, on the contrary, brands appear as the natural vehicle by which luxury plays its role.
3. The authors demonstrate the existence of a continuum of luxury with increasing intensity, from mass luxury to unaffordable luxury, via intermediary luxury (three levels of luxury).

The authors say that the luxury sector can be described through three different levels: unaffordable luxury, intermediary luxury, and mass luxury. This proposal has been integrated with other visions. For example, according to Danielle Alleres and its three level pyramid, we can associate unaffordable luxury with haute couture, pret-à-porter can be included in intermediary luxury, accessible/affordable luxury can be proposed by luxury brands that decide to propose a more accessible line in order to attract new customers that are not authentic luxury customers but are ready to buy products because they can perceive the prestige associated to the brand.

!! Corbellini and Saviolo criticize this pyramid saying that the 98% of sales in the luxury sector are in the lowest level of the pyramid. Thus, this classification is useful to describe the origin and the specificity of the field, but not to define an operative tool. The reality is that luxury sector is not only one level but there are more levels.

Maslow’s hierarchy of needs

Maslow’s aim was to identify different levels, different typologies of needs that can motivate a customer to buy. Starting from the bottom of the pyramid to the top of the pyramid, Maslow identifies 5 levels with completely different needs that motivate customers to act in a specific way. The bottom level is related to physiological needs, then we find security needs, then sense of belonging and love needs, then esteem needs (for example status → I buy a product to feel a sort of gratification), and at the top of the pyramid there are the self-actualization needs (when all goals are achieved). Maslow (1943) initially stated that individuals must satisfy lower level’s needs before progressing on to meet higher level growth needs. Later on, he clarified that satisfaction of needs is not an “all-or-none” phenomenon, admitting that his earlier statement may have given false impression that a need must be satisfied 100 percent before the next need emerges”.

The benefit ladder

The benefit ladder is more related to luxury. We have three areas: technical features, functional features, emotional features. In many cases, companies can decide whether to focus on technical, functional, or emotional features. Of course, you can find all three features in a brand or a product, but a brand should identify only one area in order to construct the image in the mind of customers. At the end of the day, for luxury brands is still a combination of three areas but there is one area upon which a brand must decide to construct its image, such choice is a strategic choice, and it will depend on the customers’ needs. The benefit ladder is a way of thinking about how you position those customer benefits in your marketing, which ones you bring to the fore, and which ones you trade on as a brand. Ascent up the ladder varies from company to company. While some use practical perks such as product price and availability, others take things up a rung or two with more complex benefits like reliability, quality and reputation for great service. At the top of the ladder, there are brands who trade on emotional benefits like feeling confident or having peace of mind.

Identity image reputation

→ Identity: how a brand defines its visual presence. Brand identity is the system of colours, design etc etc. It is the concept behind all the choices of the brand. How I want to communicate myself to others. Something that I create to convey a certain thing, a specific message (for example, identity is the dress that I wear, or a tool that I use to present my brand to the audience).

→ Image is the sense of perception. It is how others are perceiving you.

→ Reputation dynamic concept. Something created over time.

→ Essence: brand essence is used to define what the brand is now, it is complex. Everything is included in the brand essence (heritage, creativity) but you must define your visual presence, what are the main features of the brand (the identity brand does it. Here lays the difference between brand essence and brand identity). For example, heritage, which is related to both brand essence and brand identity, is the roots of the brand/what I am/my family name is a part of me in terms of essence but then I have to decide a strategic communication in order to introduce myself to others (defined by brand identity).

What is luxury industry today?

Okonkwo’s proposal for luxury product divisions makes it clear that there is complexity within the luxury industry. Nowadays, the boundaries of luxury are not only restricted to fashion, perfumes and cosmetics, watches and jewelry, and eyewear but there are other sectors (e.g., hotels, restaurants) included in it.

To describe the luxury industry, Corbellini and Saviolo proposed the following ranking of segments:

1. → Accessories (leather goods, shoes, silk items): notable growth in recent years both in terms of market value and impact on corporate turnover. Originally offered by companies as an initial purchase for new customers, today the market is hyper-segmented. We use the term “accessorization” to mark the fact that accessory is no longer a complement, but it helps to create the look.
2. → Apparel: in this case apparel is traditionally related to haute-couture and ready-to-wear (couture, exclusive items). Clothing is losing ground in terms of contribution to sales and corporate profits (seasonality and high prices!). Clothing is important because designers can express their creativity, creating “lifestyle”. Creativity lays in the fashion industry.
3. → Perfumes and cosmetics: another relevant sub-sector in the luxury industry. They are the best product category inside the accessible luxury (looking at the three levels pyramid of luxury). This category has been used by historical luxury brands to attract young consumers, breaking into new markets and consolidating brand awareness. Partnerships with leading companies (e.g., L’Oréal) have created successful and remunerative products.
4. → Jewelry and watches “hard luxury”: another name for this sub-sector. it is related to the highest level of value for every single item (in this area we can find the most expensive luxury items). This sector is related to the concepts of eternity and preciousness, and it is very concentrated with 3 top players (Richemont, Rolex, Tiffany).

Altagamma results before Covid-19

Altagamma (foundation that gathers the most important high-end companies, mainly Italian but not only. It publishes financial reports every year on luxury and fashion and on some specific phenomena that can happen over a year, for example Covid-19). From the latest report of Altagamma we notice the growth of leather goods and accessory category (7,0%), fragrances and cosmetics (5,0%), jewelry and watches (4,0%).

As previously mentioned, today the luxury sector has expanded to include any product which, even if not linked to the individual, is a component of a luxurious lifestyle. For example (describing the right side of Okonkwo’s graph) sailing, home furnishings, spas and