The heartland of luxury is Europe and the brands that are feted across the globe have their history and heritage here. The luxury handbag we see on the arm of the celebrity of the moment was conceived in Milan or Paris. When thinking of European luxury goods, the mind quickly conjures up an image of a craftsman hard at work lovingly creating a bespoke pair of shoes for the most discerning of customers. This is what people are buying into; they are purchasing more than a functional product. They are engaging with a lifestyle – one that they aspire to, or one they live every day.
CBRE has conducted research to better understand the drivers of luxury. What is it that makes people buy and how do people feel when they engage with luxury products?
One of the key findings is around the question of “when is luxury no longer luxurious enough?” There is a distinct dichotomy between the people that make a luxury purchase and those that might be best defined as living a luxury lifestyle. For the former, the aspiration to own a luxury product and the achievement of that aim is itself part of the reward. For the latter, luxury forms a very concrete part of their lifestyle.
Both sides expect the purchase and ownership of a luxury item to confer a certain status upon them. The challenge luxury brands face is to entice new customers to their products without alienating the existing customer base. One of the statements raised and discussed at length during one of the focus groups CBRE conducted was around the ubiquity of luxury. Consumers that are buying into and living the luxury lifestyle do not want to see the product they have bought being available everywhere and to everyone. They clearly expressed the view that the product has to have an exclusivity value. It has to be out of the reach of the many and should be available to the few.
Historically, price has been the natural arbiter of luxury. Today, people are more likely to save or even spend a month’s salary on a special item. This desire to be part of the elite makes the everyday consumers of luxury somewhat uncomfortable. They need to own something that is out of reach of the occasional luxury shopper – the product has to have exclusivity value. They want luxury to stand for wealth and prestige. This poses a question for the luxury brands as to how they counter this. Do they create diffusion lines that open up the brand to more people but at a lower price point, or do they create more products at the higher end of their pricing structure that have a finite target market?
To some extent this is the game that has been played in the Far East with brands seeing the so-called developing markets as an opportunity to bring luxury to new consumers. However, consumers in the Asian markets are now becoming more discerning. With the recent government crackdown on buying expensive products as gifts for business contacts, the focus for Asian purchasers has now moved to buying goods for personal consumption.
Whilst the challenges in the Chinese economy are very real, they also bring with them an equally real opportunity for Europe. As retailers slow down their expansion plans in China we see a refocusing on the European market. The Chinese consumer wants to engage with the authentic brand experience and shopping in Europe gives them that opportunity.
As the cost of travel increases for the Chinese consumer (with the devaluing of the yuan) we are seeing the average spend per visit grow as shoppers make greater use of the savings available whilst in Europe.
The point of difference remains the quality of the overall purchasing experience – the level of personal service that transcends what is normally found in a retail environment. That is what people want, that is what luxury is about.
The consumer taking part in the CBRE research is looking for the whole experience. They want and need to feel part of a luxurious experience in a luxurious environment. The fact the experience might end with them taking a product home is only part of what makes it special.
The impact of the global economy is to date a positive one in Europe, at least for luxury brands. The unique nature of the luxury products available for purchase is becoming ever more important to an increasingly informed and demanding consumer.
Whether you make a luxury purchase or live a luxury lifestyle, this sector continues to mean something unique, something special, and something that entices and inspires people.