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The Luxury Catch-22

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I saw the phenomenon for the first time just outside Atlanta. A couple of months later, I witnessed it again in Madrid. Then I started seeing it everywhere: Zurich, New York even Minnesota. Girls as young as 12 sporting Louis Vuitton wallets, bags and backpacks. Not the fake versions—the genuine items. Accessories that you would pay $1,000 and more for.

Louis Vuitton is apparently not alone as a brand favored by the excessively young. Kids queue up outside the Copenhagen Gucci store in Denmark. At peak hours, the store has a bouncer to manage the underage traffic. Inside, kids are examining belts, key rings and hats, just like they've seen their mothers doing. And they're forking out for fashion gear that starts at $800.

Let's ignore the moral concerns that this sub-teenage excess suggests. What's the motivation? It's definitely for show. These young fashionistas (and fashionistos) make sure to display their expensive accessories to the world. Belts are never hidden by shirts; fashion underpants peak above the jeans that hang, just, on the hips.

I saw one guy "wearing" a large Louis Vuitton bag around his neck—open—and containing a nice collection of Gucci stuff. He was ordering two Big Macs and a Coke at the time, and he was barely 15 years of age.

Back in the Gucci store, wealthy ladies examine the same items as kids young enough to be their children. Matrons and 15-year-olds pass each other on the up-and-down escalators. I wonder what they're thinking, the ladies who once inhabited an exclusive domain. Are they as happy with their couture labels as they once were, now that every second 12-year-old seems to be wearing the same gear? Are they thinking that their choice must be the hottest brand in town? Or are they perhaps feeling awkward and thinking that this might be the last time they ever buy the this brand. Even school girls are wearing it. Probably the latter.


With a desperate ambition to achieve two-digit growth every year, brands like Louis Vuitton are now the territory of nearly every Japanese girl. Rolex no longer belongs to James Bond and a couple of very wealthy connoisseurs. Most business people, wannabes and youths choose Rolex. With its sports line, Prada lost its exclusivity years ago. In some countries, the price fell, demanding prices for Prada just fractionally higher than Diesel clothing.

I'm sure the shareholders have been happy about the growth of their luxury brand stocks. But is the short term gain worth the possible long-term diminution of the once great brands? Have these iconic names diluted their exclusivity to a point at which they can no longer retain the cachet of being luxury brands?

The young people's market is a volatile and fickle one. Sure—there's brand loyalty. But what happens when it's suddenly no longer fashionable to wear those "luxury" brands. They'll move on, if they haven't already, having had their affections snared by another nice shiny thing, which will become the next "luxury" must-have brand.

In the wake of this juvenile exodus, older and experienced brands will begin to fade away. Already some are showing signs of this trend. Over the past year, Gucci and Prada have undergone drops in revenues. And despite a steady stream of new products hitting the market, the wealthy elite has lost its appetite for those brands and has moved on.

The risk is that this might be a sign of an unwanted disruption in the luxury industry. The more people buying the brand, the less exclusive it becomes. It's "luxury" identity is diluted along with its growing ubiquity in the community. This is the luxury brand's catch-22.

What's the solution? Well, my suggestion won't please everyone.

The fact is, luxury brands need to be artificially maintained if they are to maintain their luxury status. Take Hermes, a luxury brand that typically sells its bags for around $10,000. So far, the teenagers are only at the display windows. Inside, the stores remain the stronghold of the world's wealthy. A Hermes store may not sell bags in their hundreds every day, but perhaps the revenue per item is double that of the luxury brands that are on the slippery slope to "popularism."

In the luxury brand business, stretching brands too thinly across market segments may gain short-term revenue increases, but it also almost guarantees long-term loss to the shareholders, brand owners, and, well, consumers.

So, set your limits for how much you really want to stretch your brand before you open your doors to the public. Luxury means for the few, and no matter how good you are at making few into many, by doing so you risk losing the very essence of your brand.

As a clever man once said, it's better to hold two birds in your hands than have 10 birds on the roof.


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Martin Lindstrom (www.martinlindstrom.com) is the author of Brand Child, BRAND sense, and Buyology (October 2008).

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  • by vishals Tue Aug 26, 2008 via web

    I agree too, Its simple truth of branding what a lot of brand managers overlook. When you bring a luxury product to everyone's reach it looses its luxury status.

  • by Lieca Tue Aug 26, 2008 via web

    I agree completely I used to be a fan of Gucci, Louis Vuitton, and Coach but as I see more and more kids sporting these brands they are less attractive me. I now perfer the less visible brands...

  • by Abhay Bahugune Tue Aug 26, 2008 via web

    I completely agree with the authour on the brand dilution which happens in the event of brand starts talking to wider base of consumers than the the defined one to which brand is talking to for years.
    At the same time, my feel is this is done in a manner by which mother brand gives promise of the mother brand values at the same time sub brand gives the imagery relevance to the targetted new consumer segment, and it is done with extra care, I think both the objectives of maintaining exclusivity and promise of the mother brand as well as talking to new consumer groups and in turn acieving commercial aims can be fulfilled.

  • by 'Lola Oye-Lawrence Wed Aug 27, 2008 via web

    Beyond physical products, brand dilution has similar adverse effects in service-based organisations, as well.

    A few years ago, a couple of banks had a high appeal to the professional, business class in Nigeria, largely due to the perception of their being exclusive – not for just anyone acting on a whim. This exclusivity was evident in most facets of the banks' operations - higher than average minimum account opening balances effectively excluded the 'masses'; bank offices with classy physical structures; early adoption and use of sophisticated IT infrastructure; extremely professional, crisp-speaking personnel...

    It worked.

    The banks were attracting a certain 'sort', who could operate on the same page as they were and were ambitious in their own rights and willing to pay the extras for the perks that came with that exclusivity, where necessary.

    Following the banking reforms and consolidation in 2006, though, there has been a subtle shift in targets (whether consciously or unconsciously) to encompass a broader market. This has quietly eroded the perception of these banks as being exclusive. Now, these banks are neither here nor there - they have not remained true (and exclusive) to the niche that brought them to the dance, nor have they have they been able to gain widespread acceptance by the mass market, who largely still see them as 'elite' banks.

  • by Dawn Wed Aug 27, 2008 via web

    I have a client I just acquired about a week ago. He's going into the t-shirt business, targeting the very demographic this somewhat disturbing post discusses. (Interesting, as a side note, I just saw on the news that younger and younger people are going bankrupt these days).

    As I interviewed him about his business, he stated to me that he wants to be all things to all people. I felt the hair on the back of my neck stand on end ( I forgot to shave before meeting a new client that day).

    After a long, almost deal-breaking, debate, he began to see my point. That exclusivity is one of the strongest traits that will keep customers coming back over and over. Especially in the garment/accessories realm.

    Now this may be a slightly different scenario from what's discribed in this post, since what's being discussed is adult vs teenager brand penetration. But the idea is the same. A brand, especially a new one, has to take hold with a select few before it goes out to the masses.

    And once it goes out to the masses, be ready to see the short term payoff: wide penetration for a couple of years with strong sales and grown. This until the next "exclusive" brand shows up.

  • by Woody Wed Aug 27, 2008 via web

    It can be done, if done properly. These folks need only take a lesson from the venerable Ralph Lauren, who has successfully sub-divided his brand into many niches...Sport, RLX, Purple Label, etc. This strategy protects the integrity of each niche.

  • by Dawn Wed Aug 27, 2008 via web

    True Woody, but what effect has it had on the core brand? Just the fact that we know these sub-brands are part of RL, doesn't that still dilute the core brand?

    Liz Claiborne is suffering the ill effects of "let's-create-a-brand-to-suit-anyone-with-a-dollar-of-discretionary-income" syndrome. LC is now shedding brands faster than my cat's fur in the spring.

    Kenneth Cole is going through the same nightmare with its "bridge" brands. The Kenneth Cole core brand is suffering big time.

    Vera Wang in Kohl's...Mizrahi in Target...where does it end???

    A brand's integrity is worth everything...once it's gone, it's nearly, if not impossible to get back.

  • by Woody Wed Aug 27, 2008 via web

    Over past 5 years, Ralphie's stock as outperformed the Dow by about 124%. Sales last year were $4.88 Billion. Prada, Coach, Cole, etc, I believe, would kill for those figures. I'm normally nervous about line extensions, but my point was that Lauren has managed them better than most companies.

  • by jengel Thu Aug 28, 2008 via web

    Love this article and thank you-- just walking down Fifth Avenue in NYC this am viewing the myriad of luxury brands. I then passed by Lindt Chocolate store, and thought I would go in, but was then struck with the thought of the reality that you can find Lindt chocolate now at the checkout of a 7/11 in South Dakota. Sigh.... so I kept on walking....

  • by abhay bahugune Thu Aug 28, 2008 via web

    I would completely agree with Woody, RL gives a clear point of view on this topic.I it is the great example. Not only fashion but lot of other industries and catagories have given us learnings in terms of Sub branding. But it has to be done with extreme care and with a clear point of view of the sub brand and connects and disconnects with the mother brand.

  • by Paul Evans Sat Aug 30, 2008 via web

    Great article.

    From purses to watches the effect of mega-affluent is obvious.

    But...

    Economic-Branding is not new. And actually effects the wealthy much less than the impoverished. The student who wants the $150 pair of tennis shoes planned to make the purchase.

    At other economic-divided we're seeing extreme levels of impulse purchasing.

  • by berkant Fri Apr 24, 2009 via web

    The rarer an item the more attention it gets, the rarer an item the more expensive it becomes. This is the base of economy.

  • by vishal Tue Jun 2, 2009 via web

    Its an interesting but a viscious cycle..
    Brands make it to the luxury status-charge high and yet crave for a big bottomline in the business. So they advertise to the mass and make it a commodity eventually.. when the cycle comes to a full circle.. they realise thay have damaged the brand and spend millions on revitalising the brand image .. i have seen it in a watch comapny.

  • by JP Kuehlwein Wed Dec 26, 2012 via web

    Here we are, four years on, and the big luxury groups (LVMH, PPR, Richemont) and a few of the independent luxury brands are still growing by leaps and bounds - particularly in Asia. How are they doing it? Some - particularly the top-end independents like Hermes or Aesop - have continued to manage perceived exclusivity while expanding, by keeping prices high, supply always a bit short and stores out of sight of each other. Others have balanced the reach-down by adding extensions up concurrently. In fact, some of the masstige or fashion brands have elevated themselves up into the luxury arena. Think of Armani Prive, Dunhill Monogram, the high-end Ralph Lauren flagship stores popping up amongst Bulgari, Brioni, Bottega Venetta, etc. stores. The latter represent portfolio diversifications upwards by the LVMH and PPR groups probably to hedge their bets as their flagship brands Louis Vuitton and Gucci continue to test the limits of how far they can go before diluting image and desirability. Recall, that Gucchi has been there before. The golden G is - yet again- getting into cars, bicycles, etc. LV has added watches, fashion, accessories... and in 2013 perfumes to its line up in the last few years. Both continue to expand agessively geographically, as well. Together they have over 50 stores in China. As long as these category additions are perceived as leveraging the brand's core competency and legend (eg. rare craftsmanship for Hermes) or are seen at whimsical exploration by an artistc, trend-setting brand, then that brand should be OK(eg. Aesop Poo drops, Dunhill ski boards or detergent by Maison Kurkdjian). The brands get in trouble as soon as there is perceived transgression of legend, exlcusivity, artistry, ... or whatever combination of core attributes of that premium brand. Starbucks instant coffee or another cheap pair of Gucci shades from Maci's, anyone? Were Cayenne and Panamera really a good idea, long term? Will we see Porsche vans, soon? Stay tuned for an update in another 4 years.

  • by JP Kuehlwein Thu Feb 7, 2013 via web

    Here are some ways Luxury brands delay or escape the Catch 22 Martin is talking about:
    http://masstoclass.wordpress.com/2013/02/07/how-prestige-brands-grow-without-losing-their-shine/

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