How Alex and Ani, Saint Laurent and STORY are doing just that
Recently, cracks have begun to show in the “same old story” that serves as the traditional luxury marketing platform. For years, for decades, and in some cases for centuries, luxury brands have been doing the “same old song and dance” for their current and prospective customers. The luxury story, which describes how brands are positioned and marketed, goes like this: exclusivity, design excellence, exceptional workmanship, top-quality materials, and aspiration for brands that one aspires to own and to show off. Things are changing.
In July, Hermes reported a slowdown of sales in its fiscal second quarter 2014. In the same month, LVMH reported first-half year sales were below expectations; and Kering, owner of the heritage Gucci brand, reported a 2.4% decline in the brand’s sale in the second quarter 2014. The only bright spot for Kering was their Saint Laurent brand … but more on that later.
While many fingers point to slackening demand in China as the culprit, American affluent consumers have undergone a dramatic mood swing regarding luxury since the recession, reflected in those disappointing results. That change in attitude is illustrated in Unity Marketing’s Luxury Consumption Index, our measure of affluent consumer confidence based upon quarterly surveys.
Every three months we survey 1,250+ affluent (i.e. people with incomes at the top 20%) luxury consumers (i.e. affluents that report buying any luxury or high-end goods or services in the preceding three-month study period) about their financial status and purchase behavior. Five key measures about their finances, spending patterns, and view of the economy overall go into the calculation of the Luxury Consumption Index, which reflects the affluent consumer confidence.
Since early 2010, the LCI has stalled, moving forward one quarter, only to retreat again the next, with no consistent upward trend in affluent consumer confidence. Rather, three times in the past four years, the LCI has slid back to near recession levels. This is what I call a mood of austerity. It’s reflected among the mass affluent HENRYs (high-earners-not-rich-yet consumers with incomes $100k-$249.9k) by trading down to less premium brands and shopping destinations. For HENRYs, austerity means spending less, plain and simple.
The higher income ultra-affluents (income $250k), and the core customers for luxury brands, feel empowered financially, yet their spending has gone undercover, toward inconspicuous consumption or put another way, “conscientious consumption.” Ultra-affluents are expressing austerity as a return to basics and simplicity. For them it isn’t about saving money, they are holding out for something truly different, authentic, and special that reflects their new values.
American-affluents’ mood of austerity brings challenges to many mainline, traditional luxury brands and retailers. It also opens up opportunities for other brands that tell American customers a new story giving meaning to the brand. Aligning luxury brand positioning to the American consumer mindset is critical since by any measure the US is the world’s largest luxury market. The US has the most millionaires of any country in the world, 7.1 million according to Boston Consulting Group, which is nearly three-times more than China. And the Bain/Altagamma study reports the US leads the world in luxury goods sales, estimated to reach €62.5 billion in 2013, which is more than 3.5 times the size of the next largest country, Japan.
Luxury is very much a culturally conditioned concept. One-size-fits-all luxury won’t work in the global market; it has to be adapted to the unique character of each market. American affluents in their mood of austerity are focusing their purchasing choices on value; nobody wants to pay more when they can get good stuff for less. The brand story also plays an influential role. There is so much good product out there that the story becomes the hook that justifies the purchase. The narrative or history of a product — where it comes from, why it exists, and what it means — is increasingly becoming a key driver for purchase.
Luxury expressed American style means a trend toward the practical, simple and minimalistic, as opposed to the gaudy, showy or ostentatious. Austerity doesn’t necessarily mean cheap or low cost, but it demands that brands justify their premium prices with real value.
Here are three brands that have reinterpreted luxury well.
Selling Energy from Alex and Ani
Rhode Island-based Alex and Ani has put a new spin on jewelry marketing – emphasizing the personal experience of buying and wearing its designs, rather than placing value simply on the jewelry itself. It’s luxurious not because of what it is made from, the artisanal design, or the price, but rather by how it makes the customer feel. It’s jewelry with a meaning and purpose, designed so that customers can combine it in unique ways to create a personal statement. It is jewelry enhanced with an energy boost, as the company’s logo reflects.
A pendant tied to a specific interest (sports team, zodiac sign, charity, college, sorority) or emotion (enthusiasm, confident, enlightenment, vibrant, spirit) is the basis for each piece. Pendants are attached to wired bracelets designed to stack on the arm, or to necklaces for layering. While each individual piece is very affordable (most under $50), the concept is to create a whole collection so one can ultimately wear multiples worth several hundred dollars just on one arm. Every time she puts on her collection, she tells a personal story of where she’s been, what she values, or who she is. Or he is, since the brand is unisex by design.
Alex and Ani is a made-in-America brand, but more importantly, it is very much a brand made for American consumers today.
Saint Laurent Reinvents YSL for the Next Luxury Generation
In Unity Marketing’s affluent consumer tracking study we consistently find the young affluents, those aged 24-44 years with incomes of $100,000 and above, outspend the mature affluents 45 years and older. Young affluents are in an acquisitive life stage, while the matures may already be downscaling their lifestyles.
That leaves the younger consumers, under 45 years, as the prime targets for luxury brands. Increasingly, that means catering to Millennial shoppers, born from about 1980-2000; the leading edge of the cohort (34 years) is approaching early middle age and their peak income years.
Moneyed Millennials are looking to brands and shopping experiences that capture their unique mood and spirit. That is what makes the efforts of the newly reimagined Saint Laurent brand, under the direction of GenXer Hedi Slimane, worth studying. By dropping the Yves from the brand name, but keeping Saint Laurent Paris, it connects to the brand’s past, but looks forward to the future.
Further, the Saint Laurent reinvention has an American twist. Slimane moved his design studio from Paris to LA and opened a new flagship store on Rodeo Drive. While some of the Saint Laurent fashions feature glitz and glam, there is a minimalist, back-to-basics aesthetic, especially among the menswear designs, that connects with the current mood. Slimane is honoring the YSL-edge, but telling a new story reinterpreted for today’s hipsters. Saint Laurent was rewarded for its bold moves by a 29% growth in sales growth in the second quarter 2014, while Kering sister brand Gucci declined.
The Story Behind STORY
Made in USA, as with Alex and Ani, is a very popular story today among affluents. Luxury with an American-twist is reflected by Saint Laurent, and then there is the STORY store itself. Located in on 10th Avenue in New York City, STORY is a store that, as described on the company’s website “takes the point of view of a magazine, changes like a gallery and sells things like a store.” It is fun, innovative and quirky.
Every four to six weeks, the store is completely made over with new fixtures, displays and merchandise, all that that tell a special story. A recent STORY exhibition is called Style Tech, which features brands like CuteCircuit — fashion that fuses LED lights into fabric technology or Ringly — interfacing jewelry with a smartphone to alert the wearer to an incoming call or text message. At STORY, merchandising becomes multidimensional – good quality and outstanding value combined with a compelling story that justifies the product’s existence.
Luxury brands Have to Tell a New Story
The idea of consumer aspiration for luxury brands– that people buy out of hope or ambition – is dead. The truly affluent don’t need status symbols; quite the contrary, today they are going stealth. They need to be inspired to pay a premium for luxury. And inspiration comes from a strong value proposition with an equally strong story hook. The smart marketers also recognize that each succeeding generation craves brands and shopping experiences that reflect their own special tastes and interests.
The question is whether you are ready to transform your brand through the hard work it takes to articulate authentically your story for today’s and tomorrow’s American luxury consumers. Believe me, they sure don’t want the “same old story” and the “same old song and dance.”