Editorial Introduction

Jean-François Melon, author of the Essai politique sur le commerce (Melon 1734), defined commerce as “the exchange of the superfluous for what is necessary” and luxury as “an extraordinary sumptuousness which flows from wealth” and whose meaning is fleeting because it is driven by desires that are “relative to time and persons” (Blanqui, Rossi and Say 1966, p. 709). Melon’s concise aphorism still stands. According to Bain & Company, the business of luxury today has an approximate value of $260 billion and continues to grow even if not at the galloping pace of the previous five years.

Rather than observing shifting consumer behavior, popularity of specific sectors amongst the nouveau riche consumers, and political catalysts in the generation of new markets for luxury, in other words in keeping a distance from issues “relative to time and persons,” this issue of Luxury: History Culture Consumption aims to shed light on business questions managers of luxury businesses face every day, especially as they try to balance the need for short term revenue generation with long term firm growth.

In Kapferer on Luxury: How Luxury Brands Can Grow Yet Remain Rare (Kapferer 2015), thought leader and HEC Paris professor Jean-Noël Kapferer, delivered a well-researched and thoughtfully nuanced discussion of “abundant rarity” (Kapferer 2015, p. 41) a term that remains elusive for a lot of luxury professionals whose main challenge is how to resist responding to increasing demand.

The current special business issue of Luxury: History Culture Consumption builds on Kapferer’s written work and consciously deviates from previous issues of the journal that have been grounded on “broad sociocultural context, exploring and interrogating both our historical and contemporary understanding of the term … alongside … new voices from a variety of disciplines providing an account of luxury that includes the historical, international, political, and economic” (Faiers 2014, p. 1, p. 7). On the one hand, this issue breaks ground in publishing two articles on luxury pricing, a topic that is often alluded to but never adequately discussed in business journals for reasons that will be explained shortly. On the other hand, it also diverges from the previously established journal format, namely the academic humanities article, and offers interviews with leaders of luxury. This is because business practitioners are looking for accessible information and concise discussions of both challenges and aspirations that other executives have already faced and established. By internalizing these lessons they can move their respective luxury business forward as they strive to strike the right balance between short-term profitability and long-term firm and equity growth.

In grouping the authors’ views on the business of luxury in two distinct categories (academic articles and interviews), this issue of the journal intends to create a space in which the reader can acquire the critical distance required for responding to daily business issues with clarity and broadened perspectives. In altering the journal format, it is hoped that the unique value of this issue will be clearly communicated as the reader gains insights on significant marketing problems both from an academic and a practitioner’s perspective. Finally, while it has been attempted elsewhere (mainly at conferences) with varied degrees of success, this hybrid format aspires to bridge the distance between academics and market professionals by juxtaposing business cases to marketing theory. A predecessor in book format is The Management of Luxury: A Practitioner’s Handbook (Berghaus, Müller-Stewens, Reinecke 2014), which offers key points on various business aspects. While Berghaus et al. examine a variety of companies, Luxury: History Culture Consumption interviews executives of independent, privately owned Small to Medium Enterprises (SMEs) because this type of luxury business has a lot to gain from marketing theory on pricing strategies as it strives to sustain a competitive advantage with fewer resources than rival multinationals. Lastly, the firms represented in this issue are located in countries other than France and Italy highlighting that the provenance of luxury is geographically varied while the business itself always competes in a global market, an idea further elaborated in the book review section of the journal.

While true luxury is not comparative (Kapferer and Bastien 2009, p. 62) pricing is a communication tool to help the consumer assess the expected value of the product or service. As Russell Winer states in his article “Online Pricing Strategies: Implications for Luxury Consumers” price is an “observable component of the product” that directly impacts the consumer’s purchasing behavior but also the margins on product/services sold. In the luxury market, price is as important as the brand, its proprietary designs, heritage, and stylistic differentiation from other competitor luxury brands. In fact, price of luxury products and services should be high enough to communicate the caliber of the brand but also always presumed higher than the actual price. As complicated as this sounds, it has worked well in the luxury market but requires readjustments following the digital revolution that allows more pricing transparency (but not full transparency yet which is also why it has been difficult to build the roster of articles that examine the topic in detail). No scholar is better equipped to discuss online pricing strategies and their implications for luxury consumers other than Winer who also authored the chapter on pricing in his edited volume The History of Marketing Science (Winer and Neslin 2015). In his article, he argues that luxury pricing relies heavily on customer value, namely “the value that a consumer places on the brand,” and therefore explains the role of consumers in the pricing decision and “how academics have approached measuring customer value.” He also examines various pricing strategies, how they have evolved post-digital revolution, and their relationship to consumer behavior. In doing so, Winer has authored an essay that sets the foundation for additional work on luxury pricing strategies while also highlighting questions for future research.

Professor Masakazu Ishihara and doctoral candidate Qianyun (Poppy) Zhang contributed the second piece on luxury pricing, titled “Balancing Exclusivity and Accessibility: Patterns of Brand and Product Line Extension Strategies in the Fashion Luxury Industry.” Their work deals with the most important question of growth in the luxury industry, namely how firms balance exclusivity and accessibility. A luxury brand’s image demands that executives tightly control the virtual rarity of their product. The goal is to maintain the perception of exclusivity on the consumer’s mind while also tapping into as broad a market as possible. The challenge of figuring out at which tipping point the brand becomes too available and loses its luxury status is manageable through carefully marketing strategies. The authors discuss two price-segmentation strategies, brand and product line extensions, that allow luxury brands to manage that balance. Their article includes a review of conceptual theories on the aforementioned extension strategies, analysis of data on product prices from ten fashion luxury brands in 2015, and a discussion of the managerial implications post-implementation of brand and product line extension strategies.

Derek Reid, CEO of the Carloway Harris Tweed Mill in the Western Hebrides Islands of Scotland spoke to us about the challenges of growing a luxury business, especially in the highly competitive industry of textiles. In it, pricing has been mismanaged and has had adverse effects on how clothing manufacturers perceive the value of their suppliers’ product. His strategy against the heavy discounting has been innovation and a groundbreaking product handcrafted exclusively at the Carloway Mill.

Yeohlee Teng, CEO and Creative Director of New York City based luxury fashion brand YEOHLEE spoke to us about a different type of growth, one that stems from innovative design processes. Having worked in the fashion industry for the last 30 years, Yeohlee brings substantial experience in how independent fashion labels compete in today’s luxury fashion market that is oversaturated with product and dominated by powerful conglomerates whose cash reserves maintain their elaborate marketing efforts.

Marcel Náhlovský is Marketing Director of Czech crystal manufacturer Lasvit and in charge of the brand’s global marketing. Not quite ten years old, Lasvit, founded in 2007, tapped into the heritage of Czech crystal-making and boosted the growth of an otherwise diminishing industry infusing the local economy with new financial prospects and fighting against the commoditization of the national product. Similarly to Mr. Reid’s remarks on the importance of the bespoke market for industries steeped in craftsmanship, Mr. Náhlovský emphasized the role of bespoke orders for Lasvit’s success in the global market and highlighted their tiered brand extension that will allow the company to grow beyond the bespoke market.

Jon Omer, Vice President of Wholesale Distribution, North America, Fabergé is an expert on fine timepieces and high jewelry having worked in that industry for over 25 years. In this final interview of the current issue, Mr. Omer contributed his insights on the growth of the luxury market for timepieces and jewelry.

To conclude the special business issue of Luxury, we included two book reviews of very recently published books both of which offer a unique aspect on the growth of the luxury market. The first is a review by Thomaï Serdari of Luxury Brands in China and India written by Glyn Atwal and Douglas Bryson and published in early 2017. The authors analyze the role of the Chinese and Indian market in the growth of global luxury brands. Most importantly, the authors offer a first-rate study in cultural intelligence that should inform strategic decisions of Western luxury brands wishing to enter or expand in these two (geographic) markets and conclude each individual discussion with strategies that derive from their cultural explorations.

Dr. Else Skjold, Assistant Professor Design School Kolding, Denmark and expert on design management and sustainability authored the review of Sustainable Luxury and Social Entrepreneurship Volume II: More Stories from the Pioneers edited by Miguel Angel Gardetti and María Eugenia Girón. Published in 2016, this business title is an important contribution to the discussion of growth in luxury as one coming from the periphery, meaning not from France or Italy. While the relationship of luxury to sustainable processes of production is one that will dominate the next phase of business writing on luxury, this title highlights the importance of SMEs, a theme that resonates with our approach in selecting our interviewees for the current issue. The case studies presented in this volume relate to processes uniquely linked to the UK, Chile, Germany, Turkey, and Thailand and to the entrepreneurial Zeitgeist that characterizes the second decade of the twenty-first century, perhaps as a reaction against big corporations and conglomerates that have dominated our lifestyles but that have, occasionally, harmed the environment and local economies. The periphery seems to offer an antidote to the intense globalization of the luxury market and its unsustainable growth, which has muffled rather than accentuated the uniqueness of specific luxury products and services.

Additional information

Notes on contributors

Thomaï Serdari

Thomaï Serdari, Ph.D. is a brand strategist and Adjunct Professor of Marketing at the Leonard N. Stern School of Business, New York University. She researches methods used in the production of luxury goods as well as marketing strategies that highlight the creative aspect of luxury firms. Email: [email protected]