There is little doubt that the Diamond Trading Company has given up pushing marketing as the central theme of its Supplier of Choice program. That caused too much pain among its clients. It’s hard enough to create a brand under the best of circumstances, never mind trying to do it with one component of a product and in an industry lacking large profit margins.
The big luxury conglomerates don’t try to do that either. They prefer to spend on established names because they know the costs of building a new brand are huge and the chances of success minuscule.
We now have a full-scale war between major brands as they try to capture the public’s imagination. This past September’s issues of Vanity Fair and W were great for building biceps. Vanity Fair had 650 pages or so, and W came in at a staggering 840. The advertising was spectacular, outdone only by the prices. The models were gorgeous, and there was no copy, just wonderful shots. The only message was lifestyle images—no verbiage or tag lines. And, I noticed, almost no jewelry.
Jewelry was barely seen until well past halfway through these tomes. Tiffany, Yurman, Ripka, and Hardy were to the front, though only Yurman projected a sensuousness that compared with the couturiers. The jewelry ads that came later were tame and dull by comparison.
These ads, I thought, were a nearly frantic scream by brands determined to be preferred by an increasingly jaded public. The financial crises that started in the fall have ended the extravagant lifestyles of a portion of the target market, and there is some evidence that the affluent public is displaying luxury burnout.
Also last fall, a book came out called How Luxury Lost its Luster, by Dana Thomas. I recommend the book. It addresses the sensation I felt reading these magazines.
Thomas describes the inherent problem with the current view of luxury—that it needs to be democratized and available to all. That’s commendable, but luxury implies exclusivity and rarity. Rolex does not reveal that it sells 1 million watches a year, because that would degrade its luxury image. And no woman wants to see another woman at a party in the same dress or wearing the same jewelry. But, Thomas points out, the corporate giants that now own the brands want sales and expansion, and that, she says, is destroying luxury.
Big brands have been exploiting the ravenous appetites of luxury-hungry consumers by constantly raising prices. Thomas notes that markups easily go to 10 times cost. There still doesn’t seem to be any resistance, and we see handbags selling for $10,000. That actually can work, given the right handbag, because the consumer paying such a price knows that far less than 1 percent of the public can manage that. So it becomes exclusive.
Whether or not all that leads to a bust is a question we cannot answer, since it depends on whether the brands can maintain the sense of intoxication and power that’s part of the luxury mystique. A well-known couturier put it well, saying that his image was an illusion that hung by a thread. One small mistake and he’d be gone.
The watch business, which prima facie has to be branded, contends with constant threats from counterfeiters (as do handbag manufacturers). An industry executive recently described it as a major danger to the business, not only because of lost sales, but also because the skill of the counterfeiters is approaching that of the manufacturers. Aside from the legal and moral issues, the comment dramatizes the extraordinary costs added to watches for design, innovation, marketing, advertising, and sales. The watch itself may be worth a fraction of the final retail price.
Next month I’ll continue with thoughts about what this means to our industry.