The FT Business of Luxury Summit, hosted in the luxurious Beau-Rivage Palace hotel in the Swiss city of Lausanne, gathered many experts and industry leaders on June 6th-7th to speak on the macro factors of today’s economy. FashionMag.com sums up the most interesting points discussed.

EXPAND YOUR TARGET: NEWCOMERS

Bill Glen, president of Global Merchant Services at American Express, gave an insight into the new post-crisis consumer. “Luxury consumers are no longer just Baby boomers (+50 years old), neither belong to Generation X (26 - 46 years old)”, explains M Glen. “There is a new group of consumers who didn’t shop luxury before”. These new consumers are known as newcomers. According to American Express, their contribution to spending in today’s economy is phenomenal. Indeed, they are estimated to contribute at around 36% in the US, 33% in India and 25% in Europe. Mr. Glen explained that the newcomer has now a similar spending contribution to that of Gen X. They also tend to spend more than the aspirational group, therefore suggesting that new communication tools and ways to reach out to this audience need to be adapted for business growth for companies wishing to expand their target. 

Key idea: Emerging middle classes and consumers who never purchased luxury before and now are, pose an immediate opportunity for companies. New communication tools and messages for new luxury consumers need be reinvented for successful penetration.  

FT Luxury Summit in Lausanne

PRICE IT ACCORDINGLY TO THE MARKET 

The first consensus conveyed by the panel at the FT Luxury Summit steered towards the often repeated cliché that consumers do not look at price tags on luxury items, no matter how expensive they may be, because dreams are made of emotions and intangible values. 

This pricing strategy should not be applied in the same way according to the market. Joseph Wan, CEO of Harvey Nichols, presented a refreshing insight concerning luxury consumers in China, for instance. Mr. Wan argued that the Chinese consumer is not truly understood by foreign companies. “What you must not forget is that the notion of luxury for the super rich in China means the MOST EXPENSIVE!”, whereas China’s aspiring middle class thinks of luxury as the most well-known brand or product.  Add to this that China’s middle class barely makes up 6% of China’s entire population of 1.3 billion inhabitants, according to Euromonitor. This target is far from satisfying luxury companies’ turnovers. However, as Mr Wan reminded, they are not to be ignored all the same. They often purchase luxury products for friends or family to celebrate special occasions such as weddings or university diplomas. The main difference is that affluent consumers in the West, or the super rich from emerging economies, purchase luxury products for themselves, whereas the less affluent purchase luxury products as memorable gifts for others. 

Key idea: Pricing strategies should not be duplicated to emerging economies just because they work in the West. Consumers’ notions of luxury vary greatly depending on their culture, status, their society’s values and beliefs and many other factors. Furthermore, luxury products are highly priced, so the pricing must be justified by excellent quality and craftsmanship.


by Christian Layolle