Pricing Strategy in Luxury Goods Industry – Chanel leads the way
I came across this interesting article in on how Chanel is trying to differentiate its pricing strategy. The general expectation is that a few other brands may follow suit. Essentially, the strategy now is to reduce the prices in China by about 20% and slightly increase the prices in Europe.
Hitherto, the pricing strategy of all luxury brands was predicated on the theme of “aspiration” and set at a high price and some brands like Hermes also attempted to limit the number of products available at stores. This twin strategy was aimed at exclusivity as a critical factor in the purchase decision. The Financial Times recently stated that “The richest 1 per cent had 48.2 per cent of the world’s wealth in the year 2014, according to widely cited research from Credit Suisse, but that share has fallen and risen over the past 15 years. It is lower now than in 2000 and 2001”
Whilst the income inequality in certain countries like India, China, Indonesia, etc has increased, at a global level the income inequality has actually decreased and is decreasing further every year. This means that at a global level, incomes across countries are slowly but surely converging, thus resulting in overall greater affordability. With greater purchasing power and concomitant factors such as power of social media to influence trends, we see greater democratization of purchase decisions – the exclusivity factor thus is slowly losing its grip. On the other hand, the pressure to achieve top line growth works in favour of making products available to consumers. Hence, brand pricing strategy can no longer rely solely on exclusivity, and the growth imperative militates against limiting product availability.
Why is this new pricing strategy being implemented? I have not come across any specific analysis on this key question as all analysis seems to focus on the immediate uptrend in volume growth in China. Here is my 2 cents on this strategy that aims to increase domestic consumption in China and simultaneously discouraging Chinese customers from buying in European markets.
There are 2 factors in my view that explain this shift in consumption patterns driven by the new pricing strategy:
1. Heavy investments in stores in China have till date not yielded the desired local growth; we have no concrete numbers but the industry rumour is that some brands are bleeding financially and have reached a point of store closures so as to remain viable. If true, then the attempt to lure Chinese customers to buy locally in China makes a lot of sense. This strategy also supports the Chinese government’s economic strategy to boost local consumption.
2. The anti-corruption drive in China has reportedly resulted in key customers staying away from the luxury goods stores. This is certainly true for the gifting segment, and for items procured during overseas trips to Europe. As we know, in many sensitive sectors such as Banking, the government retains the passports of key managers/executives who need to obtain prior approval for any overseas trips (as a mechanism to reduce corruption and flee the country to avoid prosecution). But if the products are available at a competitive price in the domestic market, then the genuine customers will buy in local stores. Here I see a shift away from small leather goods to RTW and more expensive bags/shoes. Thus affordability is also a key driver in this market at this juncture as it widens the consumption base and brings in genuine customers who have declared their incomes and paid taxes properly.
Whatever the result, I am keen to study whether the luxury goods market is sensitive to price.

Posted in Leadership | Comments Off on Pricing Strategy in Luxury Goods Industry – Chanel leads the way

Gaining Momentum with TEDWomen

TEDWomen  has become an active test lab for powerful ideas and has been gaining momentum since Sheryl Sandberg gave the talk that led to her book, Lean In in 2010. I remember Jane Fonda’s talk on the “Third Act” in women’s lives and how women can make the most of it.

TEDxWanchai hosted an Open mic night last week for potential speakers where twenty talented and inspiring women living in Hong Kong spoke about how they are bringing change and momentum in their communities through unique, local solutions and ideas across fields from organic kitchens, social community portals, photography to “horse hugging” therapy; the sheer variety of topics was incredible, Archana Kotecha spoke about her crusade against human trafficking while yet another spoke about lessons learnt from a failed business venture.

Maura Thomson, the co-founder of Sassy Media Group a lifestyle media group, talked about creating a sense of belonging through Sassy’s lifestyle guides for women in Hong Kong, Singapore, Australia and Dubai while 17 year old high school student Megan Foo made a passionate cry for education for girls in developing countries.

Interspersed with poetry recitals from the Peel Street Poets, it was a unique format of sharing engaging stories of women that Hong Kong can truly be proud of; and it was my privilege to be invited to assess the participants’ presentations and electric energy as they spoke about their contribution.

More than 150 TEDx event winners around the world will take part in the TEDWomen event from 27th-29th May; this event will celebrate the movers and makers, local catalysts who are helping create momentum for ideas that are likely to change the world we live in. What are you planning to do to gain momentum this year?

More than 150 TEDx event winners around the world will take part in the TEDWomen event from 27th-29th May; this event will celebrate the movers and makers, local catalysts who are helping create momentum for ideas that are likely to change the world we live in. What are you planning to do to gain momentum this year?

Posted in People | Comments Off on Gaining Momentum with TEDWomen

2015 and the disillussioned luxury customer, has she been let down?

2014 saw a significant drop in global spending on luxury goods. While industry leaders explained how luxury spending in China showed a negative trend for the first time: –1% growth this year due to greater controls on luxury spending and changing consumption patterns and that the growing sanctions against Russia significantly contributed to the negative momentum, Bain & Co observed that 30 million luxury customers were disillusioned.

The disillusioned luxury customer 2015

The disillusioned luxury customer 2015

A combination of factors is driving this downward trend: Many of the traditional spenders of luxury are downsizing and using their money to buy experience than product. Consumers in traditional markets have become more socially aware than they used to be, shunning brands that are perceived as portraying a lifestyle out of tune with both contemporary values and reality. Steady price hikes, above and beyond inflation levels, have also caused disillusion. Most luxury goods brands have upped prices by as much as 70% over the past two to three years in an attempt to bridge the price gap between China and the rest of the world. This of course has led to consumers trading down to more affordable brands particularly in the ready to wear segment, resulting in a “leaking bucket”.

A positive outcome of this slowdown is that luxury marketers will have to work harder to focus on long term sustainable growth. In a time of weaker growth cycle and polarization between the “Absolute and Accessible”, marketers will do well by asking what their customers desire vs pushing product through tried and tested alliances and formulae.

The opportunity in 2020 is to tailor experience and product to specific customers showing divergence of tastes and preferences; an area that has seen lesser focus in an attempt to meet the exponential growth in demand from the “hedonists”, the flashy tribe with new-found wealth. This will drive a new approach to delivering exceptional experience to the different segments through better curation of product and delivery that focuses on “individual” rather than “exclusive”.  Imagine customers buying vintage trunks as they enjoy Hôtel du Marc’s neoclassical facades and hospitality in Reims, the capital of France’s Champagne region or trying a new pair of Ferragamo loafers in the Palazzio Ferragamo in Florence a la Sonam Kapoor.  The top 10 % of the 150 million customers are likely to feel less betrayed if marketers embrace this new thinking and see this moment as an opportunity to re-energize shoppers and arrest the fast growing epidemic of luxury fatigue.

Posted in Luxe-speak | Comments Off on 2015 and the disillussioned luxury customer, has she been let down?

Falling in love with luxury: Moynat takes luxury marketers back to basics

So Moynat, the iconic luggage brand that was founded in 1849, opened its cocoon with a whisper in Hong Kong Asia’s luxury capital. A delightful, quiet but impactful arrival given the race for bigger, celeb driven, high tech production-led launches that Asia has seen in recent years. The brand’s focus seems entirely on the simplicity of the product, “technique of craft” and on delivering the promise of “individuality”.

Some of the pieces I adore are the ‘Train Pochette’ below in seven color variations featuring a toy train in Taurillon-gex leather applied by the traditional marquetry craftsmanship. So no, that’s not a screen printed train says the passionate gallery presenter who seems to be equally in love and in no hurry to push a sale.  Prasanna Bhaskar MoynatThere are limited pieces in the newly opened gallery and the presentation of each individual piece on display and its craft is done with as much passion as the artist did in creating his work.

The Moynat story could very well be the answer to the luxury industry’s perils – a gentle reminder of the integrity of craft, quality and simplicity – all the elements of “pure luxury”.  A visit to the Moynat gallery is comparable to a visit to an atelier in Paris rather than to a red carpet event. The brand stokes our passion and curiosity for craft, artisanship and our relentless quest for precision in design. Simple values that create lasting legacy.


Posted in Luxe-speak | Tagged , , , , , , , , | Comments Off on Falling in love with luxury: Moynat takes luxury marketers back to basics

High touch in high tech: the return of Ron Johnson

Most conversations with fellow retailers as we celebrated Diwali festivities in Hong Kong last week have been around how online shopping experiences seem to lack the magic of touch. There has been for some time now a need for a breakthrough in online shopping making it a less “insular” ,“boring” and “transactional” experience.


Ron Johnson launches Enjoy

Ron Johnson, the former senior vice president of retail operations at Apple and former J.C. Penney CEO, announced that he raised $25 million for a new startup called Enjoy, to enhance customer experience for online purchases.  The idea as shared with the Wall Street Journal is to go beyond delivery which seems to be the focus of most online stores.

 The announcement of the return of Ron Johnson, the man with the Midas touch who transformed technology retail experience through Apple’s successful concept stores, is therefore welcome news. If one has closely followed Ron Johnson’s strengths as a retailer, this would augur a new approach to online shopping and hopefully shake retailers out of the current trend of assuming that “desirability” in the online shopping world is limited to efficiency and fast delivery alone. Shopping, we seem to have forgotten is a social activity, an outing my niece and her friends gets dressed up for on the weekend.

Time will tell if there exists an opportunity for high touch in high tech, and if Ron Johnson is able to resurrect his reputation after being unceremoniously fired from JC Penney in April 2013.


Posted in People | Tagged , , , , , , , , , | Comments Off on High touch in high tech: the return of Ron Johnson

Adding bricks to the clicks. Why does Amazon need a “Temple?”

A couple of months ago I had speculated that the natural move for online fashion retailers like Net a Porter, would be to open up a retail shop. The move makes sense. Retail stores after all, are glamorous and become the “Temple” for super brands to build desirability. Just look at the lines outside the Apple stores that continue to make it one of the world’s most desirable cult brands. The model clearly supplements the online experience. Studies also indicate that 24% of shoppers look up on line when they are shopping in the stores.

Jeff Bezos, Location of Amazon store New York (Getty images)

Jeff Bezos, Location of Amazon store New York                 (Getty images)

While Jeff Bezos spent an extra few days in India last week, wooing Indian retailers and announcing big investments in the market, Amazon made news with it’s announcement to open its first brick-and-mortar store at 7 West 34th St (a block away from Macy’s) before the holiday shopping season starts. There are several theories going around explaining Amazon’s decision

Amazon’s relatively recent foray into high end fashion, selling brands like Michael Kors and Kate Spade and advertising in Vogue magazine next to Macys and Bloomingdales builds a case for it to woo the high end customer to buy high-end fashion online – and in stores to bring the  typically personal, sensory experience that fashion demands.

The disruptive strategy will also enable same-day delivery, ordering online and picking up in-store which big retailers have already been leveraging.  There are other favorable statistics supporting Amazon’s decision to enter the high cost physical retail space.The likelihood of high end fashion and beauty retailers partnering with Amazon to be part of the in-store experience Most importantly it’s about marketing the Amazon brand.

What will ensure that this new experiment succeeds and get’s excited customers to queue up will be the uniqueness of the Amazon store concept and the promotions that it launches leveraging the . Whatever be the outcome this will be a new adventure for the  Seattle-based company that has in the past steered clear of typical retailing costs including paying for leases and managing inventory across hundreds of stores. Brick and mortar is after all a new game for Amazon to master.

Posted in Luxe-speak | Tagged , , , , , | Comments Off on Adding bricks to the clicks. Why does Amazon need a “Temple?”

John Galliano gets a second chance at Martin Margiela?

One could say “only the brave” or a company by that name would make the move of giving the British Designer his first appointment since his termination from Christian Dior in 2011 following his racist and anti-semitic remarks at a Paris café. Other than appearances at the Kate Moss wedding in 2011 and at Oscar de la Renta’s studio in 2013 to design a collection, John Galliano has been away from the fashion limelight addressing substance abuse and other issues.
John Galliano by Patrick Demarchelier
As news of his appointment broke through Womenswear Daily on Monday, there has been much speculation and discussion on what would have motivated Renzo Rosso, the President of OTB to hire Galliano particularly for Maison Margiela which is respected for innovation and challenging the status quo in the fashion world.
It’s true that Galliano has had many admirers including Rosso. But Martin Margiela is known for subverting design norms, discreet branding and deconstruction. So the fit between the two does not seem obvious. A flamboyant Galliano, has always stood for opulence and fantasy in fashion, known for his own unpredictable costumes in his after-show appearances. The marriage of the austere vs the opulence therefore evokes interest and wonder.
Maison Martin Margiela Photo by Dominique Maitre

Maison Martin Margiela
Photo by Dominique Maitre

As the house of Margiela submits to the charisma of Galliano it is to be seen if Galliano will reinvent the brand or reinvent himself staying true to the brand’s identity. His first collection is deemed to be an artisanal line to be shown in couture week in Paris in Jan 2015.
Whatever be the verdict of that show, it is heartening that the talented couturier has a second chance to showcase his skill at the risk of “Only the Brave”. The fashion world will be on tenterhooks to see the outcome. Who knows, history might be made again for the house of  Martin Margiela with this unique marriage.
Posted in Luxe-speak | Tagged , , , , , , , | Comments Off on John Galliano gets a second chance at Martin Margiela?

Luxury after Yves Carcelle: The decline of Modern luxury

As the luxury world mourns the demise of Yves Carcelle “the purveyor of modern luxury”, experts are also wondering if this marks the decline of modern luxury.Yves Carcelle Sept 2014 Prasanna Bhaskar

Carcelle is known to have created  a successful template in the 1990’s which infused modernity and creativity in European “luxury maisons” that emulated superbrand Vuitton’s  success story, in an attempt to create desirability among the growing tribe of young customers.

In the process one saw the exponential growth of the “Logo-emblazoned brands” as also a mass democratization of luxury across the globe – making luxury accessible to the lower end of the customer, and blurring the lines between craft and glamour.

Louis Vuitton Shanghai Plaza 66 Opening

Over the last 3-5 years however,  we notice more and more customers shunning the logo luxury brands and increasingly motivated by a lifestyle orientation which demands subtle elegance. The   luxury managers schooled under the tutelage of Yves Carcelle  are struggling to keep pace with this clear customer trend. Customers seem to be tired of the gimmicks and almost little differentiation in the campaigns launched by luxury brands. The truth is that most brands seem to be loyal to the template that worked in a different context, but the question now is whether this cookie cutter solution adopted across the industry has thwarted innovation born out of a leap of faith. The predictability makes the brands less desirable, whereas what made Louis Vuitton strong in the past 20 years was its novel and holistic management approach in supply chain, process, human resources and innovative products. The need for innovation is all the more urgent as we now see Apple and Google potentially entering this space over the next 10 years as technology underpins innovation in the form of wearable technology, data-capturing shoes, nano fibre- clothing with temperature control, and sunglasses that double up as internet platforms and cameras.

What would Carcelle, who is known to have re-written and changed the rules of the “luxury game”, advise the industry to do now? It is a billion dollar question and the past is no longer a good indicator of the future The Carcelle formula worked in an era when Japan was the growth engine of the sector;. the industry has tried to apply similar solutions in the current context hoping that China would become the new growth engine, but the reality has belied expectations leading to excessive investments without the concomitant payoffs. Fatigue has set in as fast as the increase in accessibility and investments in the Chinese market.

One wonders who will lead the luxury era post Carcelle? The truth is perhaps the answer does not lie in yet another formula but in going back to the main rule  in his book – the courage to dream of a vision, and remain steadfast in the execution of strategy in the face of naysayers; and to think of the long term. It has become a rather unfashionable term, but ironically the fate of the luxury fashion industry lies in an inspiring vision that propels the next growth curve.


Posted in Luxe-speak | Tagged , , , , | Comments Off on Luxury after Yves Carcelle: The decline of Modern luxury

Luxury by Wedding Design : The next stop for Private Equity?

Credit: The Wedding Design Company

I am reading yet another article in the Economic Times of how international luxury brands are openly targeting (gatecrashing!) the wedding market in India. Much has been written about Big Fat Indian weddings, estimated to be a staggering USD 25.5 billion industry growing at the explosive rate of 20-25% per annum. This figure perhaps doesn’t include certain elements of wedding spends (cash and dowry for example).A recent 2013 study by Assocham reveals that the luxury market in India is slated to show a similar growth of 25% per annum and may touch 15 bn dollars by 2015! This clearly establishes luxury’s dependence on weddings in certain markets in Asia.

In a recent meet in Hong Kong where I was invited to be on the advisory committee of the Asia Retail Expo 2013 it was interesting to hear how luxury brands are rapidly targeting the wedding market here in China. The Chinese wedding market (with 10 million couples tying the knot every year) is estimated to be USD 80 billion. Jewellery brands like TSL Jewellery today have wedding advisory services and dedicated teams advising clients and taking special orders. A large amount of this gluttonous consumption is in organizing the weddings (hospitality, décor and travel) in addition to the wedding trousseau.

Way back in 2002 when the Indian market had no real “International luxury brands” – the French and the Italians were still flirting with the market- I remember how a collaboration with the couture designers in India and the wedding planners for Louis Vuitton was seen as radical. We even risked a wedding trousseau installation with Indian trousseau elements in the LV stores then. The initiative has paid off and how! Louis Vuitton trunks are now integral to trousseau shopping in India. Elaborate trousseaus are now packed in these hand made trunks by the new rich like the Maharajas did in yesteryears. In later years with Ferragamo we toyed with the idea of  offering “gift ideas” for wedding guests  and even hosted a wedding in a Florentine villa. Wonderful memories and now looking back great marketing initiatives which only seemed then, a natural way of giving a local context to international luxury brands.

Private equity players seem to recognize the potential of the market and in recent years have flirted with the idea of acquiring indigenous trousseau brands. More interestingly there was an interest in acquiring a wedding photography service business in China by L Capital. Given the opportunity I have often wondered why Private equity hasn’t engaged with the wedding planner business in these markets. It has all the components that appeals to private equity – immense revenue potential and growth, the opportunity to scale up (boutique wedding planners are available to the super rich). At the same time the segment offers the potential to build organized infrastructure, processes and re-structure the business on the supply side to increase efficiency, a straight fit for a BPR (six sigma) initiative. The organisation of the industry will also create a  demand for professional courses for wedding design and create a quality talent pipeline which will raise the bar in creativity and execution.

Today most of the wedding planners operate like a cottage industry with challenges of quality execution and wafer thin margins due to rising costs of production. Few have been able to organize themselves like any other service business and change the revenue model to a % fee structure. The intervention of private equity would possibly mean we may live to see a network of large scale, professional “wedding agencies” operating like “boutique travel agencies” with a presence in luxury shopping malls in markets like China, Indonesia and eventually India. Private Equity, are you listening?

Posted in Luxe-speak | Tagged , , , , , , , , | Comments Off on Luxury by Wedding Design : The next stop for Private Equity?

Technology – another headline grabbing strategy for fashion brands?

I have always been intrigued how brands have embraced technology in the last decade. Fashion has traditionally been the last sector to integrate technology, this despite the fact that in most Luxury Forums industry leaders talk about technology and its impact on the fashion business.

Having said that, it is understandably challenging for a sector that has been built on the premise of exclusivity to embrace digital which is the complete opposite. Digital is all about inclusivity and greater accessibility. Also, for the last 5 decades most luxury brands have created aspiration through the story of heritage and limited edition products for the chosen few. Digital beautifully contradicts this strategy by making a product accessible to the billion eager customers in seconds after a launch.

In the recent years it has been encouraging to see brands embrace technology though sometimes as a new trend, a PR story to draw attention and reinforce market leadership. If in the past the luxury brands differentiated themselves through the limited edition lines and collaborations with the art, seasonal collections and heritage trunk shows today they seem to use a digital streaming of their shows or IPADs in the stores to build on the point of “exclusivity” and grab a headline in WWD.

But what will happen when a cool technology fails to be news worthy any more. The consumer seems to be embracing technology and making it an integral part of their everyday lives while luxury brands struggle to provide a digitally enhanced experience that will help grow the business.

Are CEOs being as demanding of their digital strategies as they are of their collections?. Are they familiar with the possibilities that technology presents to engage the customer and to facilitate a two-way dialogue rather than a one-way narrative? And most importantly are the Technology Officers in sync with the customer’s orientation towards technology and its relevance to the brand’s ethos?.

If one applies “the Golden circle” (see my favorite TED talk by Simon Senek) the questions the decision makers need to ask are Why? How? What? If the answer to the “why” is “to enhance customer experience” and act as a catalyst to build the brand’s mystique in the minds of the customer one may be on the right path. It may be very simple and not require a major shift in direction. What will be challenging is for fashion brands who have built their “temple” in exclusivity to move away from being consumed by the world of “who we are” to “why we are”. Any business-centred “digital” strategy would have to be relevant to the brand’s long-standing heritage and integrity but also has to include the customer.

As Robert Polet (ex CEO Gucci Group) said in this Google Think Capsule, it would do us good to use technology to overcome complexity and embrace the ambiguity that comes with the innovative space. A good start would be to try defining what you want technology to do for your brand and customer in 3 words.


Posted in Luxe-speak | Tagged , , , , , , , | 3 Comments