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Business Horizons (2012) 55, 453462

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Abundant rarity: The key to luxury growth

l Kapferer 1 Jean-Noe
HEC Paris, 78350 Jouy en Josas, France

Luxury; Prestige; Brand equity; Growth; Elites; Marketing syndicates

Abstract Although Western economies have not yet transitioned out of crisis, the luxury sector is growing again, especially at the high end. In emerging countries, the luxury sectors expansion has reached double digits. However, as luxury products continue to penetrate global markets, the prestige of brands like Louis Vuitton has not declined at all. This seems at odds with the concept of luxury being tied to rarity and exclusivity. Thus, how can we reconcile these facts with theory? In order to capture mounting demandsnot only from extraordinary people, but also from ordinary individualsluxury brands enact virtual rarity tactics, construct themselves as art, and adopt a fashion business model while deemphasizing exceptional quality and country of origin. Rarity of ingredients or craft has been replaced by qualitative rarity. Further, the cult of the designer is a potent tool in building emotional connections with a vast number of clients. Today, brands in the luxury sector are actually selling symbolic and magic power to the masses. There exists a culture gap between Asia and the West; namely, Asian consumers feel safer buying prestigious Western brands with which individuals around them are familiar. The insights offered herein provide clues for entrepreneurs attempting to launch luxury brands. # 2012 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.

1. Luxury: A nancial dream

Bernard Arnault, founder and CEO of Moe t Hennessy Louis Vuitton (LVMH), said straightforwardly that Luxury is the only sector that can provide luxurious margins (Kapferer & Tabatoni, 2011, p. 1). Since July 2011, after 3 years of paralysis, Americas afuent class began fueling luxury growth once again. It is difcult for such Americans to indenitely postpone this unnecessary, but very appealing, desire to buy luxury products. Interestingly, even in

E-mail address: Pernod-Ricard Chair on the Management of Prestige Brands

this time of nancial struggle, it is the high-end, inconspicuous, and fully priced products that are ying off shelves (Clifford, 2011). Todays economic crisis has prompted the afuent populationthe top 20% of income earners who together represent 60% of the marketto refocus on real value and great classics, and to pay the price for them. A sign that the sector is booming once more, 2011 was a year of new acquisitions of luxury companies and brands by investment funds in Asia and the Middle East, and by luxury groups such as LVMH, PPR, and Richemont. In all cases, the high multiplesaround 20measuring the valuations of these companies demonstrate that investors share a dream. They believe that the sectors prospects for

0007-6813/$ see front matter # 2012 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.

454 growth are huge, and they are right; the future is bright, especially in the BRIC countries (i.e., Brazil, Russia, India, and China) and soon in the CIVETS countries (i.e., Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa). In all these countries, gross domestic product (GDP) growth is high, a ne prospect since Bernstein Research nancial analysts showed that luxury market growth is strictly correlated with GDP growth because the latter creates a middle class and fosters optimism. Unlike consumers in Europe, consumers in these countries generally do not save for their retirement but rather spend money on newly available products, especially those that confer status and serve as symbols of selfachievement. In BRIC and CIVETS countries, there is no middle range. Consumers buy local brands or global fast-moving consumer goods brands to meet their everyday needs, and luxury foreign brands to spoil themselves. Having developed consumption societies quite late, people in these countries advance by leaps and bounds and claim their right to luxury. For instance, visiting newly built luxury malls is a favorite leisure-time activity for individuals in these countries. What was once described as the Malling of America (Kowinski, 2002) has now become the malling of Asia, or even of the world, with retail and entertainment mixing into retailment within superb luxury stores. To take advantage of the mounting demand for luxury goods in newly rising cities, major luxury retailers are now engaged in a very dynamic store-expansion strategy. For example, Louis Vuitton announced that it would enter so-called third-tier cities, mainly provincial capitals, in China to attract more consumers. Today, the brand has 37 stores across 29 cities in China. This move is driving other luxury brands, such as Gucci, Zegna, Coach, and Burberry, into these same third-tier cities to get a cut of the prot. This fast-paced retail expansion strategy would be good news for the luxury sector if only it could twist the basic equation that luxury = rarity, which predicts (Figure 1, A) that a products luxury statuswhich is crucial for charging high priceswill be diluted when its penetration rate increases because too many people will own it. A less stringent prediction is that increasing penetration rst boosts a products luxury status by making the brand visible and recognized, but then reaches a tipping point beyond which luxury status dilution occurs (Figure 1, B). Returning to our example, third-tier Chinese cities represent big numbers demographically speaking, but by entering such cities, luxury brands run the risk of becoming provincial themselves. Brands like Louis Vuitton have thus far succeeded in postponing this tipping point. Half of the women
Figure 1.

J-N. Kapferer
The luxury-rarity relationships

in Tokyo ofces own a Louis Vuitton bag (Chadha & Husband, 2007); however, according to Ipsos (2011) data, consumers in Japan still regard this brand as the most luxurious. Is the luxury industry actually creating a new phenomenon (Figure 1, C) in which luxury status is not diluted, but actually reinforced, by penetration rate?

2. The many meanings of luxury

Why is there apparently no contradiction between the high penetration of a luxury brand and its resilient luxury status? It could be due to the many meanings of the word luxury itself. To understand this seemingly contradictory state, we need to make a clear distinction between the notions of luxury, my luxury, the luxury sector, and the luxury business model.

2.1. Luxury as an absolute concept

Luxury as an absolute concept typically evokes images of rich and powerful individuals lives; that is, the ordinary of extraordinary people. As Castare `de (2008) noted, it is no surprise that luxury DNA can be found in the history of societys elites. Luxury was rst found in religious temples, churches, pagodas, Egyptian pyramidal tombs, and so forth, in the form of tributes to god(s) and attempts to buy mercy through the sacrice of wealth. Later, luxury became a signal of rank in aristocratic societies (Podolny, 2008). As Bataille and Hurley (1991) showed, ones rank is demonstrated by his/her ability to sacrice productive resources to buy non-productive items. In the past, luxury was the consequence of social stratication. Only recently has there been a paradigmatic shift: luxury now creates social stratication in countries in which it did not previously exist (Kapferer & Bastien, 2009). As a newly rich Chinese man, participating in a focus group, put it: What I like about luxury is

Abundant rarity: The key to luxury growth that it is expensive. This is luxurys core, latent sociological role, despite the overt excuses or rationalizations that consumers may provide when asked in surveys why they purchase luxury items for themselves. Interestingly, when asked, What examples of luxury spontaneously come to your mind? typical answers mention inaccessible products or lifestyle elements of the very rich: helicopters, private jets, and private islands in paradise seas. Luxury as an absolute concept needs no brand (Kapferer, 2010) as people talk more about lifestyle elements than about products. However, if the interviewer instead asks, What brands come to your mind when you hear the word luxury? then the answers change and refer to products or services with the list being more or less the same worldwide: Louis Vuitton, Chanel, Gucci, Rolex, Ferrari, Dior, Prada, Bulgari, Ritz Carlton, et cetera (Ipsos, 2011). Note that these brands are more accessible than the former evocations. They also communicate a lot in the media and through their extravagant stores.


2.3. Luxury as an economic sector

Luxury in the form of economics is the meaning implied when one talks about the growth of luxury. In fact, Bain & Co, a consulting company specializing in the luxury sector, regularly publishes forecasts about luxury sales. How does Bain generate these forecasts? Its analysts add up gures from companies that syndicated authorities consider to be part of the luxury sector. In Italy, France, Germany, and the United Kingdom, there are syndicated authorities that act as representatives for the collective interests of luxury companies; namely, companies that belong to these syndicates. The luxury syndicate in Italy is called Altagamma. In France, it is Comite Colbert, which represents a fourth of world luxury sales, twice as much as Altagamma. These luxury syndicates are not independent of the companies themselves, and the system works like a club. Any new member has to be co-opted and must behave according to a set of criteria and values to be admitted. However, not all members would be widely perceived as luxury brands. For instance, in France, although almost no one considers a Lacoste polo shirt to be a luxury product, Lacosteas a companyis part of Comite Colbert. As a result, Lacostes sales are taken into account in French luxury sector forecasts. Similarly, Illycaffe is part of Altagamma, while Corneliani, the Mantovian luxury mens fashion brand of Italy, is not part of the Italian syndicate even though its stores are located just in front of those of Zegna (an Altagamma company). Cornelianis sales are, therefore, not included in Italian luxury sector data. Bains forecasts do not encompass automobiles, ve-star hotels, or resorts; rather, they concentrate on luxury fashion, leather, watches, skincare products, fragrances, jewelry, and shoes. In order to continuously grow and following LVMHthe worlds number one luxury group with more than 50 luxury brands these companies have decided to democratize the sector and capture part of the massive demand in emerging economies (e.g., BRICS, CIVETS) in which the middle class is growing with an appetite for recognition, status, and pleasure. To do so, many luxury brandsconsidered as such by the corporative syndicateshave moved away from the classical luxury business model in two major ways. First, many luxury companies now base their prots on logo-typed accessories or second lines produced on a larger scale and sold as fashion objects such that consumers feel the need to buy new products each season as the fashion system dictates. For example, the notorious It bag changes from season to season depending on trends and popularity (Aspers, 2010). Fashion is about the

2.2. My luxury
My luxury has a different meaning, most often referring to a small personal luxury purchase. Take, for example, the lipstick effect: a term attributed to Este e Lauder, founder of the skincare company, who was surprised by the increase in lipstick sales during the Great Depression. This notion is an example of the well-known phenomenon whereby, after experiencing psychological stress, individuals purchase affordable luxuries as a substitute for more expensive items. For instance, a woman may purchase Dior lipstick ($30.00) to feel a sense of luxury. My luxury is clearly a break from plain, normal life and its many constraints: an escape into an ideal world of beauty, pleasure, taking care of oneself, and a bit of eternity. Individuals compulsorily buy what they do not needwhether it is a product or serviceat a price far above what functional values command, and they do this to pamper or reward themselves. However, in order to feel the full effects of my luxury, these products or services need to be from prestigious brands. That is, self-healing requires big names for its magic to operate. This is exactly the same mechanism underlying the placebo effect, by which patients illnesses disappear because they believe they are taking a real medicine. The lipstick effect only works with brand names that evoke the lifestyles of the rich and famous. It also requires a sacrice of money. As Hubert and Mauss (1981) showed, this high-price sacrice is necessary for the product to become sacred and to endow the buyer with its luxurious effects.

456 contagion of desire (Girard & Gregory, 2005). Thus, a high number of consumers buying the same fashionable product ceases to be a problem, especially in Asia where Confucian rules discourage individuals from being too original. Unlike in individualistic Western societies, in Japan, wearing the same Louis Vuitton product reinforces a feeling of togetherness, which is very important in that culture. In fact, in Asia, luxury creates both distinction from others and a sense of belonging at the same time. Second, many luxury companies have abandoned a major obligation of the luxury business model: no delocalization. For example, by making some of its products in China, Prada has reduced its production costs and improved its gross margins thanks to low labor wages. In addition, the company is even more appealing to Asian investors who can now buy the companys shares on the Hong Kong stock exchange, and lower production costs also allow brands to invest more in communication to build the dream consumers associate with them.

J-N. Kapferer placements in the blockbuster James Bond movies; that is, so everyone in the streets could recognize one, thus endowing the driver with admiration.

 Maintain full control of the value chain: From

ingredient sourcing to the retail experience, luxury quality can only be delivered if the brand has 100% control.

 Maintain full control of distribution: Distribution

is where one-on-one service and interaction should take place. The experience must be exclusive.

 Never issue licenses: Licensing necessitates loss

of control and increases the risk of consumers having a bad experience. Luxury promises exceptional quality and an exceptional experience, but licensors must be protable even after paying important licensing fees. This can only be achieved by reducing the quality of the products themselves or of the distribution. This is why between 1998 and 2008 Ralph Lauren retail sales from licensing decreased from 60% to 35%. The U.S. fashion brand bought back many of its licenses worldwide.

2.4. Luxury as a business model

Finally, luxury is also a business model that has been empirically ne-tuned over time by luxury brands that dominate worldwide, such as Louis Vuitton, Chanel, Gucci, Herme `s, Ferrari, and Rolex. These companies, many of which are still family owned, have crafted a common, yet unique, business model: a pillar of their resilience and protability. This business model runs contrary to most present business models in any sector. It rests on strict principles that maintain the uniqueness of luxury and preserve the non-comparability of those luxury brands that adhere to its guidelines (Karpik & Scott, 2010). Here are a few examples, some of which have been called the anti-laws of marketing (Kapferer & Bastien, 2009):

 Always increase the average price: Since the

middle class gets richer, to remain its dream, the luxury brand should never trade down nor cut its prices. If it does create some accessible lines, this must be done on a limited scale and must be counterbalanced by systematic tradingup. For example, when managed by Ford, all new Jaguar models were designed to make the brand more accessible. The brand never created its own S Class like Mercedes did.

 Develop direct one-on-one relationships with cli Do not delocalize production: Luxury is the ambassador of the local culture and rened art de vivre. ents: Luxury means treating all clients as VIPs. This necessitates direct, personalized, one-onone interactions, ideally in exclusive stores that represent the dream in 3D. This luxury business model can be applied to companies in any sector. Thus, Apple, MINI, and Nespresso are typical examples of companies that are not considered to be luxury, but nevertheless follow the luxury business model. There are other business models among more high-end labels, including the fashion business model and the premium business model. The main characteristic of the fashion business model is that it delocalizes production in search of low-cost labor forces. Unlike luxury, fashion does not sell timelessness. As soon as the

 Do not advertise to sell: Luxury communicates to

build the dream and to recreate it. This is not measured by short-term sales increases because, unlike fast-moving consumer goods, possessing a luxury good dilutes the excitement one had before the purchase was made.

 Communicate to non-targets: Part of the value of

owning a luxury good is the quality craftsmanship of the product, but another necessary part is recognition by non-owners. This is why Aston Martin, although a very small brand, used product

Abundant rarity: The key to luxury growth fashion season ends, sales and super-sales slashing margins are employed to eliminate inventory. Fashion does not worship quality like luxury does. As for pricing, in the luxury business model, average prices should always go up because there are enough newly rich consumers to justify this strategy as long as they dream of the brand. When this dream falters, many luxury companies prefer to expand downward, selling to more people thanks to protable accessories that have more accessible prices and can be produced in larger quantities in countries with low labor costs. Such accessories can then be bought repeatedly by consumers, a sign that the luxury brand has moved to a fashion business model where originality and change are valued, not rarity and timelessness. The premium or super-premium business model rests on a brands willingness to create the objectively best product. Grey Goose super-premium vodka, for instance, advertises itself as the worlds best-tasting vodka since it has received many awards from expert juries. Unlike luxury, which refuses to bear any comparison, super-premium brands look for it and build their fame through it.

457 period? This is typically what most famous chefs holding the Michelin three-star recognition do. The second line builds the chefs star brand awareness, and the three-star restaurant keeps the ame alive for those rare few who can access it after a long wait and an important sacrice of money.

4. From scarcity to qualitative rarity

Romanee Conti vineyards produces only a few thousands bottles of wine per year. Ferrari also restricts its production, as does watch maker Patek Philippe. Herme `s Kelly bag sales are limited by the actual scarcity of more-than-perfect crocodile skins available globally. These famous examples entertain the myth of luxury as a rarity business. However, physical rarity/scarcity is not welcomed by shareholders of listed luxury groups because it prevents fast growth. Even though some brands, such as Herme `s, hold to this objective rarity, the luxury sector has grown thanks to a shift in what may be termed virtual rarity: the feeling of privilege and of exclusivity (Groth & McDaniel, 1993). In fact, objective rarity is quite boring and insufcient if the involved components are not perceived as elementally desirable. For this reason, sustainable luxury is difcult to grow. For example, based on her personal conviction as a vegan, Stella McCartney refuses to use leather in her fashion lines and accessories. As such, her craftsmen painstakingly make use of alternative fabrics, albeit ones that are commonly thought of as less precious than leather. This is a typical premium for a fashion endeavor, but it lacks the dream factor attached to luxury. It is time to acknowledge that modern luxury enacts a qualitative rarity. It embodies a level of over-quality that runs contrary to all the trends of modern industrialized production processes and dees all laws of value analysis, the method by which the costs associated with product/service features are reduced while maintaining the features target value for the consumer. This qualitative rarity can be enacted through the production process if, for instance, handwork is needed to tie a precious red ribbon on each Chloe fragrance bottle or to engrave a seal on each Royal Salute bottle of whisky. Nondelocalization is also part of this construction of value, as is the culture or historical reference that is embedded in the product.

3. How scarcity creates value

It is a basic law of economics that when demand exceeds supply, price goes up. In one behavioral experiment, social psychologists Worchel, Lee, and Adewole (1975) made a particular brand of cookies suddenly unavailable to one group of people, while another group was still able to buy them. Postexperimental measurements showed that the perceived value of these cookies was higher in the rst group than in the second. Similarly, Apple capitalizes on this effect by creating an articial scarcity at each new product launch: people wait in line at Apple stores for an entire night and become price insensitive, even though they know almost nothing about the new product. The same effect can be seen in services. For example, it is a good signal of value when one has to book many days in advance to get a table at a restaurant. Should the restaurant owner then increase the number of his/her tables and capture a higher daily turnover? Of course not! Doing so would reduce the line and dilute the scarcity effect and, thus, the attractiveness and pricing power of the restaurant. Remember el Bully in Spain, which was widely considered to be the best restaurant in the world? Its creator decided to close it, but the waiting time for a table was more than 1 year. Wouldnt it have been better to create a second line with a few restaurants located in fashionable areas, with more accessible prices but still a reservation waiting

5. Introducing virtual rarity

Rarity can also be articially induced. One method of sustaining consumers desire for brands that now

458 offer longer series and extended production entails regularly launching limited editions, which capture media attention and uphold desirability of the brand via ephemeral rarity. Another essential lever for creating an aura of privilege is selective, if not exclusive, distribution. Luxury rarity is built at the retail level. Thus, for instance, until now, there was no Louis Vuitton fragrance because the brand refuses to sell anywhere but in its own stores. Fragrances, however, are closer to mass market and need wide exposure. Most luxury fashion brands have chosen to sell their fragrancesa key lever of brand awareness, image, and prots through selective distribution in high-end department stores. This practice endows these brands with a halo of glamour and an air of exclusivity. At a Chanel skincare and makeup counter within a department store, for example, any woman can be cared for like a VIP. . .even if only for a few minutes. Finally, communication builds virtual rarity. To construct the dream, the luxury brand must communicate far beyond its actual target. The brand, its products, and its prices must be known by many even though only a few should be able to buy. This is why Chanel typically advertises its most prestigious jewelry line, rather than the more accessible one. Luxury rms even capitalize on celebrities as brand ambassadors to spread their luxury branding message. Moreover, their systematic use of social events aims at exhibiting the brands selectivity based on whoand who is notdeemed worthy of an invitation. Brands must show that not just any celebrity can attend, but rather only a select few judged precious enough to represent the brand.

J-N. Kapferer with art because, like art, it aims at being perceived as intemporal; diamonds are forever, as is a Porsche 911. This intense proximity between art and business has another goal: to position products as authentic pieces of contemporary art, each one blessed by the hand of the designer. By doing so, luxury brands deemphasize craftsmanship, which requires time and effort and is not compatible with volume (Catry, 2007). This association with art also enhances a brands extensibility beyond its core products (Hagtvedt & Patrick, 2008). Thus, the transformation of luxury fashion designers as art icons is a consequence of the search for growth through democratization. Designers who succeed in the luxury sector are those who have personality, and are able to create followers and emotional bonds among larger audiences. Such designers are avant-gardeperhaps even polarizing and they purposefully do not appeal to everyone, creating a cultural elite of followers. These designers capitalize on a cultural segmentation; namely, people who like to think of themselves as the creative elite. The media and social media make designers into cultural icons, and their charisma is a source of authority that is embodied as an aura, bits of which are passed to clients through the designers products. When one buys a special item in the Marc Jacobs e-boutiquefor example, a Rubixcoin purse at $18 or neon rain boots at $28one has the feeling that these items have actually been designed by Marc himself. Despite their low price, this feeling of owning an extraordinary object is reinforced by the fact that they are exclusively available at Marc Jacobs stores, just as the luxury business model prescribes. Finally, the purchase of luxury products indicates ones advanced taste and serves as a social marker. Art and culture create elitism for all, which can be leveraged by selling more products to more people without diluting their appeal because these products are held as artistic objects, not as commercial products. The desire to look non-commercial and appear fully engrossed in the world of art is exemplied by advertising. Nowhere should luxury advertising obey the classical rules taught by Procter and Gamble. As regards luxury, the less explicit and understandable advertising is, the better it is. In this realm, advertising seeks to create a distance while simultaneously trying to communicate to the masses. This social construction of advertising as art holds communication as a full product of the creative brand. For instance, Dior ads are to be treated as its bags or dresses. This is why luxury brands do not have communication directors; rather, the creative director imposes his or her vision on all the brands productions. To communicate this vision,

6. From craft to art: Elitism for all

A signicant shift taking place in the luxury sector is the starication of designers. Unlike artisans, who are famous for their craft, designers now beg for recognition as creative beings. Some, such as Karl Lagerfeld, demonstrate that they have other talents, like photography or cinema. John Galliano presents himself as a piece of art, staging the typical gure of the romantic artist. Little by little, art is pervading commerce, especially in the luxury sector. Louis Vuitton promotes avant-garde artists like S. Sprouse and R. Murakami. The Muse e des Arts De coratifs in Paris hosts the Ralph Lauren collection of vintage automobiles. To build its prestigious image, Cartier installed a temporary museum within the Forbidden City in Beijing. In Seoul, The Prada Transformer is a striking building in the shape of a tetrahedron, with the capacity to change its own form and function. Luxury likes to be associated

Abundant rarity: The key to luxury growth some luxury brands go so far as advertising their new ads: discussing the famous director recruited to create it, the top models featured within it, the incredible location where it was shot, and so forth. Similarly, luxury brands now put videos on YouTube and other social media sites, documenting the making of their TV commercials. Since advertising is in essence non-credible, by focusing on the artful construction of their advertisements, luxury brands defuse their commercial undertones.

459 wide array of products available, ranging from attainable accessories to extremely expensive items. As a result, both the Tokyo administrative assistant and the CEO could buy the same brand at the same store, but of course they bought very different products. Thus, price distributes rarity through discriminatory levels. There is a price for the many and a price for the few. Even the lowest price must be seen as a sacrice, though, or else the magic of luxury does not work. The same process is now taking place in China, with millions of consumers eager to show they are succeeding while they remain novices in terms of knowing what is or is not a luxury product. Chinese consumers love leading brands. This is clearly an advantage for brands with high brand awareness and a network of stores in all major capital cities, and now even regional cities. For a local Chinese consumer, buying a luxury good is a way to participate in the world of consumption. It is also egalitarian.

7. The new reality of Asia: Egalitarian luxury?

Most of the rules of luxury brand management were invented in the West. They reect the sociology of Western societies and are dominated by concepts like distinction, class differentiation, and elite culture. In such a context, increasing the penetration of a luxury brand dilutes feelings of privilege. As a result, the elite accept paying more so conformists can no longer afford the higher prices (Amaldoss & Jain, 2005). This is conrmed by the dream equation: the notion that the desirability of a luxury brand is correlated with the difference between brand awareness and brand penetration (Dubois & Paternault, 1994). Unknown brands do not create desire and magnetism, but when luxury brands are too mass-marketed and go after all consumers through the so-called democratization of luxury, they lose their cachet (Nueno & Quelch, 1998; Silverstein & Fiske, 2003). They are no longer distinctive enough, at least in Western countries, but maybe not in Asia (Phau & Prendergast, 2000). Since 1980, Japan has been the gold mine of the luxury sector. Soon, however, China will become the worlds largest luxury market. Interestingly, Japan has a very egalitarian culture, yet it made Louis Vuitton the worlds number one luxury brand. This seems like a paradox, but it is not. One should keep in mind that when it was penetrated by luxury brands, Japan had the largest middle class of all developed countries, with a very high average income per household: more than $60,000 USD. Japan is also a society in which the group is more important than the person, and it has a very hierarchical structure. Western luxury brands provided the Japanese with a way to reward themselves, but also enabled individuals to behave according to their rank in society without disturbing social order/conformity. In Japan, owning an unknown luxury brand meant taking a risk. The fame and distribution of mega brands, such as Louis Vuitton, was very reassuring from a face-saving perspective. Furthermore, these brands made a

8. Is the cult of luxury religious?

A religious phenomenon seems to be occurring in the luxury sector. As described by Chadha and Husband (2007), there exists in Asia a cult of luxury, which appeals even to teenagers. Western youth have also adopted luxury brands, mixing and matching luxury accessories with casual clothing. Why has luxury extended so far past its natural borders? If Fukuyama (1996) is right, since the collapse of communism, there are no more ideologiesat least none that promise paradise on earth. Only consumption remains, and in its highest form: through highly hedonistic luxury goods that embody both creativity and heritage, and impart quality craftsmanship, symbolism, glamour, and transgression (through excess price). Luxury is a spiritualization process of humanmade objects. This is why price is so important in addition to the blessing of cultural and powerful elites. An excessive price is the measure of ones desire, and thus of an objects desirability based on values that have nothing to do with down-to-earth practicality. By sacricing an important part of her salary to purchase a luxury bag, the Tokyo administrative assistant creates the objects sacredness; indeed, the etymology of sacrice is to make sacred. Luxurys similarities with an actual cult are many. We already analyzed how luxury brands seem engaged in marketing adoration to sustain this cult, starting with that of the iconic designer. The iconization of particular products within a brands range is also signicant. It is how luxury counterbalances the loss of aura created by large-scale

460 technical reproduction of products. Iconic products are meant to look intemporal, almost eternal. This is achieved in two ways. First, they are permanently in the catalogue like the Porsche 911, Chanel N85, or Jaeger Lecoultres famous Reverso watch. They are also made intemporal by relating them to some highly signicant moment in the life of the brands founder. The spirit attached to this moment and the story that accompanies it endows the product with part of the aura its production in long series has destroyed. The iconic product becomes an object of the cult. One needs to possess at least one of these products once in ones lifetime. Luxury brands also cultivate mythical stories about their foundation and maintain secrecy regarding back-ofce happenings, such as details concerning production sites and quantities/nance. Their agship stores, magnicent pieces of urban art designed by famous architects, have been compared to modern cathedrals in which faith is reinforced. In these stores, each product is put on a pedestal like a holy statue or icon. The stores act as closed shrines where a subtle secret order reigns and where one is introduced selectively, thus leading to lines outside. Consumers visit the stores in small groups, making a pilgrimage and wishing to attend rituals delivered on a one-toone basis: welcoming services, demonstrations, explanations of the exceptionality of each item, et cetera. This comparison with religion is most revealing: luxury likes to present itself as an elevating cultural force. It belongs to the upper tier of Maslows pyramid, that of self-realization (Maslow, 2011). Religions like big numbers and large communities, unless they wish to remain a small sect. As this comparison with religion has its limits, however, we should instead speak of magic. As its Latin root suggests, religion ties people together in their belief of a god in heaven. Magic, on the other hand, invokes supra-natural forces in action on earth thanks to the mediation of objects, icons, and shamans. As Arnould, Price, and Curasi (1999, p. 264) wrote: Their possession links the owner or holder with immanent powers to achieve certain ends. There is something magical about possessing luxury goods. They endow the owner with the ability to become another person just by wearing a blessed cloth, jewel, or accessory. The starication of modern fashion designers is an essential prerequisite if luxury brands want to appeal to larger audiences. These designers are not mere humans anymore, but leaders who take their followers into the world of art, creative culture, taste, and sensory experiences thus far restricted to the elite. Their magic touch is passed along by contagion from the designer to the end user. As such, there is no longer the need to link luxury to rarity or a nite number of clients.

J-N. Kapferer As expressed by the dream equation of Dubois and Paternault (1994), the larger the number of clients, the more famous the name must be to keep the dream alive.

9. Nurturing the symbolic power of the luxury brand

Symbolic power is now fueled not by rarity but by the theatrics of qualitative rarity. Unlike mainstream brands, which have a single logo (e.g., Nikes swoosh), luxury brands develop a war chest of symbols. Symbolic power is also nurtured by the designers visibility as a very singular entity and by the brands highly creative communication. Hence, the importance of fashion shows, those rituals of de le s held in capital cities, acting as did medieval jousts to designate the bravest to the public. On each runway, designers agree to compete in front of the worlds cameras. This is necessary for the maintenance of their fame. Similarly, in the automobile business, F1 circuits play the same role for Ferrari and Mercedes. This is why giving mass market brand names to racing teams instead of individual automobiles makes F1 lose part of its mystique: one does not hear about Mercedes anymore, but about the Red Bull team. The widespread extension of luxury brands communication far beyond the classic glossy pages of magazines is also part of this phenomenon, as well as the latebut powerfulentrance of luxury brands to the Internet and social media. In 2011, Louis Vuitton created its own digital in-house agency with 400 persons worldwide. Its goal is to diffuse content about the brand all over the Internet, including history, heritage, craft details, social events, creative interviews, fashion shows, creative travel guides, and limited editions. If the luxury brand wants to stand above its many imitations and look-alikes, selling only an image of luxury, it must capture attention on the Internet and reveal its depth and innite creativity.

10. Short-term or long-term policy?

The goal of a luxury policy is to build pricing power, making clients become price-insensitive fans of the brand. Pushed to grow by their shareholders, some luxury brands have decided to increase penetration among the public while attempting to maintain high prices. They have achieved this by ignoring many constraints of the luxury business model, such as objective rarity and the informal rule forbidding delocalization. Instead, these brands have adopted a religious model of community building whereby

Abundant rarity: The key to luxury growth the adoration of iconic gures, experiential selective distribution, and highly visible creative communication play a central role in reinforcing the faith of the many and the symbolic power of the brand. However, there is a danger: the tradeoff between the short term and the long term. Knowing that luxury can be dened as the ordinary of extraordinary people and the extraordinary of ordinary people, a natural question arises: How long will the former dream about such brands? These people play the crucial role as the reference group for the mass of followers. Amaldoss and Jain (2008) demonstrated that the elite are ready and willing to pay more to reduce the number of followers; namely, conformists. Thus, to keep these elite consumers, brands must produce supra-luxury products, services, and events. Will having elite consumers trade up to buy the most expensive, upper ranges of a brand sufce in maintaining the illusion of rarity and feelings of privilege? Is there a point beyond which Louis Vuitton will have gone too far in penetration and diffusion? For instance, the brand has now decided to open stores in so-called C-towns in China. From a quantitative standpoint, these towns are bigger than many Western capitals. Why, then, do they not create a luxury market there too? From the standpoint of Shanghais or Beijings modern elites, though, what does it mean for the brand to go deeper into Chinese provinces? If luxury brands always need to be perceived above the mainstream to sustain their dream, how does this distribution strategy maintain the aura? Will stratication between stores with a clear hierarchy differentiating a few experiential agships in capital cities from more normal stores in the provinces be enough? Brands also develop what could be termed invisible luxury: exclusive, very private services for the rich and powerful. An example would be organization of a dinner for an elite group of individuals at the newly-built House of Vuitton in London. Such invisible luxury is designed to make even extraordinary consumers feel privileged. As for the hierarchy of stores, luxury brands aim at making the provincial client in a C-town still dream of accessing the slightly more upscale store when he or she visits a more cosmopolitan city. Clearly, there is a long-term risk here. This may be one reason why LVMH has taken an uninvited 20% share in Herme `s, whose present CEO, Patrick Thomas, said: When one of our products gets too successful we stop [selling] it (Kapferer, 2010). Herme `s wants to remain a luxury brand, not become a fashion brand. It could potentially act as the post-Louis Vuitton brand in the LVMH multiplebrand brand portfolio.


11. Clues for entrepreneurs

The future of luxury brands is in the making. Everywhere in the world, entrepreneurs are creating luxury products and hoping to build their own luxury brands. They now clearly understand the importance of positioning their brands more as pieces of art than as products. Building a luxury brand takes time. One does not launch a luxury brand as one launches a fast-moving consumer good brand, with a D-day signaling the start of an extensive marketing plan. Instead, entrepreneurs should communicate through creative directors and knit close ties with cultural elites, cultural places, and art centers with a strong preference for the avantgardeespecially if they want to represent the future. They should also understand that the classical distinction between products and communication is meaningless in the luxury realm; products are communication, and communication should be undertaken with the same exceptional exigency for style and ultra-qualitative detail as for any of the products. Also, it is important to build qualitative rarity that goes beyond objective rarity. Even newly bred brands should communicate their heritage, inspiration, cultural references, and stance as an ambassador of cultural excellence. Ralph Lauren has paved the way in this context; however, more recent examples provide interesting benchmarks. For instance, Bell & Ross, a watch brand that is now part of the Chanel Group, is only 20 years old but looks as if it has existed since WWII. Everywherefrom advertisements on the Internet to packaging, communication, and product designBell & Ross references and pays homage to the right group: those hero pilots who pushed the limits of supersonic jets. This is how new luxury brands acquire depth and prestige, thus sparking consumers desire for their very symbolic products.

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