Luxury Lifestyle Business Beyond Buzzwords
Luxury Lifestyle Business Beyond Buzzwords
Luxury lifestyle
Luxury lifestyle
Luxury lifestyle
Business beyond buzzwords
As a term and a concept, luxury is reasonably well defined. But lifestyle? Speak
ing to luxury luminaries at the annual Business of Luxury Summit hosted by the
Financial Times recently in Marrakech, Francois-Henri Pinault of PPR raised the ques
tion whether the concept of lifestyle adds value to the business of luxury or whether it
takes something away. In our work with luxury brands all over the world, we observe
that it has the power to do both. First of all, lifestyle does not rhyme with each and
every luxury brands identity. But even when it does, lifestyle remains a double-edged
sword. Venturing into lifestyle can be a blessing if you take it slow, but can turn into a
curse if you rush it. This is why we propose to think of the approximation of luxury and
lifestyle as an evolutionary process rather than a revolutionary event. Lifestyle, after
all, is about enriching consumers lives in a credible way. But building credibility takes
time, and even those who have it find that it is more easily lost than won. In this paper,
we will examine how luxury players can gauge the lifestyle potential of their brands and
how they can reap the benefits of lifestyle without diluting their heritage along the way.
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Luxury mentioned
alone
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Exhibit 1
We have searched extensively for a common denominator, but what we found was
that there is, indeed, no single definition of lifestyle nor is there a shared concept of
lifestyle in luxury. Rather, the term triggers a diverse array of connotations. Prompted
for their definition of lifestyle, participants of the Financial Times Business of Luxury
Summit whom we interviewed before the event most often quoted a way of living, a
set of attitudes and values, or specific consumption habits. In publications, we came
across a wealth of keywords ranging from mythology to personification and from
sensory appeal to symbolic value. Consumer responses in interviews conducted
in London, Paris, Milan, and Munich were no less manifold, often reverting to specific
products and brands, but also to experience and emotion:
Luxury lifestyle
Business beyond buzzwords
Luxury lifestyle means living in the finest manner. Staying at nice hotels.
Luxury lifestyle means being able to make your life pleasant.
Luxury lifestyle is a way of being, of dressing, of behaving.
Its just brand names. Thats all.
Its marketing.
To balance media buzz and consumer perception with frontline experience, we also
interviewed senior executives from 20 luxury goods companies, including fashion
houses such as Roberto Cavalli, makers of fine leather goods such as Herms, and
jewelers such as Harry Winston. Although they were far from agreeing on a single
definition of luxury lifestyle, a staggering 70 percent said they regarded their brands as
luxury lifestyle brands. Recognizing the evasive nature of the subject, a senior executive
at one of the worlds most traditional and most renowned fashion houses gave the topic
an almost philosophical spin: Lifestyle is the result of what we do, not the purpose.
Brands
which
leverage
lifestyle
across
multiple
touch points
A
B
y
into lifest
ich extend
Brands wh experiences
nd
products a
le
Exhibit 2
When it comes to category coverage our axis (B) most companies we looked at
have extended their business well beyond the original core. Taking brands with an
apparel heritage as an example, we found that more than three quarters of them offer
an assortment that spans at least four categories (Exhibit 3). However, only a few of
the more traditional, tailor-driven companies stick to a narrower product portfolio. In
contrast, some players, typically those that already feature rather broad assortments,
have transgressed the realm of products altogether by adding various types of experi
ence, such as hospitality, to their offering. Examples include Givenchy and Roberto
Cavalli. Although hotels and restaurants may only generate a fraction of an apparel
makers total revenue, these ventures often are key contributors to the brands identity.
Armani is among the most active players in this area, operating more than a dozen
cafs, two restaurants, and several hotels.
Luxury lifestyle
Business beyond buzzwords
Akris
2 categories
Carolina Herrera
KENZO
Experience
extension
Givenchy
Roberto Cavalli
3 categories
6% of brands
17%
4 categories
35%
5 categories
6 categories
28%
14%
Exhibit 3
Luxury brands with an apparel core are the most prolific lifestyle players and
leverage lifestyle comprehensively. Many of them moved into perfumes in the
1980s and 1990s, added jewelry, watches, and home products in the 2000s, and
entered the experience business within the last few years.
Luxury brands with a technical core, such as makers of jewelry or watches, tend
to be more limited in their extension. During a panel discussion at the Financial
Times Business of Luxury Summit, Frdric de Narp, President and CEO of
Harry Winston, said: There are soft luxury goods, which stand for fashion, and
hard luxury goods, which stand for timelessness. Timelessness and hard luxury
goods do not allow easily for lifestyle expansion, while fashion brands would
allow more easily for extension. Some jewelry brands have, however, success
fully added perfume, cosmetics, and accessories over time.
Within these groups, different brands have taken different approaches (Exhibit 4). The
Carolina Herrera brand, for example, has successfully established itself as a lifestyle
player, but deliberately restricts touch point and category coverage to those areas
closest to its core evening wear and festive, yet timeless elegance. A more flam
boyant brand such as Roberto Cavalli, however, stages its lifestyle of sensuality and
glamour at many touch points and even carries it over into service categories, such
as Cavalli Club and Caff Giacosa. Carolyn Risoli, representing Marc Jacobs, told us:
Some brands DNA translates better to certain lifestyle categories than others.
In keeping with these observations, the risk that luxury brands most fear, accord
ing to our survey, is brand dilution. While about half of the respondents see lifestyle
as an opportunity to enter new categories or expand their customer base, 61per
cent say they are afraid that their attempts to leverage lifestyle might damage their
brands. Those who are not credible will fail, as consumers will recognize it, a senior
executive said in one of our interviews. The good news is we believe there is a way
10
to hedge the risks of brand dilution and consumer confusion. In our experience, the
sequence of actions makes all the difference:
Step 1 is to fortify the brands core and exploit its full potential. Moving into unre
lated product categories too early creates unnecessary complexity and may even
damage the brand without adding substantial revenue, let alone profit.
Step 2 is to explore the brands lifestyle more actively in communication across
touch points and start adding adjacent product categories. Most players will want
to avoid service and experience at this stage, lest they overstretch their credibility.
Step 3 is to create a seamless world that both embodies and strengthens the
brands identity in a specific lifestyle, ultimately offering the widest conceivable
spectrum of products and experiential propositions.
While each of these steps can work as a stand-alone strategy, those who aspire to
capture the full potential of lifestyle for their brands will choose to climb them one after
another, like the rungs of a ladder. As Marc Puig, CEO and owner of Carolina Herrera,
explained to us: Each brand needs to focus on core topics, and do these right, rather
than branching out too quickly. We want to grasp our full potential before moving into
new areas.
erto
Rob alli
Cav
Brands which
leverage lifestyle
across multiple
touch points
High
na
Caroli ra
Herre
Medium
Low
Core only
ucts
Other prod
ucts
Other prod nces
and experie
Exhibit 4
Luxury lifestyle
Business beyond buzzwords
11
12
Louis Vuitton
2
Stay true to your
roots when moving into adjacent lifestyle categories:
Extending into3 lifestyle products and experience
Herms
Stick to the brands distinct design language across all categories.
4
E xtend only into categories with a DNA that fits the brandsRoberto
DNA.Cavalli
Brandswith
apparelnew
core
5
Nurture
categories, especially if they differ from the brands core.
EXAMPLES
The upside
Carolina Herrera
11
3 categories
17%
12
13
KENZO
4 categories
35%
14
Focus
on product
Experience
extension
15
Givenchy
Roberto Cavalli
5 categories
6 categories
28%
14%
Luxury lifestyle
Business beyond buzzwords
13
Linda Dauriz
Associate Principal
McKinsey & Company
Sophienstrae 26
80333 Mnchen
Germany
Phone: +49 (89) 5594-8422
E-mail: [email protected]