Luxury Goes Under Cover
Posted on 30. Jun, 2007 by themaker in Uncategorized
NEWSWEEK , JULY 2-7 , 2007 Is anything truly exclusive anymore? The answer, of course, is yes; luxury, by its very nature, will always seek higher ground. But the luxury business is undergoing a radical change. For starters, its customer base is shifting dramatically, as wealth continues to spread to new parts of the globe. Luxury distribution is changing, too; online luxury, once an oxymoron, is now omnipresent. Meanwhile, members-only services for dining, travel, entertainment and retail are proliferating. Clearly, the rich want to be rich in private, with members of their own tribe. Most important, the nature of luxury goods and services themselves are evolving. Rather than flash, luxury consumers are now seeking discretion, special access, surprise, humor, even secrecy. They don’t crave another pair of Jimmy Choos or a custom-made Bentley so much as the challenge of vying for an appointment at the Parisian jeweler JAR’maybe you’ll get a slot that day, maybe not’or an invitation to a resort where they’ll be entertained by rock stars and educated by Nobel laureates. Most of all, they want meaning, emotion and connection’witness the rise of “philanthropic travel,” where visitors to ultraposh resorts in far-flung places might help build a school or launch a mini-foundation for water-sanitation projects in between beachcombing. It’s not about keeping up with the Joneses, but about keeping up with the Gateses.
Take for instance private-equity investors, who buy up and revamp ailing firms. Flush with cash, and looking for new targets, private equity has been snapping up luxury brands’recent buys include Jil Sander and Jimmy Choo. As fashion’s old guard (Garavani Valentino, Giorgio Armani, Karl Lagerfeld) begin to step down over the next few years, financiers, rather than fashionistas, will increasingly shape the future of luxury. While some in the industry have lamented the end of designer leadership, there’s already evidence that the moneymen are a boon to both profitability and creativity. Brands like Versace, under new leadership, are moving beyond red-carpet dresses into areas like interior jet and auto design. Last year Donna Karan went a step further, researching the launch of a branded airline. Meanwhile, formerly fusty or low-profile brands like Goyard (upscale luggage) and Valextra (leather goods) have been acquired and reinvented for new audiences who appreciate their quiet elegance.
Far from homogenizing luxury, industry experts like investment banker Gail Zauder of Elixir Advisors believe that the flood of cash will infuse it with energy. “Private equity is going to help many more niche brands grow and survive,” she predicts. Already, there are luxury brands coming from places previously unheard of: Wisconsin (W.C. Russell Moccasin Co.), for example, or Alabama (Project Alabama, purveyor of handmade fashions). This reflects the growing availability of funding, and the ability of small brands to reach faraway audiences via the Internet, but also the tastes of a new kind of consumer who enjoys the stealth surprise factor of having, say, a $20,000 gown embroidered by Red State seamstresses rather than by the usual Parisian suspects.
This trend of the rich servicing the rich will only grow. Already, many new niche luxury brands are being started by socialites who have the most intimate knowledge of what their peers are looking for. The Luxury Institute’s Pedraza expects that the scions of today’s wealthy families will be the ones to launch tomorrow’s private-jet management companies and new Web sites catering to the affluent; already there are a number of closed-door sites (including one run by the Luxury Institute, which vets members by wealth) where the world’s richest people can exchange everything from restaurant recommendations to business plans. “The rich will increasingly exist in gated, private communities, online and offline,” says Pedraza. But there is an encouraging backlash to this somewhat disturbing trend: when you can have anything you want, the most discreetly fashionable gesture of all, it turns out, is giving it all away. There has been a sharp rise in philanthropic giving among the growing crop of younger financiers and entrepreneurs, often via their own namesake foundations. It’s perhaps no surprise that a recent HSBC luxury-goods research report contained a graphic of American psychologist Abraham Maslow’s famous hierarchy of emotional needs. After all, some of the most successful luxury launches in recent memory (American Express’s Red Card, Bono’s green clothing line) have been linked to higher causes. “The future of luxury will be about imparting real meaning into a product,” says Elixir’s Zauder. It’s anybody’s guess what the next generation of luxury products and services might look like. But if it touches a mogul’s heartstrings, you can bet it’ll be expensive.
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