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The Value of Luxury
Posted: Jul 29, 2010 |Comments: 0 | Share Syndicate this Article Copy to clipboard"We see consumers as the ultimate experts on brand prestige and this year they are voting on the entire perceived price/value equation of the brand as well as prestige," said Milton Pedraza, CEO of the Luxury Institute. Brand, quality, value, rarity all play a role in how we valuate prestige products and experiences. As everyone derives value differently, there are three main criteria that help us decide whether a luxury product or service is worth it:
Price Value " Deal-seekers
There is always a risk to integrity whenever a prestige brand discounts, says Milton Pedraza, CEO of the Luxury Institute. A discount suggests the original perceived value was too high and essentially, you were getting ripped off. Despite Pedraza's foreboding, Guilt Groupe has grown by leaps and bounds by offering daily flash sales to its "exclusive" 2 million invite-only members. Gilt expects to pull in $500 million in revenue in 2010 and in 2009, just two years after its launch, it posted revenues of $170 million. To counter Pedraza's point, even a 10 percent discount on $1,150 Jimmy Choo shoes ($1,035) is still not accessible for most.
Enduring Value " Artisan Craftsmanship
The economic recession has the luxury industry returning to its core: enduring quality. Hermes and Louis Vuitton have flourished amid harsh economic storms, while other, trendier fashion houses such as Christian Lacroix have gone belly-up. Herms managed to increase sales by 8.5 percent, including an 11 percent bump in the final quarter and an astonishing 20 percent gain in the Americas. In fact, Louis Vuitton held an event called "The Art of Craftsmanship," to educate young designers on the importance of old-fashioned values such as artisanship and the mastery of traditional skills at New York City's Fashion Week.
Exclusive Value " Uniqueness
By economic standards, value is derived from supply, demand and barrier to entry. Short supply, high demand and high barrier to entry drives the luxury market. Accordingly, only a select few high net worth individuals can afford to buy a $1.42 million Lamborghini Reventon or even a $170 Gucci key ring. In fact, only 20 individuals own the Reventon, as they are so rare. Uniqueness not only applies to products, but experiences as well. Quintessentially and Artisans of Leisure Travel design custom vacation packages ranging from Indiana Jones-inspired adventure or an immersion in Turkey and Israeli cultures. For those high net worth individuals seeking exclusive value, very short supply weighs heavier...
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