Published
Jun 10, 2011
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The Economics of Luxury - Part II

Published
Jun 10, 2011

Experts and industry leaders continue their discussion on “What Price Luxury?” - theme chosen for this year’s FT Business of Luxury Summit. After talking about newcomers and pricing strategies in Part I, FashionMag.com concludes its analysis of the conference around the topics of social media, collaborations and counterfeiting.

SOCIAL MEDIA

Patrón Spirits’ COO, John McDonnell, lamented that his daughter, who now attends college and no longer lives at home, ignores her father’s e-mails. Keeping in touch has become more difficult. When prompting her to answer his emails, she said she only used Facebook. Reticent Mr McDonnell decided to open a Facebook account for the love of his daughter. But when he sent her a friend request, she replied that she would never add her father to her Facebook friends. Social media such as Facebook and Twitter may not help bring families together, but it certainly helps bringing customers closer to brands. Burberry is at the forefront of digital marketing in comparison to luxury companies, and its 6.7 million facebook fans agree. The power of Social Media can be explained by the simple fact that you can create a two-way communication channel with your customers. Mr McDonnell highlighted that “a tailored message is much more effective than mass media communication”.

What is interesting to note is that some brands are shifting away from Facebook’s monopoly by creating their own networks or “social clubs”. Patrón Spirits has in this sense decided to control its own data base and better tailor its messages to its tequila enthusiasts via a community website called “Patrón Social Club”. It gives members an enhanced sense of belonging to a group, where only aficionados like themselves can participate. Although many brands may have a newsletter subscription with information on the latest trends, products or events, such as RL Magazine by Ralph Lauren, not many seem to offer the interactive technology of Web 2.0 where users can actively discuss and share pictures, links or even videos. Not yet at least. Many brands still lag behind, such as Salvatore Ferragamo who does not even have a Facebook page.

Key idea: Facebook, Twitter and private social clubs represent a direct two-way communication tool between brands and their customers. Although in terms of generating sales the miracle solution is yet to be found, brands must not neglect the opportunities that social media represents as a marketing tool.


Guests at the FT Business of Luxury Summit 2011

FRANCHISING, LICENSING, COLLABORATIONS... WHAT IS THE BEST WAY TO PENETRATE NEW MARKETS?

The eminent panel for this discussion included Thierry Andretta, Lanvin’s CEO; Lionel Breton, Chairman & CEO at Martell Mumm Perrier-Jouët; Frederick Lukoff, CEO & President of Stella McCartney and lastly Adrianne Shapira, Managing Director at Goldman Sachs. They all generally agreed that any type of collaboration, whether it is franchising, licensing, partnerships or similar, are only truly effective if there is a “win-win” contract. The difficulty, according to Mr. Lukoff, consists in finding two companies with specific needs and making the two match harmoniously in a contract, that is — a very exhaustive contract where every aspect and detail of the collaboration is covered, from designing to commercialising. “Stella McCartney never gives up control of the design, merchandising, PR”, he explained. “And one of the reasons why our collaboration with Gap Kids was successful was thanks to the detailed contract we drafted”. Clear specifications are therefore helpful in order to avoid conflicts which may not have been foreseen.

Furthermore, money is not always the reason why a brand wants to collaborate with another one, confirmed Mr. Lukoff. Stella McCartney, for example, learned more about the kidswear sector through a collaboration with Gap Kids. A knowledge which, later on, allowed the designer to launch Stella McCartney Kids.

Key idea: In any collaboration, both parties need to be crystal clear about their objectives. It is in the company’s best interest to do so as, if the collaboration is struck, the contract foresees everything.

HOW TO COUNTER COUNTERFEITING

Versace takes counterfeiting seriously. Gian Giacomo Ferraris, CEO of the Italian luxury firm, has put combating this problem at the top of his priorities. He explained that his company actively fights the counterfeit network via education, where Versace sales associates are trained to detect fakes. Moreover, customs officers around the world, especially in China and trade hubs such as South Africa, are thoroughly trained to tell the difference between authentic and street replicas. Mr Ferraris’ actions have significantly increased Versace’s counterfeits seizures on cross borders, thus decreasing the manufacturing of the latter.

Country borders are helpful in controlling the trade of counterfeits, but these actions become irrelevant on the internet, a world wide web with no borders nor customs. Carlos Moreira, founder and president of WISeKey, a Swiss security and identity management company, explains that very few companies or customers are protected from being scam victims. “URLs hardly ever begin with https://” (the “s” indicates that the transaction is secure and encrypted on e-commerce websites, for example). Given that today’s main distribution channel of counterfeits is the internet, it poses a massive problem for the entire industry that remains to be addressed.

Nathalie Moullé-Berteaux, Executive Vice-President of Public & Legal Affairs at Lacoste, added that not fighting counterfeit trade of your products can be very dangerous. A rampant trade of counterfeits can damage the brand’s image, the message it conveys and what it stands for in the public’s mind.

Key idea: Raising awareness of counterfeits and training staff and customs officials to detect fakes makes its trading more difficult. Counterfeiters are inventive and will find new ways to distribute illegal merchandise. Brands must combat counterfeiting at all levels of distribution and must educate the end consumer, the real offender some might say, about the violations it entails.


Reporting and writing by Christian Layolle
(editing by Marina Felippe)

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