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First published in Harper’s Bazaar, October 2016.
The largest uncut diamond found in more than a century failed to sell at a Sotheby’s auction in London earlier this year. A headline soon ghosts into a faded memory, but “the diamond that didn’t sell” has become emblematic as a bellwether of the luxury reset—a reset that is demarcating the separation of “luxury” from “excellence” and driving companies to look seriously at the entire brand experience as a growth engine for their businesses.
Over the past 15 years of Best Global Brands, the brand value amassed by luxury businesses has grown from USD $25.8 billion in 2000 to USD $143.7 billion in 2015. For well over a decade, luxury brands have been ascendant. They were hailed as haloed protectorates of double-digit growth. They reinvented relevance, as per Burberry, the first British luxury brand to become a Best Global Brand in 2006. And, when the economic crisis hit, luxury brands were the most resilient in weathering the storm.
However, 2016 is the year that marks the luxury reset—a reset first signaled by recent dips in brand values that is now showing up via a cascade of marked declines. And yet, against the slow landslide in value, certain brands have quietly been asserting sustainable growth. Hermès was one of the top risers across all industries in 2015, with a 17 percent increase in brand value. It rises again this year to #34 with a total brand value of USD $12,833 million. So, what is Hermès doing differently, or perhaps exceptionally? What does Hermès tell us about sustainable growth?
Meta-luxury and sustainable growth
There’s a new entry in the ever-evolving luxury lexicon.
Meta-luxury … may come closer to rationalizing the current situation
than anything else I’ve seen thus far.
—Vanessa Friedman, Fashion Director, New York Times
Four years ago, we published Meta-luxury, offering a provocative point of view on the dilution of the very concept of luxury, drawing a distinction between the convention of luxury and the conviction of meta-luxury, a business model that is based on a culture of excellence. And Hermès is in the business of excellence.
The economic model of meta-luxury brands is based on a number of dynamics. These may appear paradoxical, but over the long term, they become inimitable drivers of value and growth. The crux is that meta-luxury brands grow through both uncompromising commitment to excellence and limitation. They make decisions around extension and expansion, based on the long-term protection of the brand and health of the business. This is in sharp contrast to many brands that have fallen foul by chasing the immediate gratification of fast profits at the expense of sustainable growth initiatives, leading to brand dilution and value erosion in the long term. The guiding principles of meta-luxury brands will ultimately limit decisions around where the brand should go—and, crucially, not go—and yet, that very integrity is the long-term economic engine. In 2011, Patrick Thomas made a compelling and cautionary statement: “If you tell me I have to double the profit of Hermès, I will do it tomorrow. But then you’d have no Hermès left in five years.” Five years later, the words could not have been more prophetic for a brand committed to excellence.
Sustainable growth has deeper resonance in the wider context of sustainability. We are in a constant reevaluation of what we value and why. Across every sector, a brand’s authenticity, purpose, and commitment to society and the world are exerting an increasing influence over consumer choice.
Brunello Cucinelli is an ardent advocate of excellence in community as in business, and of the two going hand in hand. Cucinelli’s vision and philosophy of “humane capitalism” has grown into a USD $1.34 billion business. As brands redefine categories and sectors, Cucinelli is building and sustaining a community, investing in the unique knowledge and skills behind his creations, and hitting double-digit growth in the process. The sweet spot is where integrity of product meets integrity of brand experience.
Driving value through the brand experience
One of the most powerful forms of conspicuous consumption today is not the accumulation of goods, but the accumulation of memories.
— Gillian Tett, US Managing Director of the Financial Times
Luxury brands have always set the standard. The challenge now is to translate their stories of excellence within a knowledge and experience economy that craves experience as much as the product itself. And that raises challenging questions about the role of every micro and macro brand touchpoint. It also has radical implications for the role of flagship retail, of the runway to retail model, of managing rarity, and of levels of access and service. And there is a brand for every facet of those new models along the spectrum. Burberry is emerging as a brand for new seasons, melding menswear and womenswear and taking runway straight to retail. This year’s September collection hits both runways and the market, while many brands are presenting Spring/Summer 2017. Will the changing of the seasons be one of the catalysts to herald a new season of growth for Burberry?
As luxury businesses continue to work through the reset and evolve their growth strategies, a single quest remains constant. Everything begins and ends with driving brand value. How and where do consumers experience your brand? Are you surprising them and stretching how they experience the brand by showing up in new places and engaging them in interesting collaborations? Is your commitment to “doing good” understood? Are platforms and partnerships aligned to long-term brand building that reinforces relevance and consistency? Is your storytelling the stuff of myth? Are you focused on truly meaningful innovation that is aligned with a quest to do things better?
Any of us involved in the business of luxury should remember that we are only guardians of these brands. Whether our brand is 30 years old or three centuries old, it is upon us to drive relevance and engagement. Cucinelli and Hermès are reminders to us all that luxury is not a category you decide to be in, it is a natural consequence of subscribing to a culture and ecosystem of excellence. The luxury reset has already happened. It’s time to build the ecosystem.
Rebecca Robins is Global Director at Interbrand and co-author of the book Meta-luxury. She writes the LuxuryWatch blog on brandchannel. @robins_rebecca