The limits of luxury brands
A traditional rule in luxury brands is that you have to exercise strict control of both production and distribution. Quality and exclusivity are the name of the game. In fact, managing the channel is increasingly the key to success. The more you control where and how customers buy your products, the more you can control pricing, and profit.
Within limits, of course. From the Telegraph:
Glamour firms fined £32m for price-fixing on perfumes
(Filed: 15/03/2006)Manufacturers of some of the world’s most glamorous perfume and cosmetics brands were fined by French competition authorities yesterday after it was ruled that the companies had colluded to keep prices high at the expense of the consumer.
Thirteen iconic brands, including Chanel, Yves Saint Laurent, Christian Dior and Guerlain, and three leading French retailers were fined almost £32 million between them for inflating prices between 1997 and 2000.
The French competition council said that under the price-fixing arrangement, a “price police” was set up between them to artificially inflate prices, put pressure on individual vendors and threaten reprisals against those that refused to apply the prices set by the perfume and cosmetic brands.
Philippe Nasse, the council’s vice-president, said that of 4,300 prices investigated by the authorities, 80 per cent were subject to price-fixing.
The inquiry was limited to France but investigators “found elements that showed the probability of price contagion,” Mr Nasse added, noting that French prices can affect those elsewhere in Europe.
A council statement said the brands in question “claimed the standardisation of prices was designed to defend the ‘luxury image’ of products”. Several planned to appeal.
Strategy issues affecting luxury brands
Irrespective of how these specific charges are settled, they raise interesting brand strategy questions for luxury brands themselves:
- Are luxury brands inherently closed and defensive, with elaborate sets of barriers, restrictions, and gateways? If so, does this make them a Maginot Line of marketing, susceptible to flanking attacks? (Not by a conventional luxury brand, of course, but by higher forms of relevance.)
- Is a “free” luxury brand feasible?
- Do luxury brands ever compete on brand innovation? If not, are they painting them into a corner?
- Can a well-managed luxury brand be “disruption-proof”?