Luxury pushes beyond the store

Luxury brands have found it hard to come to terms with the shift in consumer shopping habits from retail to online. For several years they have dipped their toes in the water of digital, but with little commitment and much hesitation (until recently). This is understandable. Often for luxury products, the justification for higher prices is only evident upon seeing the item in real life, or it can sometimes be intangible. These assets are hard to replicate when seen on a computer screen. A store’s retail environment allows the company to control every aspect of the brand experience. Someone checking out the Louis Vuitton website could be using a slow computer in an old browser; the experience will suffer, and there is nothing the brand can do about it. Much more sensible then to invest in concept stores, such as the recent one in Selfridges. But there needs to be a focus still about managing the brand and courting attention beyond the four walls of the shop.

So it should be of little surprise to see that recently luxury has been looking to broaden its horizons in the physical space, aiming to brand experiences that seamlessly fit into the lifestyle that they think is associated with their brand. This was evident in no small part when Zeitgeist took a trip recently to St. Tropez. Before even entering the town, visitors were greeted with the sight of mega-yachts and enormous Gin Palaces, and – on one of the days Zeitgeist visited – evidence of the relatively recent collaboration between Gucci and Riva (see above picture). Such a partnership probably helps the former more than the latter. It certainly helps validate the clothing company’s brand, which sometimes fails to leverage its relatively strong heritage. Walking away the port – past the recycling collections strewn with empty bottles that had once contained vintage wine and champagne – toward the famous Place des Lices brings you face-to-face with the hotel White 1921. This is one of LVMH’s newest incarnations, an eight-room hotel.

It was a beautiful hotel to behold, and had just opened the week Zeitgeist was visiting. Though much in need of a lunchtime glass of champagne – the brand here makes the most of its ownership of several champagne labels – the dining area was sadly not open until the evening. White 1921 is not alone as a recent example of hospitality being managed by a luxury brand. LVMH’s first such hotel was back in 2010 in Courchevel, named Cheval Blanc. More recently, Bulgari have launched their own hotel in London’s Knightsbridge area, close to the Mandarin Oriental hotel. The St. Regis hotel in New York now has a small collection of fashion-related suites, including the Dior Suite. All this is about embracing a certain idea, a crystallising of what it means to be living a particular lifestyle. The question for LVMH begins to arise as to whether, strategically speaking, having one arm of your company (Dior in this case) having a room owned by St. Regis creates any significant competition between the hotels you are opening elsewhere in the world. The more they open, and the more branded suites appear under competitor’s names, the stickier this situation could get.

Releasing products that compete for the same consumer type is never a good idea, and is a mistake General Motors made. A very good essay on this is available in Richard Rumelt’s ‘Good Strategy / Bad Strategy’. The market is becoming crowded. Hermès has side-stepped this by designing luxury apartments in Singapore. Some companies have thought at a more granular, perhaps relevant, level. Trunk-maker Moynat have teamed up with the famous Le Meurice hotel in Paris by providing French chef Yannick Alléno with a roll-in trunk so he could cook breakfast for guests in the comfort of their own room. It’s an inspired idea that retains the original idea of what makes the brand special and heightens it by creating a unique experience for the consumer. The New York Times reports,

The chef’s breakfast trunk is genuinely designed to travel, its porcelain plates held upright with leather straps and its cutlery in drawers. Mr. Alléno already has plans to send it to hotels where he has connections, first in Dubai in September, then to Courchevel in the ski season and on to Marrakech. At each destination, he will make a personal appearance and demonstration.

Similarly, Prada has thought about how best to showcase its ready-to-wear line, in this case including its clothing in the sumptuous film The Great Gatsby, due out next summer. The highlight of Zeitgeist’s time in St. Tropez was in visiting one particular boutique. Christian Dior, while not be a brand one immediately associates with good food, featured an open courtyard that hosted a cafe dedicated to indulgent delights. Mr Alleno was also responsible for the food here. It was an impressive exercise in brand management… and excellent profiteroles.

A sense of ownership

In an increasingly homogenous and globalised world, how important is craft?

In some industries, the concept of owning something tangibly has become redundant; an antiquated thought that occupies old minds and outdated marketing and sales strategies. Netflix, the online video rental service, is a prime example of this. Recently the service reported record quarterly profits, with revenue up 31%, adding just under 2m subscribers in the last three months. The service, which started as a way to rent DVDs online, eventually introduced a streaming service, which, as of this month, is now more popular than the DVD part of its offering. This has not been a sudden shift, but rather one that has been happening gradually, helped independently by DVD’s gradual decline since its heyday. Blu-ray is a temporary panacea and will not combat the inexorable shift toward a medium that someday may not exist in hardcopy form. The challenge will be in how to maintain a sense of ownership for the consumer when all their films (as well, of course, as all their books and music), are only visible through an electronic device, rather than being stacked on shelves. Having physical media on your shelves is a statement of sorts, and not merely a tool to show off your intellect. Though by turns irritating and immature, Taleb’s book Black Swan does make a great point about the purpose of a library of books, a metaphor which can be extended to music and film as well. Anecdotally, Zeitgeist doesn’t know a single person who favours the practicality of an electronic book over the unique feeling of owning something tangible. Creating desire for such software [i.e. books, film, music] will be another challenge, one that at the moment is being countered by creating desire for the hardware [i.e. the platform: iPad, Kindle, etc.].

At the same time, other industries, where individuality and provenance are of greater advantage than practicality or cutting-edge convenience, are experiencing a different problem. The Economist this week reports on the problems facing the industrious knitters on Fair Isle, part of the Shetland islands. The distinctive prints they create for their knitwear, which the magazine describes as “in vogue”, has also tapped in to an increasing post-recession desire for “garments that look chunkily lasting and homemade”. In this case, provenance is a hugely significant part of why people would choose to buy this particular product. Ownership of the product is not for the mere intellectual consumption of the product, it is also about wearing something that means something, in the sense of Roland Barthes’ Mythologies. This importance, The Economist maintains, is being diluted as neighbouring knitwear manufacturers unfairly play off the Fair Isle’s name. Following in the footsteps of Harris Tweed and champagne, the cottage industry, like Cornish pasties and Yorkshire pudding, is seeking special protection for exclusive use of it’s name.

So there’s clearly a push and pull going on as to the importance – the essence – of ownership. Perhaps what is needed is a total reappraisal of what ownership means when the content you are talking about is not something tangible that you carry around with you and are free to do with as you wish, but rather something floating in the Cloud, that you merely have access to.

Out (of pocket) for a byte to eat

“One cannot think well, love well, sleep well, if one has not dined well”, wrote Virginia Woolf. A friend of Zeitgeist’s is coming to town on Friday for what will surely be a sybaritic weekend. For the first time, Zeitgeist found themselves on Toptable booking dinner at a very nice restaurant nestled in London’s Mayfair district. The reservation came with an offer of 50% off the usual a la carte menu price. What had Zeitgeist done to deserve this? Nothing. So what is in it for the restaurant? See previous answer, perhaps. As any Toptable devotee knows, offers like this are plentiful, and reflect the state of the restaurant industry as a whole, particularly in the premium sector.

Zeitgeist was walking in Notting Hill about eighteen months ago with, as it happens, this same friend. We happened to pass Nicole Farhi’s restaurant, which sits next to a Daylesford Organic. Both were teeming with people literally overflowing into the streets enjoying their expensive brunches. “Credit crunch, what credit crunch?” my observant friend quipped at the time. It was hard to disagree. The numerous plates of food and cups of coffee being consumed by these Chloé- and Zegna-wearing denizens were totally out of sync with the times. Perhaps what these people had been doing though is downtrading. Instead of going out somewhere special for a dinner, they had instead chosen to go somewhere more informal for brunch. Or perhaps instead of going away on holiday for a weekend break, they had decided to stay at home and enjoy the fruits of London. This is an anecdotal example but the argument is supported by the reams of analysis conducted by those boffins at places like Forrester and Datamonitor; JWT’s AnxietyIndex wrote in May “Ostentation is out, practicality is in.” Witness brands like Starbucks and Louis Vuitton.

It’s this lack of ostentation and sense of frugality (which, for the most part, still pervades) that perhaps explains why, writes The Economist, “Visits to posh restaurants in America declined by 15% between May 2008 and May this year… Fast-food restaurants, on the other hand, saw traffic decline only 2%.”. It would be nice to know how a “posh” restaurant is defined, but otherwise it makes for an interesting statement. The decline at both ends of the dining spectrum lends credence to the notion that there is a “cocooning” going on where people are quite happy to order in or to cook their own meals, surrounded by their HDTVs and microwaves. Clearly though it is the high end that is fairing particularly poorly.

The article notes that Restaurant Week – held during the dog days of summer in Manhattan, when the city fills with tourists and any sensible residents have escaped northward – lasts for six weeks this year, and notes that the 21 Club “usually sees its business increase by around 25-40%” during the Week. So, similar to Taste of London, the event must attract those who would not usually consider dining at such a place (for such a price). Are these the customers the restaurant wants though? No mention is made in the article as to retention rates. As pointed out in the Wall Street Journal, (which contains details of several interesting promotions),

“‘Having dollar menus and value menus has become unsustainable, from an operating profit standpoint, so restaurants need to be able to establish consumer continuity with loyalty programs. Instead of getting customers in three or four times per year for special events, they need to get them in two to three times per month,’ says Burt P. Flickinger III, managing director of Strategic Resource Group, a consumer consulting firm.”

The industry has had to adapt though as the Internet plays an increasingly dominant role in people’s lives, not only exposing the consumer and restaurant to every bad review detailing every morsel of undercooked food and every supercilious waiter, but also forcing the establishments to adapt to people’s psychology when shopping online, which mostly falls under the category of ‘bargain hunter’. A similar thing has happened with high-end fashion. Members-only sites offering significant discounts on luxury brands have sprung up everywhere. The Economist reports that two of these, Gilt and Rue La La, have begun offering restaurant discounts as well:

“Gilt, for example, recently sold a four-course meal at the Tribeca Grill, a restaurant owned by Robert De Niro, an actor, for $160 (36% off). Shopping sites like these attract image-conscious restaurants, because only the site’s members can see that the restaurant has started to offer leaner prices.”

The other lure for the restaurant in this case is knowing that those whom the offer will be seen by are likely to be a suitable target audience for your establishment; at the very least a more specific one than might be found on somewhere like Toptable. These restaurants are innovating (mostly because they have to). The prospect of drawing crowds is an attractive one. Sites like Groupon offer significant discounts on meals, but which only become active once enough people have signed up to the offer. Foursquare similarly relies on encouraging a group of people doing virtual battle in order to obtain a mayorship that grants them free coffee at Starbucks or free champagne and a great seat at Galvin’s Windows. In the long term, having offers that keep the customer loyal (and accustomed to a consistently-priced menu) will hopefully, for the sake of the restaurants, trump the savage discounting some have become imbroiled in. For Zeitgeist, value-add to the proposition is far more attractive than saving on a regular meal. Let’s hope others think the same.