Book Review by Sapphire Ng
Copyright March 2015
Kapferer on Luxury suffices as a crash course examining the sophisticated workings of the business of luxury, and supplemented with sociological explorations of the concept of luxury. With 8 chapters comprising previously published articles in for example, European Business Review, Business Horizons, and Journal of Revenue and Pricing Management, the book is packed with highly insightful details and positively interesting examples, and would most fittingly serve aspiring luxury managers and entrepreneurs, luxury aficionados, and students captivated by the world of luxury.
The intriguing specificities and idiosyncrasies of the notion of luxury are excellently expounded in the book. The author beautifully noted luxury's “ontological function of elevation” and “sociological function of social stratification.” The abstraction of luxury corresponds to “exclusivity, exceptional quality, craftsmanship, uniqueness, noble ingredients, rarity, hedonism, art and prestige.” The dimension of dream fulfillment is explored with regard to luxury, and luxury is even labelled as an “art of absence.”
The book is anchored upon the business model of “the luxury strategy,” of which incorporates 'anti-laws' of marketing. Incredibly rich in detail, the author explores profound concepts such as the artification of luxury—“a process of transformation of non-art into art” and creating the perception of the luxury industry as “a creative industry” in order to tackle “the biggest challenge for a luxury brand,” namely growth. Skillfully expressed, it is said that art can potentially bring luxury “a much needed moral and aesthetic endorsement, non-commercial connotations and a paradoxical legitimization of its high prices.”
Other similarly fascinating strategies of the luxury business model include the starification of designers; the iconization of select products; of the practical need to affirm a target market's “luxury threshold” in order to determine a product's optimum price; and of the indispensable need to assemble quality brand content material on for example, the brand's “unique craftsmanship,” heritage, creative interviews, limited editions, and even the history of the founder's life.
Useful heuristics of the luxury strategy are also aptly established at times in the book—the importance of consistently increasing the average price level, and of establishing brand non-comparability, and thus price insensitivity; and the essentiality of avoiding delocalization to prevent diffusion of the “unique country know-how, thereby destroying levers of added value.” Other rules of thumb the reader could glean from the book include the fact that increased penetration of a luxury brand potentially dilutes the feelings of privilege, or that the core objective of luxury advertising is not “to sell.”
The notably most fascinating case study covered in the book pertains to the LVMH-Bulgari agreement; the acquisition of Bulgari by the French conglomerate Moet Hennessy Louis Vuitton (LVMH). The author sought to explicate the rationale that sealed the agreement—LVMH benefited by fortifying its “weak watches and jewellery division,” and diffusing “the unique Bulgari know-how” through its group, whilst Bulgari gained access to financial capital as it successfully evaded the stock market. Rather intriguing are further discussions pertaining to the delicate need to preserve the “intangible and extremely fragile parts” of identities of brands subsumed under the umbrella of any luxury group. The exploration of Bulgari's unusually high price earnings (P/E) ratio of 69 in comparison to other major luxury companies and non-luxury companies is also very interesting.
The examination of synergies pertaining to luxury conglomerates in the chapter immediately following the investigation of the LVMH-Bulgari agreement was also especially fitting. The author satisfactorily probed the 4 types of synergies—market power synergies; operative synergies which include the access to raw material, and access to specific technology, components or products; financial synergies encompassing the pooling of financing resources, and option of pooling currency hedging at the corporate level; and corporate management synergies, which could involve for example, specific expertise in luxury branding and distribution, change management, and talent management.
Louis Vuitton remains the luxury brand most frequently cited as an example throughout the book. The reader will learn various strategies employed by Louis Vuitton—the development of “invisible luxury,” specifically the provision of “very private services for the rich and mighty;” the usage of a dual strategy to manage “the logo sensitivity of its different client groups;” the launch of a world advertising campaign called savoir-faire (know-how) in 2009; the expansion of stores in the capital cities, Tier 2 cities, and currently Tier 3 cities in China; and the significance of artification when Louis Vuitton products “lost their appeal for Japanese consumers” when the brand extended into Japan “some 30 years ago.”
Certainly, the book also contains an amazing selection of examples of other prominent luxury brands. The founder of Chanel, Coco Chanel, was distinctly artified and thus endowed with the status of a cultural icon; the author keenly noted that this case simply demonstrates the “self-fulfilling prophecy” of “post-mortem transformation.” Many other examples of the artification of luxury brands were provided, of which includes Cartier's creation of the Cartier Foundation for Contemporary Art in 1984, and Hermes's “Heavenly Horses” exhibition held in the Forbidden City in China. Regarding sustainable development, most interesting was the example of Tiffany with its Tiffany Commitments which communicate that the brand have signed the Bristol Bay Protection Pledge, “do not buy Burmese rubies,” and more.
Another predominant, and somewhat memorable, area of coverage in the book includes a survey of the premium, the mass-prestige, and the fashion business model. Mass-prestige, or masstige, brands—“luxury for the masses”—include Victoria's Secret, Ralph Lauren, Michael Kors, and Coach, while fashion mass-merchants such as H&M and Uniqlo, are known to “borrow the communication codes of luxury to lift their image while sticking to their low-cost business model of fast fashion manufactured in low-wage countries.”
The reader will learn certain defining features of the various business models—the essence of premium brand positioning is to create and manufacture an objectively “best” product, though premium brands are susceptible to obsolescence. While luxury brands do not license, masstige brands use “brand stretching,” and whilst luxury focuses on long-term value, the fashion business model is based vicariously upon the “very transient and fragile state” of being fashionable.
By reading the book, the reader will also be exposed to other interesting concepts such as the notion of “virtual rarity,” the phenomenon of “retailtainment,” the idea of “experiential luxury,” or the difference between “absolute luxury” and “relative luxury.”
The book contains numerous other intriguing ideas, some of which are embedded within the discussion of the relationship between luxury and the internet. Significantly, the author highlighted the “fundamental antinomy” between the essence of luxury and the core values of the internet, and even a potentially treacherous relationship between the two—the web is noted for its “fantastic ability” to diffuse the luxury brand content, whilst the web's major player, Facebook “endanger[s]” the competitiveness of luxury brands.
On the other hand, the author made a considerably impassioned argument against sustainable development advocates who criticize the luxury sector, attributing the accusations to biased focus on the sector's “high visibility” and “considerable symbolic power,” and the critics' undercurrent campaign for social equity.
Whilst coverage and explanation of the sole financial concept—the P/E ratio—in the book is highly lucid, in addition to the usage of a few rather self-explanatory terms including HNWIs (high-net-worth individuals), or plainly elucidated acronyms such as the BRIC countries referring to Brazil, Russia, India and China, MINT countries referring to Mexico, Indonesia, Nigeria and Turkey, or the CIVETS countries, other instances in the book however seemed to assume specific prior knowledge—the use of the marketing term “cannibalization,” and the business terms “upstream” and “downstream” in the book represent the usage of jargon unaccompanied by any terminological explanation whatsoever.
Acknowledging the fact that chapter 8 of the book sufficiently addresses the concept of sustainable development, the book however could potentially become more reader-friendly should it include at the very least a brief definition of the concept during its preliminary mention in a subsection in chapter 1, especially when the author went on to explore other facets of sustainable development, such as by inserting a table manifesting the results of a survey on “affluent buyers' sensitivity to sustainable development and luxury,” or the listing of two factors attempting to explain why “people do not think much of sustainable development issues when they buy luxury.” Pithy comments ought to have been made as well on the specific applicability of sustainable development to the business of luxury, particularly also due to the fact that the concept was mentioned and explored yet again, though minimally, in chapter 2 and 3.
Noting that the copy of the book read is an “uncorrected proof,” certain blatant repetitions, inconsistencies, and lack of cohesion is expected to be resolved by publication. However, bearing in mind that the author mentioned explicitly in the introduction that “each of [his articles] can be read autonomously,” and the fact that the majority of the book consists of previously published articles, it would surely be an odd, if not moderately uncomfortable, reading experience for the reader who chooses voluntarily to peruse the book from start to end, in a single sitting, or within a short period of time. He or she will no doubt encounter certain tediously repeated pieces of information and examples occurring in as many as 3 separate chapters.
Examples of certain replicated information include the distinct definitions of luxury as “an absolute concept,” “an economic sector,” and “a business model;” the CEO of Hermes, Patrick Thomas's comment that “as soon as a product sells too much, it is discontinued;” the quoting of the identical sets of data used to illustrate the rate of growth of the luxury sector over the years; the saying that modern luxury is “the ordinary of extraordinary people and the extraordinary of ordinary people;” and the mentions of the luxury syndicates, Altagamma and Comite Colbert.
Another glaring instance of inconsistency, and expected to be resolved by publication, pertains to the number of luxury brands subsumed under LVMH. In 2 separate occasions in the first half of the book, LVMH was introduced as having “more than 50 luxury brands,” while in another 2 separate occurrences in different chapters in part 3 of the book, LVMH is said to be “the world's largest luxury group with more than 60 brands.”
Disclaimer: I received an advance review copy of this book from NetGalley for this review.