Louis Vuitton's recent decision to launch its first TV campaign based on its core offering of luxury leather illustrates the concern some high-end brands have about their positioning and their future audience. Rather than concentrating on the brand's products, the commercial is, according to Louis Vuitton, an 'intensely atmospheric' picture of travel, designed to appeal to those high-net consumers who have traditionally been luxury's core market.
Concerns about the environment and ethical issues, alongside changes in lifestyle and incomes, are influencing the marketplace in which luxury now operates. In addition, the threat of recession has already taken its toll on the results of some brands, with Tiffany among several that have reported disappointing Christmas sales.
Although the sector is in good health - consultancy Bain & Co predicted growth of 7.5% for 2007 - it is also diverging.
According to Simon Black, director of strategic planning at Design Bridge, there is an increasingly polarised view of what luxury is. The two opposing camps are that of New Luxe (showy, status-driven, fake or real) and Old Luxe (aimed at traditional luxury consumers searching for alternative signals to show they are 'too posh to care'). To those consumers favouring the latter, it is irksome to see brands such as Burberry, which were once their exclusive preserve, now being purchased by New Luxe enthusiasts.
This dissatisfaction has not gone unnoticed. Having devalued some of their principal brands through over-hype, luxury houses are relying on discretion and subtlety to win back the lost elite. Luxury brands are therefore facing the conundrum of how best to market their goods to retain the favour of traditional luxury devotees, while simultaneously appealing to newer buyers. Burberry, for example, now places its famous check more discreetly, often on the inside of its high-end designs. It has developed a top-level premium brand, Burberry Prorsum, and uses a higher pricing structure to ensure an added degree of separation from its 'mass' offering.
Yet with the growth of luxury comes the emergence of brands that lack that traditional luxury ingredient - mythology. What makes a brand 'luxury' is often the development of this mythology using a combination of craftsmanship, PR, advertising and, possibly, fashion icons.
When Nokia launched premium mobile phone brand Vertu in 2000, it had to do so without such a heritage. To address this, Vertu has forged partnerships with luxury brands such as Ferrari and jewellery house Boucheron, which do have established mythologies. Alberto Torres, president of Vertu, likens the premium phone category to the early stages of the luxury watch market. 'It is about the quality of the product. Our phones are assembled by hand and have features such as sapphire crystal screens. We are very careful about the crafting of our product, display and customer service,' he says.
Moreover, with websites such as 20ltd, which specialises in limited-edition products, driving the exclusivity element of luxury, the growth of online serves up a further dilemma.
Some luxury brands seem uncertain as to whether the web poses a threat or an opportunity. Of the luxury 'old guard', many brands have yet to create an online store, instead using the web simply as another product showcase, and leaving third parties such as designer clothing site Net-a-Porter to take advantage of a relatively open market. 'The ability to sit in your dressing gown and buy Chanel online is democratising the entry point to luxury,' says Tom Savigar, strategy and insights director at trend forecasting consultancy The Future Laboratory. 'The web is all about convenience. Luxury is about the experience and the discernment that goes with it. Luxury brands need to combine the two.'
According to Ledbury Research, the luxury consumer spends five hours a week online, and Savigar believes that brands are missing a trick. 'Buying online offers dual gratification - the joy of the purchase, and the joy of its delivery.'
As with many sectors today, a vital area of growth within luxury centres on consumers' green concerns. Environmentalism is not just hip, suddenly it is posh. The question, however, is where conspicuous consumption fits in with the growth of ethical consumerism.
Bill Bachle, chairman of the Luxury Marketing Council Europe, admits major luxury brands are looking closely at 'correct behaviour'. 'There is a need for transparency in their communications to ensure that their marketing strategies are consistent with the stories they tell about their products' manufacture and distribution,' he says. 'With the explosion of luxury markets in areas such as China and India, human rights issues will be scrutinised as consumers demand to know the genesis of the products they buy.'
Fashion and homewares house Bamford, alongside menswear label Bamford & Sons, is seeking to establish itself as a leader in eco-luxury. As such, it pays for cotton farmers in India to become organic suppliers. Much of the cotton they produce is then hand-woven at an educational centre for destitute women in Rajasthan, which is also supported by Bamford.
This ethical concern is also making its presence felt in one of the biggest areas of the luxury industry - travel. With predicted growth of about 11% in 2007, there is scope within the sector to combine luxury quality with environmentally and ethically responsible messages. 'Instead of spending money on holidays in gated developments, people are more interested in visiting lodges and hotels that are built to fit in with the environment around them,' says Clementine Brown, a spokeswoman for concierge service Quintessentially, which has seen strong growth in eco-luxury travel.
Upmarket holidays may include visits to Amazonian tribes, or luxury accommodation such as five-star hotel The Chedi, located in Oman, home to one of the world's most rigorously green governments. National Protected Areas are scattered around the country and the Chedi offers trips into the desert, where guests can experience silence and space.
However, some doubt that luxury and environmental matters will prove a winning relationship. 'It is wishful thinking,' argues Black. 'If these are things that we are told to do, then I'm not sure they remain as luxurious to be involved in.'
Much of luxury's growth is expected to come from the scaling up of more regular items to create a 'premium' market, positioned a level below luxury. Tim Delaney, chairman of Leagas Delaney, points to brands such as Nike and Alessi, which 'command a premium because of their style or attitude'. This is upsetting to luxury brands concerned with the trend of 'masstige' - mass market and prestige. 'If retailers such as Tesco are creating premium products, it leaves labels asking: "What is our difference? Where do we stand?'" says Savigar. 'They can't democratise too much - it is part of the rarity agenda.'
Indeed, new luxury is about experiences as much as tangible objects. To create an emotional touchpoint with a brand, service and point-of-sale experiences must be exceptional. 'If the luxury element is limited to the product, people will make rational decisions and opt for something that is equally good but less pricey,' says Black.
If the future of luxury is about greater exclusivity, an impeccable customer journey and ethical production, then fake items sold on street corners fail on all counts. Almost two thirds of UK consumers - an increase of 20% on 2006 - claim they are 'proud' to have bought fake luxury clothing, footwear, watches or jewellery, according to research commissioned by Davenport Lyons. But Delaney believes fake goods 'serve as an appetiser'. 'In a funny kind of way, they feed the myth. To be worth knocking off, an item must be special,' he says.
If a recession is coming, such fakes could become more appealing to the occasional luxury consumer. However, a downturn is unlikely to have an impact on the tastes of high net worth individuals, reason enough for many brands to shift their focus to these lucrative customers.
Luxury customer tribes:
Conspicuous display is key for this shopper. Items must be highly visible and clearly show their luxe status.
Selective display is the focus for this consumer. The luxe items are there if you know what to look for, and are flashed for effect and impact.
This consumer is concerned more with understated display. They can appreciate and afford luxe items, but don't need to shout about it.
The Wrist Band
For this customer, luxe is about group display. Items are shown at all times and often signify membership of a luxe 'gang'.
This eccentric will buy, inherit or borrow luxe pieces, seemingly at random, and combine with old or inexpensive items.
The Carrier Bag
A rejecter who does not buy into the need for luxe goods, seeing no emotional or functional value in them.