How Luxury Brand Marketing Affects the Secondary Retail Market’s Sales.

This is the 4th article in The Business Of Luxury Series By Lorre White, international luxury market expert and luxury media personality “The Luxury Guru”, Owner of White Light Consulting and Luxury Blog with wealthy following.

I always say that in Luxury Businesses it is more important to have a CMO than a CFO because the success of the brands image translates into dollars. I made the following observations as a luxury marketing expert, about the lower price point luxury items of designer fashion, and how the perceived value exceeded the importance of real quality in the secondary market.

daniele dw

Daniele de Winter International Monaco

Certain luxury items like designer fashion, cosmetics, perfumes, skin care, etc., although in the luxury sector, have predominantly aspirational consumers because of the lower price point. People can save up to buy a purse, a suit, sunglasses or shoes, but they cannot save up to buy a $60 million dollar jet, yacht, etc. Lower price point luxury brands rely on the aspirational consumer for 80% of their sales. In these lower priced luxury categories quality luxury marketing makes all the difference, much more so than the quality of the product. This, it seems, is magnified and seen with great clarity in the secondary market.

dassauult

Dassault Falcon Jet

Like everyone else, I have to purge the closets regularly.  A couple of years ago I decided to try using consignment shops. Usually I am of the mindset, that time is money, and I wind up just bundling up my unwanted items and donating them. As getting my donated items to the charities often become problematic, leaving boxes of stuff waiting in closets for months, accompanied by the fact that I often have never worn designer products, I have been repeatedly encouraged to try using a consignment shop. These shops will often pick up from you on a timelier basis, if you have designer brands. So I decided to give it a try. It was a fascinating lesson in luxury marketing.

beau sats

Beau Satchelle

A consignment shop will sell your items for a piece of the sale. All differ slightly, but the one I used had the following percentage of sales: Items under $500 they took 50%, items less than $1000 but over $500 they took 40% of the sale, and designer items they priced over $1000 they took 25%. On certain brands that they deemed very likely to sell, the shops would offer a direct buyout, at a lower price than what it would consign at, but you did not have to wait for the item to sell (in other words faster and easier). Time is the most valuable commodity for the top end of the luxury sector where dollars are in abundance. Most of these purchasers really do not care about the retained value in the secondary market. However, with 80% of designer sales being from the aspirational demographics, the retained value in the secondary market is important to them.

Upon interviewing several owners of the top consignment shops in the area I learned about which items retained greater value and it was based on the mass markets perception of the brand.

louis itton monaco

For example any pair of Giuseppe Zanotti shoes/boots were less valuable than a pair of Christian LouBoutins. The real luxury sector knows that these brands are on equal footing (excuse the pun), but the aspirational market, those buying from consignment shops, were not nearly as familiar with the Zanotti brand. I think that this is an excellent example of two top quality brands where one has practiced excellent luxury market strategy and the other has not. However, LVMH purchased 30% of Zanotti in 2014 this started to improve. In fact the consignment shop owners were willing to offer a buyout option on HIGH END DESIGNER items with secondary or mass market recognition only. You make less money doing an outright sell because the shop takes the risk of the item not selling, but you have the benefit of receiving the money on the spot rather than waiting for the item to sell. The shop offered to purchase worn LouBoutins and would only consign (so no risk to them) new, never worn Zanottis of greater retail value. The same was true with men’s suits. The often considered superior brand of Brioni, they would only consign, but the better known by the masses, Armani, the shop purchased out right. This was fascinating to me as a luxury marketing expert about how the perceived value by the non-primary purchaser changed the value of an item. Not only was this true among brands of equal real status by educated and experienced luxury consumers, but brands that clearly sell for less at full price actually received more value than their superior brand counter parts that did not have any mass recognition. The consignment shops preferred Burberry and Coach over far superior brands like Zanotti, Brioni, The reason is simply that some brands have better marketing.

burberry

There is of course the argument that from a luxury brand perspective, that it is better to not be known. Every time a non-primary purchaser wears a luxury brand, it reduces that brands value. Let me explain. If a very wealthy woman who only wears Chanel suits at $10,000 each, buys 10 new suits each year, and either sells on consignment, or donates to charity, her old suits. Now her maid shows up to work every day in a Chanel suit, that she got for free to $100. How long do you think the primary purchaser is going to continue to buy Chanel suits at $10,000? Every time a non-primary purchaser is seem wearing their brand it reduces its prestige, and thus its brand value. The secondary market for designer fashion is actually harmful to the brand.

chanel suits

As a consumer, when you walk out of the shop with better marketed brands you retain more the retail value of the product. This value is not in the quality of the product, but entirely based on the quality of the marketing. This was also true in housewares consignment shops. More mass recognized brands, like Tiffany crystal, had a high buyout offer than brands like Baccarat, known to be of superior quality to the real luxury consumer. The better marketed brands maintain the value in the secondary market, which allows them to sell their used items at a better price, in order to afford to repurchase new.

 

luxury-logos

Here is a list of women’s clothing and accessories brands that have maintained an elite brand image to consumers of the US mass market:

Balenciaga

Burberry

Celine

Chanel

Chloe

Christian Dior

Christian Louboutin

David Yurman

Dolce & Gabbana

Fendi

Givench

Gucci

Hermes

Jimmy Choo

Judith Leiber

Louis Vuitton

Missoni

Miu Miu

Prada

Tiffany

Tory Burch

Valentino

Versace

Yves Saint Laurent

****

Lorre White The Luxury Guru Blk & Wht

To catch up on Luxury Business Articles by International Luxury Marketing Expert Lorre White, published  in CCI RIVIERA & MONACO NEWS – the leading international English Speaking News & Event source for Monaco & Riviera Region, please click on the following connections or complete contact form:

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