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The Business of Luxury Brands When building a business, it makes a lot of sense to stop, think and decide how we want to position ourselves.

By Vinil Ramdev

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For centuries, luxury brands have been a symbol of status, power, class and style. Brands like Armani, Gucci, Rolls Royce, Mercedes and Ferrari have been used by emperors, business tycoons and wealthy individuals for many generations.

The luxury brand industry is estimated at over $ 200 billion worldwide. Louis Vuitton Moet Hennessy, the famous luxury brand saw revenues of over 35 billion Euros in 2015.

With disposable incomes of people in countries like India, China and Russia rising, the demand for luxury brands is only increasing.

But what makes these luxury brands so desirable?

Scarcity and Exclusivity

If a brand is available to everybody, then it's not necessarily something people aspire for. People generally tend to aspire for something that is hard to get. If it's easily available then everybody has it and there is no exclusivity. Scarcity and exclusivity go hand in hand; limited edition cars and bikes are trying to do just that. Ferrari produced just 7255 units in 2014.

Mass production is not in the DNA of these luxury brands. Craftsmanship, price, customization, long waiting list and country where they are made can all add to their uniqueness.

Italians are generally perceived to be stylish. That is one of the reasons that a big majority of fashion brands are of Italian origin.

Status Symbol

Vema Reddy, who works at a tech firm, says "I buy luxury brands for the status it brings."

When asked about other factors like comfort, style or quality, he said "Sure, they're important but you can get them off other consumer brands too."

A friend of mine mentioned that his BMW was a symbol of his success. So when someone's buying a car, he could most likely be buying prestige rather than any sort of functionality.

Limiting channels of distribution

Consumer brands produce on a mass scale and distribute it widely so that the product is easily available. But the luxury market operates in the exact opposite way.

The key is to produce less than the demand, and have a waiting list.

The limited edition bottles by Prodiguer is an example, it was only available to a select few. 18-Karat gold edition watch by Apple is another example of the limited edition strategy.

Luxury brands are normally sold in their own company stores where special VIP treatment is given to their customers.

The BMW store in Munich is an example where customers can experience the car before buying.

Experience and Belonging

The brand experience starts even before the customer enters the store of a luxury product and it doesn't end with the sale.

The strategy is to evoke a feeling of belongingness to an exclusive circle to which only few people can belong. The Harley-Davidson Owners Group (H.O.G), and the Beetle Owners Club are prime examples.

Tom Ford organized a fashion show for few of his exclusive customers. The media was not allowed to cover the event. He did the compeering himself while Beyoncé and Julianne Moore modelled at the event.

To satisfy consumer's feelings of pride and prestige, Envus Motorsports provides luxury experiences by renting out top of the line cars ranging from Ferrari to Lamborghini, and then filming the entire experience so that their customers can share it with their friends and relive the moment. They are not just selling rentals but a luxury experience.

Conclusion

The business of luxury brands can be very exciting and dynamic. When building a business, it makes a lot of sense to stop, think and decide how we want to position ourselves. It's important to remember that we're not just selling a product, but all the emotions that get associated with it.

Vinil Ramdev

Entrepreneur and Business Writer

Vinil Ramdev is an entrepreneur, business writer and marketer. He graduated with a Bachelors degree in Marketing in 2004. Since then, Vinil has been involved in starting and growing several businesses predominantly in retail, marketing, media, advertising and on the internet. His skill for seeing the big picture, and identifying trends and patterns have made him a sort-after consultant for companies who want to grow their business and make their products more discoverable. 

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