What Does Luxury Really Mean in Design?

I spoke at KBIS® as part of the Voice of the Industry on social media, but before my session, Greg Rohl, VP of Marketing at Rohl spoke on a topic near and dear to many of our hearts: luxury. The title of his presentation was “Understanding What Makes Authentic Luxury for the Kitchen & Bath,” and the write up of the session went like this:

What Makes Authentic Luxury for the Kitchen & Bath is designed to assist designers, builders, showroom consultants and sales representatives to value the importance of understanding what truly makes authentic luxury – and how this understanding can help them grow their business. This program has been built in conjunction with Pam Danziger, published authority on marketing luxury. Her recent research with the design community, work with Kravet and ROHL and a collaboration with Greg Rohl on the development of 3 day-long AuthLux Summits (Chicago, NYC, Dallas) have resulted in a comprehensive look at the topic. Areas to be explored: Material, craft, place of origin; the importance of original design; how to market and brand your knowledge – differentiating yourself and your work.

Like my session, Greg’s was CEU-credited. One of the things I really like to do is listen to other “voices.” It actually helps my own voice and in this case, I wasn’t disappointed. Besides, his presentation wasn’t just a presentation: he had a “designer’s guild” in the room with him – three top designers who he asked questions and had answered, much to the enjoyment of the audience who also participated in the exchanges. It was so good, I decided to blog about it here on KB-Resource. We’re not only changing the website; we’re working to make it relevant in this true age of disruption. While he based his presentation on research done by Pam Danziger, one of the recognized marketers in this channel, the whole session was worth it because he tackled one of the primary problems in our world today: the effects of disruption on terms like luxury. Before I discuss what I learned in his session, let me explain what I mean.

Tick, Tock, Tick, Tock

On January 19, Swiss luxury watchmaker Audemars Piguet said it would launch a second-hand business this year, “becoming the first big brand to announce plans to tap into a fast-growing market for pre-owned premium watches.” Now while that may not seem like news, if you are trying to understand luxury and what the internet is doing to that word, it’s worth your time to take a look at this. Rohl’s presentation was on “authentic” and what the internet is doing is tearing down walls on that adjective, revealing luxury in its bare essence for people to define for themselves. For example, I never heard of Piguet, but that doesn’t change the fact that Piguet watches on the www.gemnation.com website range from Royal Oak Men’s Watch for $16,000 to the Royal Oak Men’s Watch on sale now for $1,181.840. Oddly, they carry the same name, both by Piguet, but like vehicles, there’s a range of options in a watch. Who would have known that?

What makes this move essential to understanding what is happening is that luxury watchmakers have avoided the second-hand trade. They were fearful of diluting the exclusivity of their brands and cannibalizing their sales. So, they gave that up to third-party dealers. However, that second hand market is expanding more rapidly than their own “exclusive” luxury market and they want in on the action.

 

Tickets, Tickets, Let Me See Your Tickets

If you recall, the same thing happened to Ticketmaster. In an e-commerce forum put on by Forrester Research a few years ago, Jared Smith, President, Ticketmaster North America, presented a session called “Disrupting Ticketmaster From The Inside Out.” In that session he explained how ticket resellers would stalk the Ticketmaster product. They figured it out: they want to serve the fan better, so they would pounce on our website once we opened up the sales of tickets and buy them up. Secondary ticket sales became a $4.5B market and doubled in five years, he told us. The age of digital helped the resellers, and so, “we created our own competition.”

Smith was smart enough to recognize two things: 1) that Ticketmaster didn’t control the channel, and 2) there was a massive shift in fan behavior. In other words, “we sold all our good seats and had nothing left on our own shelf.” That meant problems, because 35 percent of fan searches ended up with unavailable tickets. They were forced to go to the resellers. “And so we decided to disrupt ourselves,” he told the audience that day. “We bit our own ankles. Our goal was to re-capture the secondary market,” he said. In other words, “We have to always have what the customer wants.”

Everyone Needs to Be Amazon

Having what people want is the essence of the Amazon promise. And even when they don’t, they try. I recently ordered 20 copies of a book for my entire company. Amazon promised the order, communicated it was shipped, and then communicated that the order was misplaced. However, three of the 20 showed up. I got a refund for the 17 that did not arrive, they charged me for the three. Was I angry? A little. Disappointed? Yes. Will I order from them again? Yes. They tried, which is what customer service is all about.

In Ticketmaster’s case, they came with a clever strategy: TM+. Trusted Source. The fan doesn’t want to comparison shop. They want a single place, a safe secure option. All resellers still have to buy from us because of our deals. We take delivery from the artist. That’s a huge differentiation. Since no one can provide that view of the fan like us, aggregation of data works, he said. “People are concerned about ticket fraud,” he said. “Well, we are the ‘official site.’ We can verify your purchase.”

Today it’s called Tickmasterverified, and they have morphed into even fan to fan sales. In other words, disrupting yourself can lead to additional revenue streams – and opportunities to serve your customers.

That’s what Piguet is doing by entering the second-hand market. And I tweeted, “Well, well. Watch the dominoes fall as watchmaker Audemars Piguet said it would launch a second-hand business this year.” These are serious problems for brand, and Greg Rohl brought that out along with his designers. Here’s what I learned.

Authentic Luxury

Greg pointed out that the adjective – authentic – has become ubiquitous. The word “ubiquitous” is always one of the “beware-when-you-hear-it” words because like luxury itself, we need to understand the meaning of words if we are going to understand disruption and what to do about it. It refers to something that is found everywhere, at the same time.

Yet, Greg was saying that  ubiquitous has lost its meaning – in other words, authentic has become a commodity, attached to everything as he said from “cheese to corporate culture.” How often have you heard, “be authentic?” I think that means, don’t be “fake.” Boy, have we heard that word a lot lately!

Greg went on to discuss the word luxury, too, which he said took a beating, either “referring to egotistical indulgence or becoming completely water down.” In other words, commoditized and bastardized like other words (i.e., love).

Greg quickly realized that to define “authentic luxury,” they needed voices other than their own, and that’s why they created the Auth Lux Designer Guild, comprised of three designers: Marcia Tucker from Marcia Tucker Interiors, Julia Buckingham from Modernique, and Denise McGaha from Denise McGaha Interiors. Here’s what happened.

1. Greg presented Pam Danziger research about the topic. While not the exact research, Danziger has been very active in this space. In 2015, she produced a 40-page document titled, “Five Luxe Trends for 2015 that are shaping the future for marketing to the U.S. Affluent Luxury Consumer Market.” You can download and read for yourself and learn terms like “Total Affluents” or “Henrys.” Oddly, the document doesn’t contain one use of the word “Authentic.” More recently, Danziger produced “To-The-Trade Interior Design Industry Disrupted.” You can register to download this 20-pager and be further challenged because if you thought 2015 was full of disruption, wait until you read what she says here. For example, here are a few of her disruptive, very true statements:
   • “Designers can’t rely anymore on the old idea that their competitive edge is to provide access to exclusive high-quality, design-intensive products for the home. In this internet-powered age, consumers have discovered how to work around designers who previously controlled their ‘exclusive’ sources.”
   • “To-the-trade product suppliers have seen their traditional distribution channel shrinking and increasingly are meeting the consumers directly in the marketplace, leaving designers out in the cold.”
   • She quotes Chris Ramey, president of the Home Trust International, a membership consortium of brands serving the luxury market, show says: “Technology allows bottom-feeders to sell lower quality knock-offs to fool otherwise informed consumers.”

It’s worth your time to download and read this research because it will make you think. The last quote is especially interesting, because Ramey actually got it wrong: it isn’t that technology allows people to sell lower quality; technology is leveling the playing field by allowing consumers to define words like quality[1], and like luxury. Who needs a million-dollar watch, really?

One of my dear friends owned a Bentley. I didn’t know what a Bentley was, so I called my other friend who said, “about a quarter million dollars.” “Oh,” I replied. I saw it and it was a car. It got him from point A to point B. Another dear friend bought two: one for himself, and one for his wife. He shows me the marketing pieces Bentley produces. They bought Bentleys because they can. And therein often lies why you buy a million dollar watch or another: because you can.

However, today it’s different. People today are about making their own statements, not with someone else’s brand. Just witness in any industry the rise of the independent company who spring up out of nowhere, threatening the share of the major brands in that space. Technology – or more appropriately the internet – is what allows that to happen. In other words, technology is changing taste. “De gustibus non est disputandum.” Or, you can’t argue about taste.

2. Greg’s presentation touched on what makes a luxury brand, alluding to providing culture and a customer benefit: ultimate quality. Here again, adding the adjective causes some confusion. In our research, we’ve never run across anyone who ever said they don’t want quality. But, when we probe into that question, especially with designers, we often hear, “You can feel it.” In Greg’s presentation, the designer guild actually reflected that when one of them said, “I ask my client to pick up the product and feel[2] it for themselves. Quality makes itself apparent in the sense of touch.”

3. The Q/A with the designer guild was of great benefit to the audience. Here are some highlights.
   • Only one in three ultra affluent are using designers. When I asked a question about this afterward on why this was so, the answer I heard was, “lack of awareness.” Yet, even affluence itself as a word is changing. Part of the re-definition of luxury is understanding that luxury now means as people’s wealth continues to rise, the middle class will rise and further change the word’s definition. The Organization for Economic Co-operation and Development estimates that the size of the middle class globally will reach 3.2 billion by 2020, up from 1.8 billion in 2009.
   • There is a resentment against Restoration Hardware. The Guild felt that such outlets destroy the sense of design and luxury that they are trying to create through the use of luxury brands.
   • Kitchens and Baths are the most used rooms in the home, and people get excited about these rooms. “Small space is where you can go and win the client over.” Marcia Tucker said this and from our own experience with our clients, she’s right on the money.
   • Information and its flow has to be controlled. In discussing the support that they can get from manufacturers, the Guild said educate them on the products. Give them the stories they need for their clients. “Let us touch the products.” But it is the information itself – about design, about luxury, about what makes this luxury or not – that  must be controlled, if success will be reached. But, that’s the problem, isn’t it? How do you control information in the age of the internet? The answer is, you can’t. Like water will find the lowest level or electricity will seek the ground, information will seep into our systems, both technical and personal. We see images, we hear things. In fact, our senses are the great receptors of information that somehow get translated into terms like luxury.

For example, I was an English teacher. I leaned to read Shakespeare and the classics. Today, there is rarely any way you can tell people about how great Shakespeare is because the language has been leveled. Even in American literature, try reading Edgar Allan Poe. “During the whole of a dull, dark, and soundless day in the autumn of the year, when the clouds hung oppressively low in the heavens, I had been passing alone, on horseback, through a singularly dreary tract of country; and at length found myself, as the shades of the evening drew on, within view of the melancholy House of Usher.” Or put in today’s language, “I rode up to the House of Usher in the dark.” We lose appreciation, and therein lies, I believe, part of the “luxury” definition[3]: appreciation. I learned a long time ago that you can understand something without appreciating it, but you will never appreciate anything unless you understand it. Therefore, education is the thing to understand luxury, isn’t it?

There was a discussion about protecting the designer’s IP (intellectual property). The designer, in fact, becomes the brand, which is exactly the point. If the designer is the brand, the one who uses brands in a unique combination and aesthetic, how do you protect it? Their suggestion was through social media, and hashtagging themselves, branding to themselves. That makes sense, if you are on those social media channels, which was brought up in my own presentation). However, there is no way to enforce the information or IP. Just as you can’t contain the information or ideas, we can never control or protect all IP. “The thing that hath been, it is that which shall be; and that which is done, is that which shall be done; and there is no new thing under the sun.” That’s Ecclesiastes 1:9 and no truer words have been spoken.

In all, the session was terrific. It sparked discussions, made people think, and really helped to understand just how much disruption is going on in our world of the kitchen and bath. I’d like to sincerely thank Greg Rohl and his Designer Guild for the opportunity to sit in and listen. In fact, a few people stayed over for my own presentation, which made the perfect transition of using social media as a listening tool, not just a speaking tool. Please e-mail me at [email protected] with your comments.

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[1] Quality overtook exclusivity in the Albatross Global Solutions and Numberly’s fourth annual ‘The Journey of a Luxury Consumer’ report last year as the leading characteristic of luxury. But quality was always one of those intangible qualities that every product must have, further indicating the commoditization of the word “luxury” itself. In other words, quality was always imbedded in the definition of luxury and went without question; the reason it is emerging as not just a characteristic but a leading characteristic of “luxury” is because, perhaps, more and more products claiming to meet the definition of luxury that lacked it!

[2] Deloitte produced its fourth Global Powers of Luxury Goods report that examined the 100 largest luxury goods companies (sales of US$222) on a global basis based on their consolidated sales of luxury goods in FY2016. The report discussed key trends shaping the luxury market – trends reflected in the Rohl presentation discussion. One of the trends is how consumers, empowered by social networks and digital devices, are dictating increasingly when, where and how they engage with luxury brands. More important, perhaps, are the three trends they observed: 1) Premium and luxury goods companies are continuing to make deals in order to regain control of the design and distribution of existing brands; 2) The sector is slowly but surely embracing the new digital reality and the opportunities it presents. Luxury goods companies have acquired cutting-edge technology firms in an effort to turn digital into a competitive advantage; and 3) Private equity firms continue to invest in the sector, with the objective of unlocking value in premium and luxury brands and capturing future growth opportunities. That first trend is what the presentation was all about: control. But there were also others, including: new technologies that foster the growing convergence of content and commerce; increasingly fragmented demand, especially as younger shoppers embrace new, more affordable luxury brands; the continued rationalization of the luxury business as investors with proven capabilities continue to acquire or partner with family businesses to enhance their growth; and the desire for greater control throughout the value chain, particularly among well established brands in pursuit of a more fully-integrated go-to-market strategy. It is worth reading this report, as well as their Global Powers of Luxury Goods 2017: the new luxury consumer.

[3] In a piece of research for one of our clients last year, we interviewed members of this major association who played in that space called luxury. Most members didn’t offer too much detail on how they define luxury, but typically indicated it is a “higher-end” product that is unique and needs to be seen/shown in a showroom setting. In fact, one of the things we found out is that the term “changes” by region. According to Euromonitor International, one of the world’s leading independent providers of strategic market research, the luxury goods industry is actually entering a new phase, where visible consumption is “giving way to more meaningful luxury experiences.” Experiences are not visible. Indeed, the “feeling” of luxury is just that: intangible.