The Road to Luxury

A thorough, comprehensive guide to the luxury goods industry for executives, entrepreneurs, and students interested to know about the luxury business

As key new luxury markets like Asia, Latin America and Africa continue to expand, The Road to Luxury: The Evolution, Markets and Strategies of Luxury Brand Management gives professionals interested in the industry a holistic understanding of luxury market dynamics around the world using stories, experiences, relevant data and statistics on current market trends. For investors, the book offers valuable insight on where the industry is headed. For industry insiders and executives, it presents valuable data with which to craft successful business strategies.

• The definitive insider's guide to the luxury sector by leading figures in the field
• Includes rigorous academic data, including information on the business attractiveness and appropriateness of various country markets
• Examines strategies and success factors of key players, and insight into the systems and operations, retail, distribution and e-commerce, emerging markets and emerging brands, as well as management styles

For professionals in the luxury industry, as well as those studying it or investing in it, The Road to Luxury presents a complete and information-packed resource covering virtually every aspect of this growing sector.

Acknowledgments xi

About the Authors xiii

Prologue: The Pink Bag 1

Chapter 1: Introduction: Definition and Crisis of Luxury 5

Issues of Defining Luxury 6

Crisis 8

The Luxury Industry 10

Reaction to the Crisis of Global Markets 12

Effect of Crisis on the Luxury Industry 18

Strategic Response to Crisis 20

Conclusion 25

Chapter 2: Evolution of the Global Luxury Market 29

Evolution 32

How Has It Changed? 38

Luxury Industry Trends 40

Conclusion 44

Chapter 3: Who’s Who of Luxury 47

The Consumers 48

The Actors 50

Conclusion 88

Chapter 4: Branding 89

Luxury Marketing: Highly Creative and Selective 92

Cobranding: Does It Enhance Branding or Selling? 107

Brand Extensions 109

Pricing 112

Storytelling: Culture, Event, and Communication 115

Digital Marketing 119

Discussion 129

Conclusion 130

Chapter 5: Brand Identity, Clients, and Ethos 133

Brand Identity 134

Ethos 140

Clients 144

Discussion 149

Conclusion 153

Chapter 6: Family Houses, Corporatization, and New Entrants 155

What is a Family Business? 158

Family Business during Crisis 177

Family Businesses of the Future: Corporatization 178

Changes during Transition from Family Business to Corporation 182

Entrepreneurs and New Entrants 186

Trends and Discussion 190

Conclusion 193

Chapter 7: Management Styles in the Luxury Industry 195

Path Dependency: Management Styles 197

Managing Paradoxes 202

Examples of Styles 210

Analysis 227

Conclusion 230

Chapter 8: Skills 235

Historical Craftsmanship 238

Entrepreneurial Designers 240

The Sales Team 243

The Professional Managers 244

Skills Required 245

Managing Talent 248

Conclusion 261

Chapter 9: Services: The Point of Sale 265

Issues in Point-of-Sale 268

The Customer Dimension 269

The Service Dimension 277

Conclusion 280

Chapter 10: Systems and Operations in the Luxury Business 285

The Challenge 286

Global Supply Chain 290

Customer Relationship Management 295

Information Technology 301

Conclusion 302

Chapter 11: Retail, Distribution, and E-Commerce 307

Channels of Distribution 309

Travel Retail and Duty-Free Stores 324

Strategic Decisions in Geographic Expansion 328

Online Distribution and E-Commerce 331

Conclusion 335

Chapter 12: Intellectual Property Rights and Counterfeiting 337

Counterfeiting: Issues for Luxury Brands 340

The Issue of Legality 344

Is It an Emerging Market Phenomenon? 346

Effect on a Brand 347

Examples of Responses to Counterfeiting 350

What to Do to Prevent Counterfeiting? 353

Gray Market 362

Conclusion 364

Chapter 13: Emerging Markets and Emerging Market Luxury Brands 367

Brazil 369

Russia 381

India 386

China 395

Strategic Actions 404

Conclusion 409

Chapter 14: The Future and Questions to Ponder 411

Research Design, Methodology, and Data Collection 421

Bibliography 427

Index 433

ASHOK SOM is Professor of Global Strategy in the Management Department at ESSEC Business School, Paris-Singapore. He is the founder of the India Research Center, was the Founding Associate Dean of the Global MBA program, and the founder of the Global Management Programs on Luxury and Retail Management (in partnership with Indian Institute of Management (IIM) Ahmedabad, India.

CHRISTIAN BLANCKAERT is the Chairman of Petit-Bateau. He is also the Senior Advisor of Eurazeo and a board member of Moncler and Champagne Piper-Heidseick. He has previously served as Executive Vice President of Hermes International from 1996 to 2009.

The Road to Luxury explores the fascinating history of luxury goods and explains the evolution of the burgeoning luxury marketplace, to offer a clear understanding of the dynamics of the luxury world. Citing current data and statistics on market trends, Ashok Som and Christian Blanckaert offer insight into the systems and operations, retail, distribution and e-commerce, emerging markets and emerging brands, as well as the different management styles throughout the luxury industry.

Luxury brands have been carefully crafted through meticulous strategies in marketing and brand building, making their mark in the consumer's subconscious. These brands are defined by: brand strength, differentiation, exclusivity, innovation, product craftsmanship and precision, premium pricing, and high quality. The Road to Luxury examines the key strategies and success factors that are employed by the leading organizations in the luxury market. The authors also reveal the winning and losing tactics of many well-known players in the luxury industry adopted during and post recession.

Filled with examples from household brands such as Louis Vuitton, Hermes, and Bottega Veneta to name a few, The Road to Luxury considers the skills and craftsmanship required to produce exquisite goods both in terms of economies of scale and economies of scope. To meet the needs of the ever expanding luxury marketplace it is necessary to find the special skill-sets required in craftsmen, who also possess an implicit understanding of the brand DNA; designers who understand and create innovations around the brand DNA; sales staff who translate the story of the brand to the diverse and growing consumer pool across different cultures, nations and continents; and managers who can run the business not as a small and medium sized enterprise but as a global corporation.

Nothing happens quickly in the luxury world and the authors show why building a brand identity is a painfully slow but rewarding process. To be successful in the luxury market, the meaning of the brand and what it stands for needs to be clarified both internally and externally- the codes need to be defined, the brand needs to know who it is, what it represents and why it exists.

The Road to Luxury presents a complete and informative resource that covers virtually every aspect of this growing sector.

Praise for THE ROAD TO LUXURY

"I enjoyed reading this 360-degree overview of the Luxury world and I think it could become a sort of a 'Bible' for everyone belonging to or studying to enter this challenging world. Besides providing a deep analysis on the evolution of this sector, such as the who's who, branding, retail, operations and emerging markets, I think everyone involved in this world will be able to find answers to every question which may arise or needs clarification. The reading is easily comprehensible and dotted with amusing stories like 'The pink bag' or the description of the perfect store manager....all this makes a wonderful 'package' full of passion without which anyone would not be able to enter or survive in the Luxury world."
—Giovanna Furlanetto, President, Furla

"The Road to Luxury is a brilliantly insightful map of global luxury. The book walks you through the evolution of modern luxury brands, markets and the talents that drive it. It also provides a view on future shifts with emerging markets and brands as well as some warning signs. The book is a must read for all luxury executives."
—Grace Nida, Managing Director, Global Luxury Sector, Korn Ferry

"This book gives a global view on the luxury industry. It has a comprehensive approach which makes it relevant to all audiences. The mix between academic research and real-world examples makes it a comprehensive tool and gives the reader a great amount of knowledge about the vibrant world of luxury. I encourage everyone to read it whether you are a student, a professional or just curious to learn about the exciting world of luxury."
—Patrick Chalhoub, Co-CEO, Chalhoub Group

"Building on their extensive academic practice and their professional knowledge of the industry, Ashok Som and Christian Blanckaert provide one of the most complete reviews of the luxury industry to date. The Road to Luxury is an insightful must-read for both young professionals looking for a detailed overview of the industry and experienced managers willing to refresh specific aspects of what makes the luxury industry unique."
—Francis Belin, Senior Vice President Asia Pacific, Swarovski Consumer Goods Business

"The Road to Luxury presents a thorough analysis of the luxury industry in a remarkably easy to read way. The authors evaluate the critical processes, skills and major players of luxury compared to those of other industries, skillfully identifying the key points that harness success. Professor Ashok Som has studied and worked with the major industry players and this clearly grants him a privileged and passionate perspective on the industry. The book is a good reference point for understanding the luxury industry's key drivers and making more informed decisions, which makes it as an ideal handbook for people who are currently working in the industry or who wish to understand what make this industry special."
—Stefano Rivera, CEO, Scabal

"I found this book beautifully illustrated, very pleasant to read, and full of great ideas for managing the LEONARD operations worldwide in the years to come. I will keep the book within reach so I can consult it regularly to find inspiration."
—Daniel Tribouillard, Chairman of the Board, LEONARD Fashion