Jan 31, 2009

Columnists - Vir Sanghvi;Let's celebrate quality

Few terms are as misused—and therefore, as meaningless—as luxury. Ask anybody in the so-called luxury business for a definition of luxury and you will see them grope for answers. Each year, at the Hindustan Times (HT) Luxury Conference, I ask executives of so-called luxury brands what luxury means to them and the answers are so vague and confusing that the term seems nearly devoid of all meaning these days.
And yet, on the other hand, it is not. Everywhere you go, they talk about luxury. And if the term was so meaningless, why do we have so many conferences devoted to it? Why do so many magazines claim to cater to the “luxury” segment? And why, in this century more than any other, is the word used in so many different contexts?
The short answer to all of those questions is that luxury does have a specific meaning. But it is a commercial meaning and one that luxury marketers are reluctant to share with the general public.

In business terms, luxury means “brand value”. Let’s take a specific example. Make two identical handbags at a cost of say, $50 (around Rs2,500) each. Given how retail mark-ups work, you should be able to sell them in the shops at say, $200 each

Now, put a famous designer label on one and leave the other unbranded. The unbranded bag will still find buyers at $200 but the designer bag will fly off the shelves at $600 (most top designer labels have mark-ups that ensure that a bag’s cost is around one-twelfth or one-fifteenth of the selling price).
In the commercial world, that’s called luxury: when you can flog something for a price vastly in excess of its manufacturing cost only because it has been branded.
You could argue that this is a definition of branding, not of luxury, but the truth is that luxury has simply become a matter of branding. At the very first HT Luxury Conference, I chaired a session with the head of one of the world’s leading “luxury” conglomerates. One of his labels had recently lost a charismatic designer, a man whose creative vision had been credited with turning the company around.
I asked the conglomerate boss if he missed that creative fire in the company. Why was it, I asked, that relatively few people had heard of the designer’s successors or had been given a chance to understand their philosophies of design. The executive—who had previously worked in the ice-cream business with great distinction—was clear. It was about the label, not the designer or his or her creative vision. It was the brand that had to ensure the premium. So forget all that stuff about quality, design, passion etc. Modern luxury was about the premium.

This philosophy has emerged out of the global prosperity of the last decade. Suddenly, people had more money than ever before. They wanted to trade up in every area of their lives. Some shifts were easy; if you previously travelled by train, you now flew; if you flew economy, you now flew club; if you had a small flat, you moved to a bigger one; if you lived in Dadar, you moved to Malabar Hill, etc.
But others were more complicated. If you wore glasses, then how were you to trade up? Well, you bought more expensive frames. They might not actually look much better or cost much more to make but if they had a designer label attached to them, then they were premium products (ironically, no designer makes his own spectacle range: they all license their names to industrial conglomerates which turn out glasses by the millions and then slap designer names on them).
Take the most notorious instance of the boom in bogus luxury, the designer handbag. It has now reached a stage where it is almost unthinkable for a middle class (let alone upper middle class) woman in much of the world to carry a bag that does not have a designer label of some sort. At the top end, bags are hideously overpriced (Rs3 lakh or more is not uncommon) but even entry-level bags sell at a huge mark-up.
What is luxurious about these bags? They are made in vast quantities (hundreds of thousands) in factories all over the world. They are easy to buy (unless you are in Tokyo where Louis Vuitton makes hapless customers line up to enter their shops—but then, the Japanese love that!) and sold in hundreds of cities.
Yet, when people talk about the luxury market, bags are always an important component. Estimates of how the luxury business is faring usually make reference to Louis Vuitton. And when we look at the profits of the luxury fashion houses, we find that the largest contributor to the bottom line is the accessory (i.e. handbags) segment.
If the global recession continues—and it’s a terrible thing to say but I think it will—then the mass-market kind of luxury where insecure people are required to pay vast premiums for labels is almost certain to shrink. This is not to say that somebody who carries a Prada bag will suddenly go downmarket, only that somebody who used to buy three new bags a year may now be content with only one in the new circumstances.
Figures suggest that retail sales are down this autumn and most luxury houses are scaling their profit forecasts down. The years of unbridled growth are clearly over.
So, is this the end of the luxury boom? Well, actually no. I think that the downturn offers an opportunity to pause and to reassess our attitudes to luxury. Branded luxury has become a gigantic confidence trick. So it’s time to move away from it and look for genuine luxury.
How you define genuine luxury depends on you. But here’s my definition. Genuine luxury must be about craftsmanship, about quality and about personal choice. Why wear Calvin Klein’s name on your bum when you can go out and find a pair of jeans that really flatters your figure, even if nobody has heard of the manufacturer? Why pay Rs3 lakh for a mass-produced handbag when you can get a traditional craftsman to make you a nice piece of jewellery for less than that? And the jewellery is sustainable luxury. It won’t be overtaken next year by a new trend.

Once you move away from the tyranny of labels, you find that you actually have much more money to spend. Almost everything you buy will cost one-third its designer equivalent. The money you save can now be spent on genuine luxury. I’ve written before about how appalled I am by Indians who buy factory-made men’s shoes for Rs60,000 and more when it is possible to get a traditional cobbler to hand stitch a bespoke pair of shoes for you for Rs4,000.
In my definition of luxury—because personal choice is such an important component—anything that has become the rage or is currently at the height of fashion is automatically excluded. To wear the same clothes as everybody else because you are told they’re fashionable is neither luxury nor a style statement. The only statement it does make is that you have no style of your own.
I always think that genuine luxury hotels are a good example of how luxury works. In the hotel business, the super deluxe hotels—the Four Seasons, the Mandarin Orientals, the Ritz Carltons, etc.—do not necessarily look very different, at least on the outside, from the Hyatts and the Sheratons. But the luxury is reflected in the service, in the sense of being pampered, in the attention to detail, in the planning of the room and in the quality of every single element and ingredient used in the hotel.
Kurt Wachtveitl, the legendary general manager of Bangkok’s Oriental hotel always says that genuine luxury is about dreams and possibilities. When he sells the Oriental, he doesn’t just sell the location or the history. He sells the dream of a place that is so luxurious that all things are possible and nothing is ever considered impossible.
How different is that from the mad rush to buy the latest car or the newest It bag? True luxury must involve people, it must flow from a craftsman’s talents, from an artist’s imagination, from a chef’s passion or from a hotelier’s vision. These days, alas, luxury is about spending large amounts of money to promote industrial products, about hyping the new collections in fashion magazines that survive on advertising and about creating a bogus snob value.
If the recession helps draw that era to a close, I will celebrate by dancing in the streets. Let’s tell the marketers and the conglomerates where to get off. Let’s celebrate quality, instead. Because that’s real luxury. And it is sustainable.

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