With the Indian economy growing at a healthy 7.5 per cent, putting more disposable income into the pockets of the middle class, luxury brands have become are much more affordable and much less elitist.

‘Affordable luxury’ is the common trend across the world of luxury brands. So what is fuelling this phenomenon?

First, luxury brands the world over are increasingly focusing on purchase over elitism. A brand’s relevance in the market is primal, much ahead of its positioning.

Relevance in today’s world for consumer brands is measured through levels of customer engagement. In other words, if you are not being talked about on social media, you are on your way to oblivion in the market too. By and large, the propensity of customers to engage shoots up if they actually own the brand, as versus being just an aspirant. This new reality is making luxury brands eschew their elitist positioning.

Direct sell Next, manufacturers are now accessing consumers directly. In this online, connected and global world, brands are for the first time finding direct routes to the buyer, creating alternatives to the near monopoly of the wholesale/retail channel.

This allows brands and makers to pass on the cost advantage to consumers through lower pricing, and exposes the traditional wholesale/retail channel’s large share of the retail price. This trend is strong in India too, with the country’s online luxury market set to touch $35 billion by 2016, according to an Assocham study.

Third, pure discount channels have always existed for luxury goods, but they have traditionally been just an outlet for surplus stock or old season stock. However, with two major global economic downturns in the last 15 years, and an overall dimming of consumer confidence, discount channels have gained an identity of their own. Luxury brands now ‘create’ lower specification collections tailored for sale at discount channels, positioned at a much lower average suggested retail price compared to their regular high-street stores.

A tectonic shift Further, with the ownership of almost every large luxury brand in the world now moving from the super-rich families into the hands of private equity firms, there is a clear and significant change in business goals.

Private Equity firms aim to create scalable businesses that sell widely and deeply, focusing more on revenue than profitability. This leads to decisions to create categories and sub-brands, which are more accessibly priced while maintaining the same quality standards.

Finally, with manufacturing of luxury goods moving from Europe to low-cost locations in Asia and elsewhere, we now have a situation where manufacturers in these places have massively increased their quality capabilities.

Due to this consolidation, the difference in core product quality between the two is pretty much indiscernible today. Customers are increasingly aware of this narrowed gap in quality, which impacts their willingness to pay a heavy premium for just a brand logo.

This tectonic shift in the luxury brands landscape has been met with glee by consumers, and with caution by others — mostly the ultra-luxe retailers and brands. For the former, it offers access to a lifestyle and products which were out of reach earlier. For the latter, it represents a double-edged sword that can bring massive sales growth if managed well, but brand dilution if not.

The writer is the COO of the Leather Accessories division of the Cross Brand

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