Stevens, PA October 28, 2005 — What happens to the top of the retail market when the lower rungs on the consumer retailing ladder start to move up? That’s the question I have been pondering ever since I got my September issue of Vogue and was stunned by the eight-page fashion spread featuring Wal-Mart fashions — an oxymoron if ever there was one. What was even more surprising than the fact that Wal-Mart took out that much ad space in the premium fashion magazine was that some of the outfits featured didn’t look half bad.

Wal-Mart’s move comes right after Target bought up all the available ad space in The New Yorker magazine to showcase their fashion and lifestyle merchandise to the literati and JC Penney moved into a more fashionable up market with their licensed Nicole Miller line. Other mid-market brands that are taking a stronger position in the luxury sector include Banana Republic with their more pricey and limited distribution Café Society collection and J. Crew is breaking price barriers with limited edition $600 crocodile shoes and an $800 hand-beaded skirt. How should luxury companies react when the gap between the upper-tier of the market where they reside and everybody else starts to shrink?

Clearly if the bottom is moving up, then the marketers at the top of the market must also move upwards to maintain a reach between themselves and everybody else. But that is getting harder and harder to do since it requires that luxury marketers must move even faster, offering fashions and designs even more desirable, materials and detailing even more spectacular and shopping experiences even more luxurious. All and all it is easier for the lower-tier marketers to copy-cat the upper crust than it will be for the luxury marketers to find a new direction to move their brands even more upscale.

One obvious strategy — making their designs even more expensive — should be approached with caution. While there are people who will pay full list price, the majority of luxury consumers today are extremely value conscious. They will pay, but they want to know that the price/value equation is stacked in their favor. In the new luxury market price isn’t about the money, but the meaning. In order to raise prices, luxury marketers need to add more meaning, more value, more luxuriousness in a tangible way that delivers enhanced value to the consumers. That means they can’t just up the price, but they have to align their products and brand proposition with the consumer’s value system. In order to do that they need a deep understanding of the consumer and the value equations that controls their buying in the luxury marketplace.

Thus we see the concept of luxflation — the need to continually inflate a brand’s luxury value to keep the luxury edge — at work. Luxury is in perpetual motion and what was extraordinary yesterday becomes ordinary today. There is an inevitable downward gravitational pull of all luxury concepts toward the masses, so Wal-Mart showcases their affordable fashions in Vogue and J. Crew reinterprets designer shoes for their middle-income shoppers. Luxury marketers must fight that downward gravitational pull by continually enhancing or inflating the luxury quotient in their brands, their products, their shopping experiences. With the new luxury trends emerging at the mass market level, luxury marketers must work even harder, faster and more aggressively today than ever before to keep that luxury edge.

Latest Issue of Luxury Business Just Published

Also in the October/November issue of Luxury Business are these stories:

• The Market for Home Luxuries: The Challenges and the New Opportunities
  
• Casual Luxury: The Emerging Lifestyle Trend in Luxury Home
  
• House & Garden magazine is most widely read among luxury consumers
  
• Luxury Gifting Projections Christmas 2005

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