Luxury brand executives world over recognize the potentially huge rewards of market success in primary emerging markets (BRICS), but are often challenged to deliver positive returns. To use a metaphor, many international luxury brands feel that they were swimming against the tide. Although we accept that each luxury brand and each emerging market context presents its own idiosyncrasies, we provide an overview of 5 drivers of change that is set to transform the luxury landscape in emerging markets. This sets a realistic context of growth opportunities in emerging markets, and also raises the question if current and future luxury brand strategies are able to deliver a competitive advantage in some of the world's most dynamic markets.
Democratic Luxury
Democratization of luxury is no longer a western phenomenon. The game changer that has given rise to a global consumer society has undoubtedly been the rapid expansion of the middle classes. The aspiring classes in emerging markets are no longer at a financial distance from luxury via affordable luxury brands, luxury branded accessories or the willingness to trade-up to acquire a 'must-have' luxury item. The desire for luxury brands has also extended its reach to bring into its fold new segments such as the female consumer in urban India and new geographies to include smaller cities and towns that were until recently conspicuously absent from the luxury map. Likewise, it has never been easier for consumers to access the lure of luxury brands, whether this is reflected in the growth of luxury retail, including e-commerce, or the live-streaming of international fashion shows. The democratization of luxury in emerging markets has strategic implications for luxury brand strategies – how to strike the balance between accessibility and exclusivity.
Myriad Segments
Luxury can mean different things to different people. This theory holds true in emerging markets as well. The commonly held belief that social and economic status is a key driver of luxury consumption in emerging markets is too simplistic an approach to understand consumer behavior. The luxury consumer in emerging markets is not homogeneous, and myriad segments are more likely to be the norm. First-time luxury consumers may indeed be attracted by the aspirational status of the logo, but logo fatigue, as evident in China, suggests that discerning consumers are in fact driven less by extrinsic, and more by intrinsic values. Status still plays an important role, but is expressed less conspicuously. The growing popularity of Burgundy wines in China is testimony to a new generation of increasingly sophisticated luxury consumers whose status is characterised by refinement and knowledge. Brands that appeal to a target that is too broad are likely to fail. Luxury brands in emerging markets need to, therefore, design market strategies that are crafted for the defined target segment.
Digital Luxury
Luxury brands generally accept that digital strategies need to be at the forefront of global marketing strategies. However, many international luxury brands are failing to capitalize on developing compelling content specifically for emerging markets. Evidence suggests that consumers in emerging markets research luxury products online before making a purchase, more than the consumers in developed markets. However, local social media platforms, such as VK.com in Russia, remain ignored by many international luxury brands. It is also social media engagement amongst these younger populations that is disrupting traditional communication channels. It is no coincidence that the Wall Street Journal headlined Brazil as 'The Social Media Capital of the Universe'. It is within this context that word of mouth (positive or negative) is an important predictor of attitudes and behavior. Moreover, e-commerce is set to revolutionise the digital landscape as an increasing share of luxury shoppers in emerging markets are making more purchases via their smartphones and tablets. International luxury brands need to question if their local online retail strategy is not only connecting, but immersing the luxury consumer.
Cultural Meanings
International luxury brand managers are often determined to present a consistent global image across borders. However, consumers in emerging markets are also searching for local cultural meanings that they can relate to at a personal level. In India, this might be about associating with royal patronage that is embedded in how luxury is truly appreciated. Luxury brands in emerging markets need to, therefore, identify culturally relevant meanings that can be compellingly integrated in the brand offering. Innovation is at times key to achieving market success in local markets. For example, L’Oréal established a research and innovation centre in India (other locations include Europe, the U.S., China, Japan and Brazil) with the objective to develop beauty products that are coherent with Indian specificities. Local products that also celebrate the brand's heritage or story, such as the launch of two Indian made sparkling wines, Chandon Brut and Chandon Brut Rosé, is helping to reshape future luxury ecosystem models.
Local competition
Many international luxury brands entered emerging markets with a belief that their brand aura will prove too strong for local competitors. In many cases, these brands have indeed succeeded building a strong local following. It is, however, the continual rise of local luxury brands whether Brazilian, Russian, Chinese, Indian or African, which are transforming the competitive brand landscape. Although a growing sense of national identity and pride is helping to support these luxury brands, it is also the ability for local brands to compete on quality, craftsmanship and creativity that is firing up the market. A quick glance, for example, through Vogue India shows a gamut of Indian fashion designers and jewelers who specialize in bridal wear and jewellery. If international luxury brands are to compete versus local competitors, they must not only understand local buyer behavior, but also offer competitive attractive products and services. Competitive pressures should, however, be welcomed as a positive factor to foster creativity and innovation.
There is certainly no blueprint for market success in emerging markets. However, luxury brands will need to accept that emerging markets represent a very different market environment compared to developed markets. As elsewhere, international luxury brands will need to be flexible to modify existing strategies for the changing and sometimes unpredictable local market conditions. Despite challenges such as economic instability in Russia and a shift in gift-giving practices in China, we remain optimistic that emerging markets will offer long-term growth opportunities. Are you ready to seize this prize?
Glyn Atwal is Associate Professor of Marketing at the Burgundy School of Business, an international Graduate School of the French network of Grandes Ecoles. His teaching, research, and consultancy expertise focuses on marketing and strategy in emerging markets. He has presented at leading universities worldwide, including Harvard Business School, and is co-editor of Luxury Brands in Emerging Markets (Palgrave Macmillan).
Douglas Bryson is Professor (Titulaire 1) at the ESC Rennes School of Business, France. His recent research is a mosaic of applied social psychology and consumer behaviour topics. Douglas is co-editor together with Glyn of Luxury Brands in Emerging Markets (Palgrave Macmillan)
