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Comment: the challenges for global luxury retail by Gregor Jackson

Luxury brands have gone through something of a transformation over the past decade. Like every other retailer they suffered during the recession and had to find a way to diversify their business models to survive, at a time when there has also been massive change in the international retail market.

In 2001 the acronym BRICs (Brazil, Russia, India and China) was coined to define emerging economies. This came at important time; the growth of the Internet has been a pivotal factor in the global growth of brands.

Many brands have sought the wide-ranging opportunities that come from launching in new markets, often through transactional websites or “soft launches” - collaborating with local retail groups. Both routes pose enormous challenges from an operational point of view. Taxes, set up costs, local knowledge and deliveries must be managed, as well as the adaptation of business models and traditional ways of working.

For luxury brands, the biggest challenges include remaining exclusive and aspirational while also being in every corner of the world; retaining or growing the strength of their brand equity while also being adaptable and, personal to local markets, without diluting brand value or heritage.

A handful of luxury brands have successfully adopted this business model; British brand Burberry has been hugely successful in China, playing on its heritage and core brand values to inspire a completely different audience, whilst still remaining aspirational and exclusive on its home turf. Louis Vuitton, Chanel, Hermes, Gucci, and Rolex have also been successful in Asia, as well as the Middle East, attracting an international elite who still looks to European brands as the epitome of chic and luxury style.

Another opportunity luxury brands are adopting to cater for their international clientele is the ever-growing trend in travel retail. Fortnum & Mason is an interesting example of this, having opened its first store outside Piccadilly in its 307 year history - in St Pancras International in 2013. In March this year the retailer launched its first overseas standalone store, in Dubai. Both developments have captured the imagination of a new customer base.

Looking to the future of international luxury retail, brands such as Tom Ford and Alexander McQueen have been hugely successful in launching (Tom Ford) and evolving (Alexander McQueen) in international markets.

Tom Ford has established both its cosmetics, which gain entry-level access to the brand, as well as ultra-exclusive couture ranges. Alexander McQueen has adapted rapidly since the death of its founder in 2010, to being a very proud British export. Exposure via the Duchess of Cambridge (a huge advocate of British designers) has attracted the attention of the vast US market.

Looking ahead, one of the fastest growing luxury hotspot is Qatar, where the number of millionaires in the country is set to grow by 7% to reach 63,000 in 2014. The next challenge for luxury brands is to remain exclusive whilst launching across the globe, and diversifying their business models to attract a burgeoning audience.

 

Gregor Jackson is founder of gpstudio, a design consultancy specialising in brand strategy, retail architecture, interior, graphic and lighting design.