Is Kenya ready for the exclusive world of luxury?

In case you had missed this article posted in the Business Daily on 24 February 2014, we received consent from the author, Maryanne Njeri Maina to post her article here. She touches on issues of luxury, haute couture and what that really entails. Leading from the question as to whether Kenya is ready for that exclusive world of luxury. One of key phrases is “that an expensive item is not necessarily a luxury item.” This, we believe is an important element to grasp especially for upcoming fashion designers. There is more to luxury than setting a high price tag and is pegged, as Maryanne says, on craftsmanship.

Read more below on Maryanne Njeri Maina’s article and feel free to comment below.

Maryanne Njeri Maina is an MBA student in Luxury Brand Management at HEC School of Management in Paris – Twitter: @njerimaina.

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Last week’s ranking of Kenya’s richest was accompanied by a chapter on global luxury brands that have shown interest in establishing a local presence for a piece of the billionaires’ spending. A steady growth in the global economy in the past three decades has seen a huge explosion of the luxury universe, according to Boston Consulting Group. Annual sales of luxury products and services are expected to exceed 880 billion euros (Sh103) by 2020.

That means the global luxury market is expected to grow from 730 billion euros to 880 billion euros in the next six years, driven mainly by organic growth. The number of luxury consumers will increase from today’s 380 million to 440 million during the same period. It is estimated that about 10 million consumers enter the luxury market each year.

“The fact, however, is that an expensive item is not necessarily a luxury item.”

The logical question then is what constitutes luxury and which products qualify to be classified as luxurious. Luxury is a universe. But this universe has a few words that have been misused for several years in different markets. The list of misused words includes the interchangeability of luxury with haute couture.  The fact, however, is that an expensive item is not necessarily a luxury item.

The world of luxury was invented in Europe (France and Italy) and was initially mainly adopted by US consumers before it spread to other markets across the globe. This is the reason the world of luxury is dominated by French and Italian brands such as Louis Vuitton, Gucci, Hermes, Moet & Chandon, and many others.

Luxury expresses taste, creative identity, the intrinsic passion of a creator, and social distinction. Luxury has skill, mastery and craftsmanship. Through interaction with a luxury product consumers became a part of the story it tells. Luxury products preserve a heritage while portraying a culture. It involves some degree of hedonism.

One example of this is the Hermès silk scarves which retail for at least $400 per scarf. These scarves require 300 silk cocoons, and are labour-intensive. To produce the scarf for a certain collection can take up to two years. Another example is the timepiece; Rotonde de Cartier 42mm Panther with granulation by Maison Cartier (the House of Cartier). This timepiece was released in 2013 and is made using approximately 3,500 granules of 22k gold and the collection is limited to 20 timepieces. [Pictured below]

Rotonde de Cartier 42mm Panther with granulation by Maison Cartier

It is important to note that this industry is specific to certain economies and creates jobs for the artisans who are the purveyors of the craft. The Maasai artisans have used their craftsmanship in the Louis Vuitton 2012 Men’s Spring-Summer Collection. In Gabon, the Okoume wood has been used by the craftsmen to create handles for Louis Vuitton trunks from 150 years ago.

The high-pricing of the luxury products is therefore pegged on that craftsmanship. If the luxury company can’t get enough of a certain material that meets their standards, they discontinue it.

The universe of luxury has several characteristics. First, the retail prices are high, often fixed above the value of the product or service. Second, the products are offered with personalised services. It is all about an experience. Luxury makes the owner feel privileged. The bottom-line is that luxury sets the price and does not respond to demand.

For many luxury products, when sales grow beyond a certain level, production stops, as the business is also not about volumes. In fact, the normal industry practice is to raise prices to increase demand. Discounts are not part of the game. “Any products that are discounted 50 per cent in January are fashion brands, not luxury brands,” says Jean-Noel Kapferer, a professor of luxury strategies at HEC Paris. “You always raise your prices with time.”

Luxury products are restricted in supply, their distribution controlled.

Audemairs Piguet timepieces which are in limited supply retail at a price of one million euros (more than Sh115 million) but are known to be very successful. Buying a luxury product is not easy. For some markets such as Africa, one has to travel to Europe or possibly to Morocco or South Africa to get it. The idea is to limit and control supply to maintain an edge in the marketplace.

Even when one has the money and has travelled to location of sale, it is not easy to buy a luxury product. To buy a Ferrari car, for instance, can take up to two years of waiting. For a Kelly or Birkin bag by Maison Hermès, it is possible to wait for several months or more than a year.  To be sure a Kelly bag retails at more than $20,000 (Sh1.7 million). Again controlled distribution creates scarcity and demand in this universe.

Through these definitions, one can understand why several brands such as Zara or H&M are not luxury. These are businesses of volumes, characterised by the high demand, discounts and are sold in several stores globally. They are produced quickly, copying high and street fashion style. Their new collections are released in a span of two weeks globally. Therefore, this kind of consumer has the opportunity to buy at an affordable price and discard the item soon after purchasing it since more clothes will be produced in a short period of time.

This then brings us to the issue of haute couture. Haute couture is high-sewing, done by a dressmaker (couturier) using his or her hand to stitch. The father of haute couture was an Englishman in Paris known as Charles Fredrick Worthdress.

The term haute couture is regulated by the French law. Fashion houses in France are required to follow a strict set of rules to be allowed to use this term in their advertising. To earn the right to call itself a couture house and to use the term haute couture in advertising and any other way, members of the federation are required to follow certain rules. To produce haute couture requires a lot of time and skill.

For this kind of business, budget is not an issue for the client. The cost ranges from $20,000 to $100,000 and possibly higher than that. The French Chambre of Couture has approved various couturiers and designers.

The list of approved couturiers includes Azzedine Alaia, Givenchy, Christian Dior, Balmain, Balenciaga, John Galliano among others. Alaia is claimed to be one of the last couturiers in the world and has only one store in Paris. His clients range from Rihanna, Michelle Obama, Grace Jones to royalty. Distribution of its products is highly controlled.

As wealth increases in emerging markets, the luxury consumers from these countries are certainly going to increase. But not anything that comes with a foreign sounding name is luxury. The differences are stark and distinctions important.

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