26
Feb
2013

Is 2013 the year for ‘affordable luxury’ brands?

It has been interesting to speak with executives of luxury brands and hear them reported in the media on the subject of their plans and expectations for 2013. The big names have come out in many cases to say that they will not open more stores this year but will redevelop the existing ones. The logic for doing this is clear; it’s about consolidation and delivering a better experience for consumers, and after a challenging 2012 its hardly surprising.

This has raised a question in my mind as to whether this change of strategy and the tipping point of the Chinese luxury sector I spoke of in a previous blog http://www.fdkginsight.com/the-tipping-point-of-the-chinese-luxury-market/  will create a more attractive window of opportunity for affordable luxury brands? The reasons are a few, but would include consumer attitudes being more cautious in terms of spending on luxury, consumer knowledge having become greater in the past 12 months, the increased availability of retail space if some of the top brands hold back on expansion, and the possibility that the cost of space, or at least the terms of a lease might become more attractive as a result.

For many of the high quality affordable luxury brands, the market conditions and the caution of some of the more established brands may be a chance to either recover ground that was lost through a late arrival into China or to develop the brand recognition and acceptance amongst consumers. There is also the possibility that consumers wanting to purchase in China see these brands as almost as good in terms of quality as some of their considerably more expensive counterparts, or look at the brand in Europe and decide for similar reasons that for the price of one brand they could buy two products from the other.

Many middle market luxury brands across all sectors suffered in 2012 because they were not able to demonstrate value for money to a more sensitive consumer group. These brands are those that created an appearance of being of the top luxury category but unfortunately for them, the travelling Chinese learned that they were not, and realized that they had lower cost yet similar quality choices at their fingertips. Brands positioning themselves as affordable performed well

The tipping point the sector went through in late 2012 has and will continue to make many brands revisit their consumer engagement strategies and expansion plans for 2013 onwards, and play to the advantage of affordable luxury brands whether they have any level of presence in China already. It also has the potential to create an opportunity for those affordable luxury brands with zero presence in China to tell their stories and build awareness. The door will not close for a while, but they really ought to take the chance to go through it as soon as they can.

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