25
Aug
2013

Is affordable luxury now the new black?

Twelve months ago, ‘affordable luxury’ was a designation that some brands used with pride, and others derided as a poor mans imitation of the real thing. The term of course was created to allow what were, and still are in the main premium brands to appeal to wannabe luxury consumers, and to start eating into the business of the genuine luxury brands. In China, we see many brands that at best are high-premium slotting themselves into the luxury market, and others such as designer brands, finding the ‘affordable luxury’ label more sociably acceptable and understandable in the eyes of the Chinese consumer.

Roll forward a year, and we see the affordable luxury sector expanding rapidly as Chinese consumers cut back on spending whilst still wanting the social kudos of owning luxury products. This sector that has filled a void between premium and luxury and has opened up a whole world of possibilities for brands that want to enter China as high up the value chain as they can climb, whilst allowing the true luxury brands to extend downwards and introduce products at price points, that 18 months ago would have been sniffed at.

Lets not forget the consumer, who now has justification to spend less money on luxury items, and still has a wide range of choices that include international brands new to China and some Chinese brands that now have a potential stepping-stone into the luxury sector. The overall effect at first sight appears at least, to be a win-win-win situation, but will affordable luxury become the new black?

We already see that spending on the top products within a number of luxury categories has decreased, whilst the middle market remains buoyant. Will the middle class and upper middle-class consumers buy into affordable luxury as we might expect, and will we see an explosion in this sector to match or exceed that of luxury before it? The signs are that this will be the case, certainly from where I sit.

The concept of affordable luxury appears to me to be one that will be adopted in the developing markets of China, India and Brazil, where the new generations want to reward themselves as frequently as they can afford to adapting ‘luxury’ to suit their needs. Whether it genuinely becomes the new black may still become a stretch.

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