Fashion invading new industries:
Defining the fashion luxury business model influence and performance as a leader for new contemporary consumer adaptations.
Miriam Daniela Aguilar Anaya BA Fashion marketing and communication, Level 6, 2021-2022 6FAMK001C Major Project CWK2 José Guerrero Word Count: 8,682 words
Figure 1: Mydomaine, 2021 Figure 2: The Birkin boy, 2018 Figure 3: Maison jasmin, 2015 Figure 4: Natalie Chapman, 2022
Abstract
The purpose of this dissertation was to understand the critical characteristics of the fashion luxury business model and how it acts as a leader for other industries choosing to enter the luxury market but also to study the consequential phenomenon of the new unconventional luxury along with the shifts into the consumer’s behaviors and perceptions of luxury.
The topic of other industries adopting the fashion luxury business model is of current matter. Much published recent literature has tended to focus on the exploration of the traditional factors of the business model with little acknowledgment of the new adoptions and factors inside the unconventional luxury. Through the literature review of this thesis, the most relevant authors inside the management field were explored. The exploration of these works allowed the understanding of the critical factors other industries need in order to adopt the fashion luxury business model, such as experience-focused conceptualizations, reshaping the identity of their products, and institutionalism innovations as consumers have shifted into an identity-driven consumerism. The methods undertaken in order to answer the research objectives of this dissertation were an intrusive analysis of various study cases of brands that adopted the fashion luxury business model, such as Nespresso, Nouvelle-Aquitaine’s co-
gnac, Larry jewelry, and Alpha. Followed by the business model’s key components, roles, and future challenges. The results from the preceding methods noted that luxury is not about provenance anymore but about the consumer’s desires, making the hedonistic assets of a brand/product extra critical. Furthermore, studies about the unconventional luxury allowed the acknowledgment that scarcity is not one of the main characteristics of the fashion luxury business model anymore, but about the power of icons. It is finally concluded that the fashion luxury business model is an eye-catching model for other industries in order to broaden their companies; therefore, their profit margins resulting in the rise of the new unconventional luxury made for the masses closing into the concept of “luxury democratization”.
Acknowledgements The author would like to acknowledge her tutor, Professor José Guerrero, for his support and valuable insights given during the process of this dissertation.
At the same time she is grateful for the support and motivation given from her parents and her dog Bruno.
Figure 5: The upper shelf, 2022
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Figure 6: Lusting Upon, 2021
Table of contents
Introduction 09
Motivation 11 Aim 11 Objectives and research questions 12 Research map 14
Literature review 16 Key findings 36
Methodology 38 Data collection 42 Results 58
Discussion, conclusion and limitations 60 Bibliography 64 Appendix 71 07
Introd
duction
Figure 7: Dinner at a luxury restaurant, Be fancy fit, 2021 Figure 8: luxury home goods, Pinterest, 2020 Figure 9: Wellness products, Nordic Nest, 2022
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Luxury products have an alluring and durable worldwide appeal that helps brands generate compelling functionality and essential aspects such as experiential and symbolic appeals (Goor et al., 2020). It has become increasingly difficult for other industries to ignore the various successes that the fashion luxury business model has created, making it an appealing example of how companies can increase their competitiveness and grow their business with long-term interests. Based on a report by Bain & co, 2021, the global luxury market is forecasted to grow at an annual compound rate of 10% from 2020 to 2025 or from $217 Billion to $340-370 Billion. While provenance can be a crucial pillar of the fashion luxury business model, this does not mean that the market has to be local or limited (Kapferer, 2012). “international ambition” has been promoted the last years thanks to the new technologies, encouraging other industries to broaden their businesses into the luxury concept. Furthermore, this paper introduces the influence of the fashion luxury business model on other industries and the factors that led to its success, but also the shifts in consumer adaptations and a new concept created as a consequence of this phenomenon called the new unconventional luxury.
Motivation This dissertation on the topic of industries imitating fashion business management processes is of great interest for the student derived from a personal interest in management developed through her course. The concept shaped from the student’s studies and personal observation fused into this topic from curiosity transformed into determination to contribute to the industry about the new findings and a view of the future for various industries.
Aim This study aims to understand and analyze the evolution of various industries approaching fashion business behaviors by analyzing management sources. For this, it is essential to decode the parts and processes that fashion has managed for years to lead to their success and, by any given, been imitated by other industries reconsidering future expectations.
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1- Understanding the key characteristics of the fashion luxury business model and why it acts as a leader for other industries. 1. What are the fundamental characteristics of the fashion business model that have made successful the fashion industry? 1.1 How and why is the fashion industry performing as a leader for other industries? 1.2 Is institutionalization a tool for brand differentiation and what other strategies convey them?
2- Analyzing companies marketing investments in forecasting and new consumer value perceptions as a fashion business model adoption. 2. Which terms in the fashion business model are making customers shift in terms of culture, behavior and lifestyles ? 2.1 What is the new consumer’s perception of value and trustworthiness by adopting the fashion business model?
3- Analyzing the conversion from traditional luxury towards the unconventional luxury made for the masses as an optimistic scenario for other industries to perform these practices. 3. What is the evolution of the new unconventional luxury created by the imitation of the fashion luxury business model?
Figure 10: Authentic vintage Cesca chair, Secem, 2021
Objectives and research questions 13
Research map
Figure 11: Luxurious dinner, Pinterest, 2017
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Figure 12: Luxury beauty products, Beauty affairs, 2020
Literature review
1st part: Fashion luxury business model characteristics and adaptations that lead to its success 1. Fundamental characteristics of the fashion luxury business model and its successes. Luxury products therefore brands have an intrinsic worldwide appeal (Goor et al., 2020) generating significant, functional, experiential and symbolic consumer assets provoking a desire for consumers across the world (Berthon et al., 2009). This market is expected to grow at an annual compound rate of 10% between 2020 and 2025 led by the international growth of the United States of America, China and Japan which account currently the 46% of the global luxury sales (Statista 2021) has showcased an international ambition and attained the eye from other industries as luxury is not about provenance anymore (Kapferer, 2012) but by the individual desires (Vigneron and Johnson, 2004), This phenomenon and other industries emulating the fashion luxury industry have accelerated the new unconventional fashion luxury business model (FLBM) corroborating the influence of it. It is crucial to first acknowledge that a business model (BM) indicates how
companies gain profit and deliver their value towards their consumers as a mechanism for generation purposes (Guercini et al., 2015). According to Teece, 2010 the BM “cumulates for consumer needs and the ability to pay, defines the aspect by which enterprises respond to and deliver value to their stakeholders, serving as an enticing tool to fabricate consumers that pay for value and convert those investments into profit through proper design and operation elements based on the value chain”, aforesaid, the are three components of a luxury business model as follows: a value proposition, the value creation additional to the delivery system and the value capture system (Richardson, 2008); acknowledging the traditional FLBM in the sense that was coming from product-focused receiving conceptualization, the contemporary unconventional FLBM switches into inquiring an experiential alongside a scarcity approach (Bryson et al., 2013), creating itself an impassable amplitude between an individual towards others, part of this elevation phenomenon comes from the traditional FLBM intangible added value made from “the griffe” as an establishment with a his-
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torical heritage for European based companies and narrative-based commonly for American companies led by an author/creator-driven authority as a unique, affection expressed brand exclusivity (Kapferer, 2012). This intangible uniqueness has been emulated into the fashion luxury business model (FLBM) as the evolution between demand and supply which has expanded in the novel decades ceasing and evolving in what is called “luxury democratization” (Dubois and Laurent, 1996) that consists in the leadership of business models adoptions based in revenue growth through the production and sale of licensed products or accessories which have minor prices for iconic/important goods from the brand image of this luxury businesses. This evolution holds varied perceptions from less exclusivity into exaggerated limitations forms (Vigneron and Johnson, 2004), serving as “maximum exclusiveness,” despite the absence of the definition of this concept in theoretical business studies the meaning of this concept acts as a comparison between luxury at “affordable prices” being a small accessory of the brand in contrast to a crafted handbag priced towards the $300,000 delivering exclusivity and uniqueness at its best. The FLBM has been emulated and
praised by other industries for their creation of intangible sources that serve them as their own core value. Kapferer (2005) calls this phenomenon the “magic” composed of six factors as follows: The creator’s charismatic authority towards the public; networks within transgressive artists; rituals, such as fashion shows, events, etc.; theatricalization of retail as a transmitter of communication between the brand and the consumer; brand heritage and history (frequently for European brands); production of excess and a sumptuous communication creating a surreal word towards the viewer. Atkinson et al., 2021 opposes to Kapferer’s idea and indicates that in the new contemporary unconventional luxury, the new factors are composed by attention capital, inconspicuous consumption, intrinsic experiential value, life enrichment, self-directed pleasure and sustainability. It is evident that these unique factors have influenced the various specific successes of the FLBM inside the fashion industry.
Figure 13: Green lizard birkin bag, Thaïs Gerald, 2022 Figure 14: Levis inspired editorial, Pinterest, 2022
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2. The fashion industry as a leader for other industries. Vickers and Renard (2003) affirm that luxury opposed to non-luxury goods re-differentiated by functional, experiential, and interactional symbolic dimensions, can be related to products/ brands that are consisting with the “new luxury”, which is a reproduction of the FLBM where, as mentioned before, still affordable products with premium prices can differentiate themselves aspirating on higher levels of quality and various characteristics. As an example of this, the emergent beer market is evolving into new branches of “luxurious beers” basing their added value in its craftsmanship, heritage, and identity (Williams et al. 2018) however this phenomenon is further conspicuous in already developed markets, assuming they benefit and practice the positive usage of the six key characteristics of luxury (Dubois et al., 2001) showcased as follows: luxury products ability to perceive high levels of expertise; perceived “heritage” or storytelling enhancing their authenticity; aesthetics committing the previous attributes explained; pricing appeal as the perception of quality and luxury
perception that is assured by it mostly referred as the “halo effect” (Berveland, 2005), limited supplies meaning scarcity and the superfluous hedonistic assets of the brand/product considered as an experience driven by intentions. This form of innovative new consumption method was primarily approved by the fashion industry as an active method of consumption that leads to positive economic activities by increasing the creative process through which consumers and companies create an enforced profitable identity (Christensen et al. 2005). On the contrary, Ogilvy (1990) states that, consumers have become unreliable as “their semiotic field is a mix between messages, conflicting meanings and inconsistent impulses” reshaping the identity of the products which have become with lives of their own by creating their own individual experiences as an active form of relationship transforming the FLBM into an economy of icons (Braudrillard, 1990). This economy has enhanced the experience-based unconventional luxury or “new luxury” into a consumer further institutional driven economy (see chapter no.3) shifting from mass-production focus into an immersion of an authentic experience enhancing the individual in an intimate measure.
Figure 15: Ultra premium beer served in stemless champagne bottles, Guinness, 2014
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“Authentic experiences as the new core added value for companies inside the FLBM”
Gilmore and pine, 2002 states that it is recognizable that the culture of this innovative experience designs will become and is becoming a substantial component of this companies imitating the luxury market that goes beyond product excellence but as a key component to the creation of brand value. The FLBM emulates as a leader by being the architect of categories as experiential perspective, institutionalization and conspicuousness (Roy et al., 2022) while being the distinctive commander of status which creates an optimal direction for other industries to adopt this category.
Figure 16: Darren Muir caviar, Pinterest, 2018 Figure 17: Brooklyn-based design studio, Architectural Digest, 2021
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Figure 18: Personalized skincare, Proven Skincare, 2021
3. Institutionalization as the new key management tool. It is known that companies adopt innovations in their own business models in order to achieve profitable social gains adapting them to their own rational beliefs, norms and future expectations that align to their demand for management solutions, institutionalization is the new fundamental component that encapsulates the companies’s own core value which has been updated and adapted by the FLBM being a compelling practice for other industries as it is been before displayed its successfulness, Aksom, 2020 affirms that this new institutionalism is due by synthesizing and focusing on their “own” cultural construction as an organizational decision-making composition for present and futuristic approaches involving new generations, although there is a critical opposite attitude as consumers serving as organizations/ niches are also reflecting on their own institution’s behaviors and rationality (Meyer, 1977) creating companies to battle their business models between being a brand centered institution or a consumer approached institution in order to create an inertial resistance towards creating an statement based on the target or their own beliefs and rely on their influences based on their
notion of global social value. Considering the updated omni-personal approach where the customer relationship acts as the leader of what is relevant and what is not according to Le Xuan, 2019, this customization meets the consumer requirements for hyper-relevancy by personalizing and customizing products made by costumer requirements (see chapter no. 6) gaining an advantage usage in longterm strategies. As an example, the beauty industry has been adapting this phenomenon accurately as an experiential differentiation tool customized by AI and AR (Salsky, 2020) in order to curate products that the consumer demands and create an holistic sense of ownership and collaboration between the brand and the individual. An adverse point of view establishes that the institution should promote the business “pushed” personalization promoting their own curated content as the core of institutionalization in the FLBM, as personalization based institutions tend to hold casual relationships between the consumer which can arise and cease to exist at the moment the consumer requirements are not met. This phenomenon creates a discussion inside the FLBM requiring if institutionalization adopted by other categories meet the qualifications to emphasize a social understanding that enhances the interest that a powerful knowledgable institution does embody its effect inviting businesses to compose a deep consideration around consumer’s perceptions and behaviors inside the contemporary unconventional FLBM (Meyer, 2008).
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Figure 19: Aesop Skincare store, Eric Petscheck, 2020
2nd part: The adopted FLBM and the individual 4. The contemporary unconventional FLBM shifting consumer’s behaviors and lifestyles In the FLBM, forecasting is considered crucial to provide strategic guidance towards the transformations of the future in order to make companies profitable, although it is considered a practice based on intuition and creativity, which can make its essence weak (Roussi, 2012). This data analysis changes in terms of interpretation during various studies mentioned forward as the interpretation of this evolution adjusts to the author’s further analysis. Consumers do not purchase only based on social status but as an essential means of communicating to other individuals and themselves about one’s identity (Belk, 1988). As mentioned before by Kapferer, 2005, it is known that companies having insights into the individual’s lifestyle habits are particularly valuable in management decisions (Orth et al., 2004). Based on a study made by He et al., 2010, these lifestyle insights are divided by five factors mentioned forward: Brand references, attitudes towards innovative products, luxury consumption,
word of mouth behaviors, and impulsive purchases. Measured to the extent that consumer’s purchases decisions are built by variables of one’s need for uniqueness, price consciousness, need for achievement, need for respect and public interest orientation, therefore, we can conclude that products/brands are building blocks inside the individual’s lifestyle. According to Sanders, 2017, there are two main categories in terms of forecasting: judgmental forecasting (qualitative methods) and statistical forecasting (quantitative methods), which integrate into a persistent forecasting process in order to create a reliable idea of intuition inside a market-oriented study that connects with culture, commerce, manufacturing and industry behaviors (Cassidy, 2019). Inside the fashion industry, these interpretations of cultural, aesthetics, and behavioral changes act as an inspirational tool for the internal creative teams, which therefore act as the leaders or mediators of culture-making a connection between culture and its form of materiality (Cobb et al., 2012). Material aspects of cultural and behavioral changes are critical to the social sense, social context, and time context, which argues that consumption
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“Consumers do not purchase only based on social status but as an essential means of communicating to other individuals and themselves about one’s identity”
is not detached from social or emotional values (Miller, 1987). On the contrary, Baudrillard, 2005 dictates that social consumption patterns are a reflection of a detachment of reality towards a culture made of signs (icons, as mentioned before), this intangible criteria creates a consumption made by a simulation of what a product can represent behind its materiality. In capitalization, consumer goods are in a constant cycle of valuation and devaluation, consequently adding importance to the novelty effect (Beckert, 2016) as a pure strategy made by the FLBM where constant progress and innovation are the most valuable guaranty of a successful business; contributing to institutionalization inside the FLBM by cause of the mechanism that fashion dictates where the new becomes old in a brief period of time as a consequence of consumer’s demands and perceptions of value.
Figure 20: Wassily designer vintage leather armchair, Knoll International, 2019
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5. Perceptions of value and trustworthiness as an effect of the FLBM Substantial revenues coming thanks to the FLBM and an exponential increase of consumers purchasing luxury goods through the last years has incited interest of a better understanding of the individual’s perceptions of luxury products which are helpful in order to perceive the valuable consideration of other industries to apply this practices to their businesses (Kapferer, 2018). Luxury brand marketers (Wiedman n et al., 2007; Kapferer, 2018; Dubois and Laurent, 1994; Berthon, 2009) review that luxury brand perceptions differ from consumer to consumer and that the critical difference to focus on is in the individual personal experiences (Thomsen et al., 2020). Kauppinen-Räisänen, 2019 dictates that consumer’s emotional experiences are the new values of the new unconventional luxury, and as the internationalization of luxury products increases and becomes more accessible, consumers seek to find experiences that create a sense of identity for them (Eckhardt et al., 2020). This emphasis has evolved the consumer luxury perceptions (CLP) to shift in marketing approaches as a more contemporary visible presence of brands in social media which has encouraged its access and values (Pentina et al., 2018). This encouragement has led CLP to have new expectations that reflect the consumer’s personal perceptions of luxury, requesting them to offer more compelling experiences compared to non-luxury brands. Vigneron and Johnson, 2004 dictate that
the consumers evaluate their CLP by the following variables: conspicuousness, public consumption to display prestige; uniqueness, exclusivity; quality of the product, perceived value; hedonism, experience of consumption; and the extended self, preference of goods that reflect the individual’s identity. A study by Burnsed et al., 2014 exposes that furniture companies that apply the FLBM, have these similar variables of CLP, applied as follows: conspicuousness in furnishing goods entails the individual’s importance of approval from family, friends, or guests regarding the consumer’s purchasing decisions but also, the consumer’s seek for quality perceived by the brand’s name linked to superiority, refinement, and excellence perceived commonly by the products external construction and price range (Grewal et al., 1998). The point of purchase leads the experience of consumption (hedonism) in the individual, introducing familiarity and knowledge of the brand’s product associated by demographic, socioeconomic, lifestyle, and cultural groups (Forney et al., 2005). On the other hand, Wang et al., 2004 affirm that design and style are the essential attributes for the furnishing industry as the CLP indicates that their home is a reflection of themselves as an expression of the extended self of the individual and their personality. Additionally, style refers to products with particular design characteristics that have been found to be the most attention-catching attributes, uniqueness, that lead the individual to a final purchase decision (Bennington, 2002).
Figure 21: Iconic Barbican apartment, Sight Unseen, 2021 Figure 22: Homard bleu’s tartare, Cultura Gourmet, 2017 ment, Sight Unseen, 2021 Figure 22: Homard bleu’s tartare, Cultura Gourmet, 2017
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Figure 23: Luxury product from the food industry, Luccari speciality coffee, 2018
3rd part: Shifts in the new contemporary luxury inside the FLBM 6. Evolution of the new unconventional luxury created by the imitation of the FLBM by other industries The interpretations of luxury in previous research are thus far subjective and contextual, and there is still a lack of investigations about unconventional luxury nevertheless, Thomsen, 2020 affirms in his research that there is observations of specific changes in society that have enhanced a rapid development in technology, altering the present consumption styles shifting from the traditional consumer who is affluent and buys in-store to a more younger generation of consumers who are connected globally and seek to demand specific characteristics from brands, therefore changing the consumer’s interaction with the companies (Kapferer, 2009; Wirtz et al., 2018). The FLBM has experienced a few alterations over the past few years, complying with an emerging new fit for the individual’s newer expectations by shifting from “having-to-being” and from “owning to experiencing” (Cristini et al., 2017), projecting luxury with updated characteristics showcased and explained as follows:
Epistemological scarcity, experiential and agentic (Thomsen et al., 2020). The epistemological scarcity comes from an ontological scarcity where the limited source of a product becomes just limited by the individual’s perceptual abilities. This characteristic focuses on the uniqueness of the luxury confrontation, which is mainly accessible to everyone if the individual is apprehensive about the product as it is found in unusual contexts or triggered inexpensively (Banister et al., 2020). This characteristic works if the product or luxury “object” is internalized or self-relevant to the consumer more than if it is considered precious by others (Belk,1998). An evident example of this is the beauty industry, as companies are starting to invest in hyper-personalization, directing their consumers toward self-pleasure where these luxury labeled products derive value from individual personal desires and data (Rosenbaum, 2019). Experiential luxury leaves the idea that the FLBM has to be product-focused. In contrast, an evolution for unconventional concepts of what luxury experiences have to be (Thomsen
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et al., 2020) is debating between the conspicuous consumption of a luxury brand into the creation of an ephemeral and meaningful experience for the product depending on the individual as different consumers have different perceptions of luxurious food, water or even air depending on their places, time, culture and the self (Cristini et al., 2020). This ephemeral private and internal meaning leaves the idea of companies serving the masses but instead focusing on the storytelling behind to create their brand’s status, power, or prestige (Han et al., 2010). Banister et al., 2020 promote the idea that the luxury experience now involves an individual agentic notion towards the brands emphasizing the definition of luxury products as social marks (icons as specified before) where the consumers see themselves as receiving a symbol instead of a product, where luxury does not require an agency to be considered a luxury by the individual (Thomsen et al., 2020). Advancing on new unconventional luxury research, the interpersonal reactions towards luxury brands have made it crucial for the individual to engage with them as this has a transfor-
mative change towards the product’s dematerialization of the luxury product towards an holistic approach from individual to brand (Leban et al., 2020).
Figure 24: Mies Van Der Rohe Barcelona chair, Cow boy Zoom, 2020 Figure 25: New York bathroom apartment, Vogue, 2018
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Key findings Figure 26: Panthere de Cartier, Loop, 2022
1. The contemporary unconventional luxury gives attention to the consumer’s desires rather than power of influence by brands. 2. Other industries have contributed to luxury democratization by adopting the FLBM characteristics, giving their consumers perceptions of quality at lower prices. 3. Luxury is not about provenance anymore but the individual (consumer) desires. 4. Luxury democratization as a consequence of internationalization inside the FLBM 5. Hedonistic assets of the brand/product are a key for companies imitating the FLBM 6. The unconventional luxury involves institutional driven companies enhancing an intimate relationship between the company and the individual. 7. Luxury products/brands are building blocks inside the individual’s lifestyle therefore it is critical for companies to focus on the individual personal experiences. 8. The FLBM constrains industries to act as leaders of culture-making connections towards its public. 9. Consumers seek to find a sense of identity in the luxury industry. 10. The consumer luxury perceptions have obligated companies to offer more compelling experiences in order to satisfy their consumer desires. 11. Scarcity is not the main characteristic inside the unconventional luxury, but about unconventional contexts of the product and the power of icons. 12. Luxury experiences now involve an agentic notion from the individual by emphasizing the idea of icons.
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Figure 27: Lail vineyards blueprint brochure design, Napa brand design, 2022 Figure 28: Vintage luxury car, Valentina brand, 2016 Figure 29: Lemon sole lounge chairs, Kwok Hoï Chan, 2012
Methodology 39
This dissertation aims to demonstrate the changes in various industries opting for fashion industry behaviors, demonstrating the background and effects behind the topic. This research methodology has been designed to demonstrate and examine the topic focusing on business and brand management as an identification tool to get a theoretical point of view. The author of the dissertation offers an examination primarily from secondary sources such as books and research papers published principally on brand management and consumer behaviors, allowing the student to consume a partial vision of the subject exposed. This section aims to demonstrate the changes in various industries opting for fashion industry behaviors, demonstrating the background and effects behind the topic. This research methodology has been designed with the aim to demonstrate and examine the topic focusing on business and brand management as an identification tool to get a theoretical point of view. The author of this dissertation offers an examination primarily from secondary sources such as books and re-
search papers published principally on brand management and consumer behaviors, allowing the student to consume a partial vision of the subject exposed. Furthermore, the student presents a gradual introduction on the topic, decoding the concept of the brand followed by data analysis to convey the main research point with an integral and combined perspective as the reasoning of this approach is due to transmit a business perspective. The literature review answers the research questions that decode concepts in branding, imitation of industries inquiring fashion brands business models, and consumer’s perceptions, exposing topics such as fashion luxury business evolution and their roles in marketing. This approach towards the review is completed to collect updated current information and theories related to the topic from the most prominent and renowned professionals in the field selected to appreciate economic, social, and cultural factors to intend an extensive perspective on the concept. In addition, contemporary and recent literature is vital due to the substantial change of these factors influencing companies regularly. The student method predominate-
ly involves collecting and analyzing the literaturea while visualizing content in visual models and graphics to demonstrate more exhaustive and theoretical theories. In order to understand the materialization of ideas and concepts in business management alongside their attributes and product perceptions from their consumers, the author will use primarily sources and analysis from professor Jean-Noël Kapferer (Author, professor, and reputed expert on brand management), Bernard Dubois (Strategy and management author and advisor) and Gilles Laurent (Author and professor reputed in luxury marketing). To comprehend the fashion industry turning shifting consumer’s behaviors and lifestyles but also new consumer luxury perceptions created by the fashion luxury business model, the author will consider the research from Peter E. Rossi (Expert on consumption effects and consumer behaviors), Jean Baudrillard (Expert sociologist), Hannele Kauppinen-Räisänen (Author and professor of consumer perceptions studies and luxury management) and Les Johnson (Porfessor of marketing and expert in business
models). In order to understand the role of marketing in brand management and what models of innovation have led the new consumerism. The author will analyze recent research composed by Thyra Uth Thomsen (Pioneer in the study of the new unconventional luxury) and the effect of the new characteristics of contemporary unconventional luxury and shifts in marketing that lead to new product success as a knowledge fusion perspective (Frankwick, 2016). Inside the data collection, the author will evaluate visual models, graphics and case studies primarily from authors being Blancheton et al, 2020, Milanesi et al., 2020, and Pereira et al., 2018, among others in order to prove the key findings, objectives and research questions exposed before. Principally there will be showcased examples and studies of other industries applications of the FLBM and its effectiveness but also key components and future challenges of the FLBM. Concerning the main difficulty of this dissertation will be the access and selectivity of all the sources described and not described before. The comprehensive sources of information available can lead to bewilderment and differences in personal approaches from the student towards the topic.
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Figure 30: Dallas apartement, El Atelier, 2021 Figure 31: Revolution glasswear, Fferrone Design, 2011 Figure 32: Speciality food, Festival International de la Photographie Culinaire, 2021
Data collection
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The aim for this section is to compose a recollection of secondary research in order to prove the objectives and research questions that where proposed in this dissertation. This part will be represented by the findings of various tutors showcasing the application and evolution of the FLBM and some successes of the winery industry, jewelry industry and food industry that adopted the FLBM but also supporting evidence showcasing recent statistics of each industry. The scientific research studies results from Matzler et al. 2013 will be exposed as a certain breakthrough to showcase the evolution of the luxury industry and the new industry entrants in order to deduct and corroborate the optimization of the FLBM. Foremost, there will be exposed findings and analysis of a few cases studies by Blancheton et al., 2020, Pereira et al., 2018 and Milanesi et al., 2020 showcasing the successes of three industries that adopted the FLBM and how they implemented it, concluding with the future challenges of the FLBM.
Positioning
FLBM application from other industries In this part, there will be exposed the applications from the FLBM that brands are adopting in order to create strong and flexible profitable businesses. The exploration of this business model is an attempt to reveal the specific variables that benefit and reconcile the status strategy. As an example, the student will display the study case of Nespresso adopting the FLBM with scientific research study results from Kapferer, 2010, Giacosa, 2018 and Matzler et al., 2013. As mentioned before, the FLBM core characteristics are the value creation, value capture and value proposition referring how the company format and process their activities (Teece, 2010), but also including more superficial characteristics such as the product and service, the profit formula and marketing/sales that create the brands positioning (Matzler et al., 2013). Furthermore, Nespresso has proven to be successful innovating into the FLBM, growing by 30% each year since 2000.
Customization as Nespresso created a system where they sell individual portions of coffee capsules with different tastes to their customers giving them the experience value of preparing their own espressos according to their preferences depending on the Nespresso machine and the capsules they buy, Mixing personalization with convenience at the same time.
Components of the FLBM
Product and service More than 16 different tastes are offered which are individually vacuum packed in order to preserve the coffee’s quality focusing on the individual personal experience and enhancing exclusivity by marketing limited edition coffee.
Marketing and sales Nespresso based their product from traditional retail distribution to internet sales which they call Nespresso Club, creating the individual to create a sense of ownership or institutionalization. They also provide experience based exclusive boutiques and flagship stores.
Profit formula They sale high quality personalized coffee-machines at economic prices. Nespresso does not profit by selling this machines but by selling their coffee capsules at premium prices which is an example of luxury democratization.
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Core characteristics of the FLBM
Value creation Production and marketing of democratized speciality food ensuring quality, exclusivity and sustainability (Nespresso founded a Sustainable quality program that ensures the reutilization of their coffee capsules).
Value capture In 2015, Nespresso owned 24.5% of the market share in the coffee capsule market (Statista, 2015) and exports from Europe to 64 countries worldwide (Nespresso, 2022).
Value proposition Uniqueness and exclusiveness of product that brings the individual and hedonistic sensorial valuable experience in the art of making quality coffee at home with lower prices.
Figure 33: Nespresso´s FLBM chart
Before and after the FLBM Furthermore, there will be exposed the shifts Nespresso has built from a traditional coffee seller to a speciality coffee seller. Having the characteristics and components of the FLBM, The author will express a comparison from the before and after the company applied the FLBM.
Before the FLBM The traditional coffee industry concerns B2B practices considering that consumer used to consider coffee as a pantry or supermarket product therefore the primary selling point where supermarkets, basing their positioning in quality at low prices as a key factor differentiation (Kapferer, 2010). Their product and service was simple: Branded ground coffee bought from wholesalers provided mostly from Brazil (Lundy, 2009). Their profit formula was based in applying low cost with less profit margins but selling in masses but also as a marketing practice, implementing B2B relationship between coffee company and wholesaler but also minimal B2C relationships like mass advertisements or shelf positioning. This business model value creation involves commonly the provenance of the product but also a low pricing strategy and their value proposition is based on the characteristics of the product and its effectiveness.
After the FLBM By acknowledging the adaptation of Nespresso previously, We can say by including the FLBM, their profit margin has increased positively. From 2021, Nespresso has increased their sales up to 7% as the highest in six years with 3.6% of organic growth with revenues for over $4 Billion as Nestlé company most profitable brand of 85% of the share (Statista, 2020) (Nestlé business report, 2020).
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Figure 34: Nespresso leather coffee machine, Nespresso, 2018
Key ideas from Nespresso’s FLBM 1.
Nespresso shifted from a B2B approach to a more closer relationship to the consumer (B2C).
2.
They turned a transactional business into their own direct channels with recurring revenues and bigger profit margins.
3.
They changed their strategy with an innovative product that gives the consumer an experience and ritualistic approach.
Figure 35: Traditional coffee brand vs Nespresso´s FLBM
Key components and roles of the FLBM Additionally, The management studies of Giacosa, 2018 are essential to clarify the components and roles that the FLBM has as the results from her study into the FLBM, dictate a collection of aspects that are key for other industries adaptations into the business model.
Innovativeness In order to adapt to the FLBM, innovation is crucial, strict quality control of the business model including the distribution is essential to optimize its success. Introduction of new tools aimed to catch the consumers attention such as experiential values to ensure competitive advantage in order to introduce a innovative product that creates an aspirational emotion from the individual but also invites businesses to apply unconventional and new terms that can be interpreted as an example: the contemporary unconventional luxury.
Long term vision in the investments approach Lack of companies long term vision can make the FLBM arduous as a creation of a luxury company has to constitute a long-lasting process in order to have a perspective of the companies activities continuation. Shareholder have as a priority the company’s social influence and symbolism assets (icons) to ensure or maximize its survival but also enhancing the companies prestige.
The company’s assets The company has to own prestige or a consistent story-telling to ensure the authenticity of the brand as a long term vision, this should be coherent with its values and philosophy in order to retain loyal customers and impose institutionalization. Another factor is its price policy that depends on availability of luxury goods as the reduction of a price can disinterest consumers, companies applying the unconventional luxury can use the high/low policy (keeping prices high in profitable seasons but reducing prices when sale season start). The innovativeness of the company has to be coherent with the company’s identity in order to be practical.
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Other study cases Case study: Winery industry Nouvelle-Aquitaine’s cognac business is based in a group union of small local suppliers from this region which conformed their business model based in the three ground components of the FLBM (value proposition, the value creation additional to the delivery system and the value capture system (Teece, 2010)). This business value proposition is based in the uniqueness of their product as their brandy is produced from grapes originated from the area where the soil and temperature are of a certain quality which therefore creates the exclusive product that brings experiential value to the consumer by showcasing heritage and craftsmanship along with associating their product with “elegance, power and close proximity to art and creation” perceiving a creation of a social factor or value therefore the application of the art of conspicuousness. Their value creation is admissible through the French culture of winery through thousands of years that allows them to have a unique production as the modest manufacturing of their cognac has been of tradition and specific know-
how in that area creating the perception of high levels of expertise and perceived heritage or storytelling that enhances the authenticity of their business therefore their value capture system is guaranteed by their exports which include 97% of the cognac exported, due to internationalization, the foreign marketers have the capacity to sell at high prices with large profit margins. Nowadays Nouvelle-Aquitaine’s luxury brandy business has reached the 64.6 billion dollars but also expecting an increase of growth 5.97% from 2022 to 2025 (Statista, 2022).
Figure 36: Cognac cocktails, A couple cooks, 2020
Figure 37: worldwide French liquor exportation market share, Statista, 2020
Figure 38: Global Cognac market 2021-2025, Technavio, 2021
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Figure 39: Larry jewelry ring, Larry jewelry, 2020
Figure 40: Global luxury jewelry market prediction, by value (USD Billion), Blueweave consulting, 2021
Figure 41: Luxury jewelry market size, Grand view research, 2021
Case study: Jewelry industry
year (Larry Jewelry annual report, 2021) and their first expansion into the Australian market.
Larry Jewelry company has escalated into one of the most prominent luxury jewelers in the Chinese and Singaporean market basing their value proposition into the experiential and agentic characteristics of the unconventional FLBM. This company relies on the influence of manufacturing quality jewelry and gems (Pereira et al., 2018) with a developing market that assures constant growth and innovation by having a rich heritage, building their CLP by their importance of culture, excellence perceptions, elegance and “grandeur” aspirations. Caric Horn, the CEO of the company, shares that their success (by adopting the FLBM) is from their authentic traditions of craftsmanship in the Asia Pacific region but also their intrinsic adaptability to create customized items for every customer creating long term connections between brand and individual, Horn explained, “much of the pieces that we design is based on the costumer’s body type. In our field, we are aware that matching a piece of jewelry to the costumer’s body type would increase… levels of comfort, while wearing them. Nothing is created in bulk anymore. It takes skill to deliver the ultimate experience”. Larry jewelry makes their product consumption meaningful for the individual by impelling culture and spiritual aspects in their products as for example creating special collections directed towards the Chinese cultural gift market. In 2021 they represented a 58.6% increase in revenue compared to the last
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Figure 42: Fresh whole summer truffles, Truffle Plantin, 2021
Case study: Food industry Alpha is an Italian based company located in the Umbria region with a huge historical heritage by operating the truffle industry, sharing a global market of almost 70% by being the primary leaders of this industry and being the first ones to advertise this mushroom as a “speciality food” or “luxury food” (Heide et al., 2018) featuring the CLP of quality of product and exclusivity, as truffles are considered a local tradition product. This company used the FLBM as an example of showcasing the self directed pleasure and experiential value that the truffle brings in a ritualistic approach, as this mushroom requires explicit environmental conditions in order to develop in the soil offering the aftereffect of the scarcity perception. Alpha has also created a touristic cultural experience ensuing the attraction of tourists to the region in order to take their possible/current consumers through the process of hunting and harvest ing of truffles as well as demonstrating the companies culture and heritage establishing a relationship of a gastronomic institutional brand. Recently they have expanded their experiences into the U.S. market by creating flagship stores throughout the country as a target to spread the companies storytelling and truffle culture. Currently the truffle market has increased 8.9% compared to 2021 and comprehends a market value of $202 million.
Figure 43: Black sliced truffles in oil, Calamillor Miami, 2022
Figure 44: Global luxury food market revenue growth prediction from 2020 to 2027, Credence research, 2021
Figure 45: Luxury food market size, Business wire, 2021
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Future challenges of the FLBM Furthermore, the results from a study from Kapferer, 2018 describe effectively the future challenges that the FLBM will confront in the forthcoming, such as the difficulties that a new unconventional FLBM can bring.
1. High technology. Luxury inclination to embrace technology and thus far have relevance.
2. Luxury accessibility to the masses. App services that bring easy accessibility.
3. Amazon as the top luxury retailer. Threatens the CLP of exclusivity, conspicuousness and selectiveness.
4. The internet opens the individual’s accessibility to brands. Enhaces the importance of institutionalization inside the FLBM.
5. Sociological shifts in CLP. Differentiations of luxury between the new digital natives and the past generations.
Figure 46: Gen z influencer, Pinterest, 2022
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Figure 47: Cartier watch, Tere Lozano, 2022 Figure 48: Vintage gym decor, Pinterest, 2021 Figure 49: Bowers and Wilkins speaker, Fnac, 2022
Data Results
1. The core characteristics and components of the FLBM are crucial in order to position a FLBM brand into the market. 2. It is important for a company adopting the FLBM to own their distribution channels in order to guarantee quality of product. 3. The key components that a company has to have in order to adopt the FLBM are innovativeness, company’s assets and long term vision in their future investments. 4. Personalization, institutionalization, know-how leadership are some important types of innovation inside the FLBM. 5. The new unconventional luxury brings the individual effortless accessibility to luxury, making institutionalization more important than never.
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Figure 50: AM/PM campaign, Pinterest, 2013 Figure 51: Love French is better coat, Pinterest, 2021 Figure 52: GMD Berlin bookcases, 1stDibs, 2022
Discussion, conclusions and limitations 61
This section aims to explore the further results and key findings presented previously by research found in the literature review and data results. This discussion will consider the three main objectives of this dissertation in order to answer the main research questions with supporting findings from the previous research studies. The three main objectives are: To understand the key characteristics of the fashion luxury business model and why it acts as a leader for other industries; analyzing companies marketing investments in forecasting and new consumer value perceptions as a fashion business model adoption; and analyzing the conversion from traditional luxury towards the unconventional luxury made for the masses as an optimistic scenario for other industries to perform these practices. As discussed previously in the literature review, it was discovered that, other industries have enhanced the evolution of the FLBM as it is, coming from a traditional product-focused conceptualization, the FLBM has switched into an experiential scarcity approach inquiring the idea/concept of “luxury democratization” thanks to the current
technological advancements which have given the individual an effortless accessibility to luxury companies. The research that accompanied the FLBM lead to the exploration of the new six factors that differentiate the FLBM companies positioning inside the luxury industry, proving that other companies by adopting the FLBM still can differentiate themselves by selling affordable products with premium prices and aspirations on higher levels of quality and creativity, nevertheless, reshaping the identity of products has enhanced the economy of icons, adjusting the inquiring an experiential approach at an intimate measure between companies and the individual. Furthermore, an important finding is that the FLBM updated and enhanced the compelling practice for other industries to practice institutionalism innovations, serving as organizational reflections of the consumer’s behaviors and rationality, motivating companies to step into the FLBM in order to have “self-relevancy”. However, there is a considerable amount of studies that counterpart between the effectivity of institutionalism concepts or having a consumer-centered approach.
Additionally, it was considered that thanks to the unconventional luxury, consumers have shifted from status-driven consumerism into a more identity-driven consumerism representing an attachment between social/emotional values with luxury consumption. This has enhanced the individual’s luxury perceptions as having an extended self reflection towards the FLBM products. From the scientific research collected from the previous sections, an important concept of the evolution of the unconventional luxury was studied. Discovering that the new luxury conveys consumers that own-to-experience and claim for epistemological, experiential and agentic aspects creating the dematerialization of the luxury product towards an holistic approach. Nonetheless, there is still a lack of investigations about this concept as it is a very current and undiscovered topic. The author interpreted the characteristics of the contemporary unconventional luxury into the Nespresso case among others, discovering and proving its relevancy and effectiveness into the FLBM composition by studying the before and after the application of the FLBM inside the coffee company and how it became successful by applying the previous concepts and key components. On the other hand, the qualitative and quantitative studies in data results, affirmed the idea that a company requires innovation, total control on their assets and long term vision in order to apply the FLBM successfully.
Presenting a statement of the extent where the objectives and research questions of this dissertation were met and understanding the way in which other industries can apply and develop into the FLBM was met through the literature and data collection examined. It enabled the formation and summary of the evolution and application of the FLBM. Determining its effectiveness and inviting other industries to apply this model in order to achieve their objectives and long term visions with the acknowledgment of consumers shifts in lifestyle and behaviors, but also their new luxury perceptions/requirements from companies. Concerning the limitations the student had through the dissertation, the main difficulty was the access of quantitative sources throughout the data collection process but also a lack of scientific studies concerning the contemporary concept of the unconventional luxury. To conclude, FLBM is a fundamental topic in order to understand its successfulness and therefore be seen as an inspiration for companies long term visions seeking to increase their profit margins through this concepts. furthermore, The author motivates and offer possibilities for future research avenues and exploration into the new unconventional luxury but also the other industries behaviors towards the FLBM.
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Figure 53: Dorm lamp, Zara Home, 2022
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Figure 54: Two table lamps, Giovanni Banci, 2021 Figure 55: Crafted beer, Bizarrely, 2020
Appendix 71
Comparison betweeen traditional luxury vs the unconventional luxury
Figure 56: Differences between the traditional luxury vs the unconventional luxury, Thomsen et al., 2020
Individuals journey into their luxury perceptions
Figure 57: CLP journey, Pentina et al., 2018
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Evolution of the global luxury goods in 2021 From year 2017 till 2020, the compound annual growth of luxury goods sales has increased by 1.8% where still the top ten share of luxury companies own the 51.4% market share. Among the disruptive year of 2020 due to the pandemic, companies have been implementing certain changes in their strategies merging their approach into digitalization and sustainability demonstrating factors of the contemporary unconventional luxury which helped them still remain profitable (Faccioli et al., 2021).
Figure 58: Top ten share of the top 100 for luxury goods sales and net profit, Deloitte, 2021
The watchmaking industry and hospitality industry has gained a position in the top companies in the year 2020 along with four parts of the luxury products variety involves other industries compared to the 2 parts that come from fashion in that year.
Figure 59: Luxury goods sales from the top ten companies from 2019 to 2020, Deloitte, 2021
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Inside the top 100 powers of luxury goods, Estée Lauder company from the beauty industry has remained in the top 3 alongside with Richemont company from the watchmaking industry in the top 4. In this list the beauty industry and the jewelry industry are predominant apart from the fashion industry. The rest of the list included companies from the hospitality industry and home goods industry. The fastest growing luxury goods companies included in the first place The farfetch Limited company, this company is a luxury multi-brand e.commerce platform that sells majorly from fashion and accessory goods to beauty, jewelry, home goods and furniture. The remaining companies include the jewelry industry, the watchmaking industry and the beauty industry.
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Figure 60: 20 fastest growing luxury goods companies 2020, Deloitte, 2021
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Figure 61: Dwellins ideas, Pinterest, 2022 Figure 62: Big top barware, Sightseen, 2021
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