17 minute read
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.
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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-
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
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
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
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).
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
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
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
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
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 transformative 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
