The luxury market is tricky to crack but the rewards can be great

rolex-vancouver


Powered by Guardian.co.ukThis article titled “The luxury market is tricky to crack but the rewards can be great” was written by Alison Coleman, for theguardian.com on Thursday 20th October 2016 06.30 UTC

Building a luxury or premium goods business is not for the fainthearted. Both markets are notoriously difficult to enter, and while the rewards can be great, the risks are high.

Competition in luxury markets is fierce, primarily because the customer base is comparatively limited and, due to the high prices, repeat purchase is not a regular phenomenon.

Small businesses often get it wrong, and for several reasons. “The first is timing,” says Paurav Shukla, professor of luxury brand marketing at Glasgow Caledonian University, London. “They are in a hurry to build a luxury brand, but they lack the required resources. Secondly, they assume that by creating a unique and innovative product or service, the market will immediately latch on to it. A luxury business needs to create a certain mystique around it, and connect with those deep desires and aspirations in order to secure an affective commitment among the target audience.”

But this hasn’t deterred entrepreneurs like Matt Brown and Tony Weiss, who launched their luxury male grooming goods business Thomas Clipper in 2014. Boosted by three successful Kickstarter campaigns, the company now exports to 35 countries and is stocked by Fortnum & Mason.

Matt Brown (left) and Tony Weiss, founders of Thomas Clipper
Tony Weiss (left) and Matt Brown, founders of Thomas Clipper. ‘Luxury is about giving people what they want, above and beyond what they expect,’ Brown says.

The idea was born out of a gap in the market – an all-metal British-designed razor didn’t exist, so the founders made one – that evolved to become a luxury lifestyle brand. Brown says: “Luxury is about giving people what they want, above and beyond what they expect. We ask our customers what they want, they tell us, and we make it. We call this community-driven luxury. It’s a new model, and a real detachment from the secrecy and ‘we know best’ attitude of the luxury market.”

One of the biggest challenges they came up against was finding suppliers and manufacturers they could trust to produce their luxury goods. “You need to get to know them, and go through highs and a few lows together before you feel certain of the trust,” says Brown.

To date, the company has shipped more than 1,000 online orders and has just launched with a luxury boutique in New York. They are now seeking £70,000 funding on Seedrs, a community equity-for-funding platform, to scale up their luxury brand.

The importance of branding

While branding is key for all business, for the luxury market, it’s the very foundation of its success. For some businesses, tapping into that sector has required a complete rebrand.

Krystian Zajac is founder and managing director of Andrew Lucas London, a luxury design company that creates bespoke property and technology solutions, ranging from underground swimming pools to built-in cinemas. He says: “We started out in 2003 as a company specialising in IT services for the home. As this grew, we found an increasing number of our clients asking about home automation products and whether this could also be integrated within their properties.”

Zajac also knew that a strong brand was the key to making a business stand out from its peers in any industry, but his business name did not reflect the new clients they were attracting. He says: “When we first launched, the business was called It’s Done! Technology. In 2014, the decision to rebrand as Andrew Lucas London was made for precisely this reason. We had to create a visual identity and ethos that matched the same level of elegance and sophistication that these marques are known for.”

The premium end of the scale is no easier to crack. Shukla says this market “is focused on high quality, extraordinary service and the best functional and hedonic benefits. Lexus, for example, would be a premium automobile.”

Tom (left) and Phil Beahon co-founders of Castore
Tom (left) and Phil Beahon launched Castore in 2016. ‘You have a much smaller margin for error when building a premium brand,’ says Phil.

When brothers and former sports professionals Tom and Phil Beahon came up with the idea for their men’s sportswear brand Castore, it was with this market in mind. The business launched this summer with the help of a £40,000 Virgin startup loan. As well as availability online, the brand will be stocked in premium retailers Harrods and Selfridges.

The idea first took shape when Tom was in the US and became interested in two sportswear brands that were selling at a premium price compared to mass-market brands like Nike and Adidas.

Phil explains: “We did some market research, asking affluent, discerning gym goers why they bought the sportswear that they did and whether they’d be interested in a more premium, technology-driven brand instead. The responses were extremely positive.”

As in the luxury market, startups struggle to gain a foothold in the premium market, where customers are time poor and harder to reach. They are a combination of very wealthy and hardworking professionals, and tend to spend less time consuming traditional marketing materials than other customers.

“You also have a much smaller margin for error when building a premium brand,” adds Phil. “Customers are far less forgiving of a below par product or advertising campaign, which can result in the need to over invest in certain areas. That said, once you do build a relationship with these customers, they tend to be more loyal than other customers and have higher levels of disposable income to invest in your brand, which really improves recurring revenue rates and helps drive returns.”

Sign up to become a member of the Guardian Small Business Network here for more advice, insight and best practice direct to your inbox.

guardian.co.uk © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.