Amati and Associates

How To Build A Luxury Brand

Home » Insights » Branding » How To Build A Luxury Brand
How To Build A Luxury Brand

What is luxury?

Before touching on luxury branding, we must address the definition of luxury, which is no easy task. While many focus on pricing, high ticket prices are more effective than category drivers. Many luxury wanna-be products and services have higher than average tickets yet do not deliver on any dimension of a luxury experience.
So, which are the dimensions? According to experts:
1. Quality – higher-quality materials and craftsmanship, finest services

2. Selective – limited supply, not broadly available although with large retail networks

3. Authenticity – unique design or manufacture

4. Personalization- personalize your product/ service and the experience

5. Innovation – new technology

6. Emotions- Experience-based value proposition

Trends likely to impact your Luxury Brand

Luxury trends are changing rapidly as the world changes. Macro shifts are fundamental forces that affect every aspect of our lives. Trends are what we see now. Macro shifts are what we expect to happen over time.

(1) Consolidation of online

Online sales grew exponentially between 2020 and 2021 due to the pandemic. Luxury e-commerce is expected to reach $90 billion in 2022. The internet is becoming central for shopping, especially for luxury items. Luxury brands are shifting away from multi-brand marketplaces and towards direct sales.

(2) Millennials and Gen Z are becoming the primary luxury shopper

The Millennial generation is becoming essential to the luxury industry.70% of luxury customers are millennials. Generation Z wants brands to be authentic and sustainable. Most luxury brands aren’t doing enough to connect with this generation, which also leads to the push toward circular luxury markets.

The global second-hand market will reach $77 billion by 2025, with growth rates pacing the broader luxury market. Resale (thanks for its more curated assort­ments) is driving the expansion and is expected to expand eleven times faster than ordinary clothing retailers.

Many Luxury brands are especially well-suited and promise great potential for the resale market because of their timelessness, enduring desirableness, durability, and sometimes scarcity.

On the one hand, the luxury resale industry is growing because it is tapping into an expanding market for a more circular economy. On the other hand, luxury resalers find themselves in a more significant competitive environment with more online resale sites facilitating pre-owned items to be purchased and sold.


(3) The China effect

The COVID-19 pandemic has created a disconnect between Chinese buyers and luxury brands. Will affluent Chinese consumers come back? And when?

Luxury goods are sold internationally, but the trend is shifting toward domestic consumption. We expect the Chinese consumer to become the world’s largest luxury consumer in the next decade, accounting for 40%-45% of global luxury consumption by 2025.

However, there are some concerns about the sustainability of the luxury market because of China’s increasing emphasis on common prosperity goals.

C-Suites, Advisors and Founders from 50 countries follow our Substack Newsletter

Will you? Join today for free.

Visit our Substack

What is a luxury brand?

Difficult to come to a generally accepted definition of a luxury brand because even the experts in the field use the term ‘luxury brands’ differently. Luxury brands are usually associated with expensive products, but that is only one dimension of differentiation. Differences also include production, retailing approach, and communication framework.

Luxury brands do not refer only to particular catwalk pieces or one-in-a-kind jewels: industrially produced fine china, such as Wedgwood, is a ‘luxury brand.’

In the late 1980s, many luxury brands adopted the strategies of the Parisians – Pierre Cardin and Jean-Paul Gaultier. Some Luxury brands – through licensing deals -started competing in the mass market. A luxury brand with a luxury image has been applied to industrially manufactured products, such as perfume and sunglasses, to scale up and generate huge revenues. In turn, these activities funded the luxury image-buil­ding ventures.

This massification paved the way for industrialized high street fashion brands to mimic the Haute luxury houses by emulating their superficial features, including the designer label, but without the creative talent and artisanal quality of the master craftsman. The latter two are critical components of a luxury brand. This is how luxury brands connect deeply with their customers.

The trickier part about what differentiates a luxurious brand from other brands is that it ties directly into the definition. Luxury brands can be defined differently by different markets.

Anyone who has ever shopped there can see what distinguishes Louis Vuitton from Walmart in luxury products. Although the difference between Louis Vuitton and Hermès is not apparent, it is still there.

In keeping with our example of Louis Vuitton vs. Gucci, we can say that Hermes, there are many reasons why Louis Vuitton is a better example of a luxury brand than any other brand.

The company collaborates with various artists, but it does not dilute its brand. So Hermes. Regardless of who is in charge, LV maintains a consistent design language. But what made Louis Vuitton where it is today is that it carefully measured everything related to its brand. The company also considered a long-term brand-building strategy throughout the entire project. No luxury brand is built overnight.

Barriers to new entrant Brands: The Virtuous Cycle of a Luxury Brand

The most successful luxury brands have created a virtuous circle that accelerates their growth and margins. This will likely develop an apparent barrier for emerging brands and new entrants.

In a nutshell, the more prominent brands have four consequences for their magnitude,

1) enjoy better advertising rates

2) spend in absolute terms more money on advertising

3) have lower retail costs

4) enjoy better prime retail opportunities

These four effects combine to create even better conditions. Better advertising rates and lower retail costs imply that mega luxury brands deliver – in relative terms – better returns to their investors. But at the same time, the combination of enormous advertising budgets and better retail locations also positively affects the quantity and the quality of traffic in their shops. Furthermore, because they are large advertisers, they also get better PR returns, as no glossy magazine would penalize one of their largest clients! This creates a trifecta effect on the Brand Building (larger budgets, better PR, and more traffic in their locations), enhancing the brand’s profile and reputation.

The retail efficiency allows for a better direct vs. wholesale revenue mix, which delivers better margins and experiences, contributing to the bottom line and brand building. All these aspects combined accelerate growth.

Key steps in developing a Luxury Brand?

These are steps that are necessary when building a brand for the prestige market:

1) Focus on the customer experience, make it relevant, emotional and differentiating. How shopping in a Hermes is different from Tiffany’s? What makes the Hermes experience unique vs. the Tiffany one?

2) Leverage the power of rituals in the experience; it will make your brand go viral

3) Focus on your product/ service quality and build storytelling about it; it will give your credibility. For example, remember the storytelling around Hermes stitchers training for five years before touching their first Birkin Bag.

4) It is more difficult for a mass-market brand to become selective than vice versa. Focus on the particular side, and be demanding on your brand licenses. While they grow your customer base and awareness of the brand, they risk diluting it (and your risk losing control of your brand development efforts).

5) Think in Terms of Emotional Benefit – Reason To Believe Diads: each emotional benefit needs to be credible. A Reason to Believe is necessary for each benefit (even emotional ones). That gives you the right to play as a brand.

6) Become obsessive about your brand execution. Always maintain the same tone of voice and look and feel. It will accelerate the return on your initial efforts. It will make it easier for consumers to build memories about the brand


No Comments yet!

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Download our Business Cases


Fractional CMO for an AI Startup.

Download PDF

Freelance Project for a Pharma StartUp.

Download PDF

Boutique Advisory for a Beverage Company.

Download PDF

Cases compilated and reviewed by Clutch