To tap the growing interest of the working class in ‘aspirational’ products, various luxury brands are bringing out affordable collections geared towards a frugal audience, raking in the revenue and most importantly profits for the brands. As the economy shows positive signs, it comes as no surprise that people are opting to invest their money on brands that offer luxurious looks at less exorbitant prices. On the one hand, while high-end luxury brands such as Prada and Louis Vuitton are constantly inflating prices, affordable luxury brands or diffusion lines or bridge brands, are becoming a huge favourite amongst mass shoppers.
According to a report published by Euromonitor International, in 2013, sales of luxury goods exceeded US $ 318 billion worldwide, representing a year-on-year real value gain of 3 per cent, driven by emerging markets and ‘affordable luxury’ brands. In the past two decades luxury brands have been constantly exploring new possibilities of becoming more affordable to appeal to the masses and henceforth widen their marketing base. As a result, their inclination to provide reasonably priced products is directly linked to their drive for greater profits which is also linked to going public. Some may call these range of products as sister lines or second lines, but the truth is that these lines are major boosters of growth. Trending towards global acceptance, powerful luxury brands are opening brand flagship stores in capitals and key provincial cities around the globe promoting ‘affordable luxury’. While brands such as Dior and Chanel firmly refuse to embrace this trend, affordable ranges such as Miu Miu by Prada, Michael Michael
Kors by Michael Kors, M. Mission by Missoni, DKNY by Donna Karan, Ed Hardy by Christian Audigier, AX Armani Exchange by Georgio Armani, Kate Spade, Karen Millen, Tory Burch, Mark by Marc Jacobs, Poppy by Coach, T by Alexander Wang, Lauren by Ralph Lauren, Calvin Klein and Tommy Hilfiger led the trend by targeting young consumers without putting a huge hole in their pocket. “Rising demand for affordable luxury in developed markets is also linked in part to the industry’s strategic obsession with China. Retail prices of many European luxury brands have risen sharply over the past year as part of a deliberate plan to align more closely with China, where heavy import duties push prices up. The rationale is that higher prices in Europe will encourage Chinese consumers to do more of their luxury shopping at home rather than on foreign trips,” said Fflur Roberts, the head of luxury goods research at Euromonitor International.
With a combination of strong purchasing power of the new cash-rich middle class and wider penetration into the emerging markets, these middle-range brands entice the customers by the prestige value of luxury brands, as they identify with affordable luxury as a ‘status’ stepping stone in their upward mobility.
Amongst the various bridge brands, Michael Kors, essentially a sportswear brand from the ‘Project Runaway’ judge, has maintained to carve its niche in this growing segment. With handbags priced as less than US $ 500, it provides a mix of just-high-enough prices and accessible-yet-glamorous designs. The company has reported sales growth of at least 40 per cent every quarter since it went public in December 2011 as its products resonate with customers. Michael Kors raised its revenue forecast for the year ending in March 2014 to US $ 3.19 billion from US $ 3 billion.
Following various bridge brands, Karen Millen is also shifting towards the affordable luxury market as it plans international expansion through 400 stores in 2014 including wholly owned and franchised outlets. The group will open a flagship store in New York’s Fifth Avenue this year which will be followed by stores in South East Asia, Central America and also Outer Mongolia. “There are actually very few global apparel retailers between high street and luxury. The majority of the competition that fills this sector is accessories players. Everything we do should be luxury except the price. That gives you a true point of differentiation,” informed Mike Shearwood, Chief Executive, Kate Millen.
These middle-range brands between luxury and budget are on a growth path as they continue expansion, reorganization, repositioning or introducing new lucrative lines. “There is this white space between major designer collections and contemporary lines. Designers like Tory Burch, Phillip Lim and Alexander Wang are filling that gap. These collections provide their own great creativity at a great value,” explained Robert Burke of Robert Burke Associates, the New York luxury consulting company. Particularly, these collections target a younger audience aged from 25-33, with medium incomes, who are keen to experience the world of luxury.
Moreover, the development of these diffusion lines have also been heavily influenced by fast fashion brands such as Zara, H&M, Forever21, etc. with their innovative and highly efficient supply chains that are constantly challenging big fashion houses. These fast fashion brands adapt to the latest catwalk trends, providing cheap designer versions into their stores quickly. Meanwhile, another seemingly strong and noticeable trend has been the merger of retail department chains and fashion designers in creating exclusive lines that keep the budget-oriented shoppers in mind. This includes Target’s collaboration with designers such as Isaac Mizrahi, Missoni, Phillip Lim, and Prabal Gurung, H&M’s highly successful collaboration with Versace, Isabel Marant, Lanvin and Maison Martin Margiela, while Kohl’s continues to create trendy and affordable clothing by teaming up with with Narcisco Rodriguez, Derek Lam and more recently Catherine Malandrino. Call it the need to branch out from the niche segment of exorbitant pricing and runway fashion as these brands appeal to the common man
with their exclusive designs and affordable pricing.