New Basel/Ipsos report on changing luxury market

Expect fierce competition among powerful luxury brands and a move away from generic products in the rapidly changing “new luxury market” in the immediate future, says a new report on the luxury watch and jewelry sector. Much of this is prompted by significant changes in consumer attitudes and buying behavior since Sept. 11, 2001, the report notes. Experts surveyed also predict a decline in the number of small fine-jewelry manufacturers.

Trend Report 2003/2004 is a collaboration of BaselWorld, the largest annual watch and jewelry trade fair (held in Basel, Switzerland) and Ipsos France, a Paris-based international market research firm. The report surveys attitudes about luxury products in recent decades, challenges now facing the luxury watch and jewelry business, and how major vendors plan to deal with them. The study is the first of a planned series of similar annual reports.

This report is based on interviews with officials of 20 major bellwether watch and jewelry brands and groups such as Gucci, Bulgari, Corum, Festina or Hermès—all exhibitors at BaselWorld. A summary was presented Sept. 15 in New York City by Monica Guarnaccia, BaselWorld director of marketing and communication, and Valérie Chassè, Ipsos deputy director, at a press conference attended by dozens of journalists from U.S. consumer, business, and watch and jewelry trade publications. Additional presentations will be held in Italy and China.

Changing attitudes. The report notes that decades ago, luxury watches and jewelry “denoted social status and wealth,” with exclusivity and prestige being their hallmarks. In the 1980s and ’90s—with more available wealth (thanks to factors like a booming stock market and new dot-com businesses), greater purchasing power for the middle class, and a “new elite” (like athletes, rock and rap stars, and oil barons)—there was more focus on individuality and apirational lifestyles. In this “affluent, celebrity-led culture,” many luxury brands became “overly accessible,” says the report, with mid-price entry points, a variety of products at affordable prices, and marketing and distribution that targeted both upscale and middle-class consumers. Fine watches and jewelry became accessories of one’s image and appearance. “Luxury was now in everyone’s reach,” says the report, but conversely seemed “to be losing its relevance.”

The social and economic impact of Sept. 11 changed consumers’ buying behaviors. That has led, again, to “a redefinition of luxury and attitudes about luxury,” says the report, as consumers return to the “traditional luxury brand values [such as] durability, reliability, and timelessness,” and look for well-made, upscale products that “augment their personal well-being.”

“The purchase of watches and jewelry has become less frivolous and no longer driven by trends,” says the Basel/Ipsos study. “There’s a return to trustworthy brands which [promise] status and product quality. Clients now demand genuine value as well as consideration of their needs (service, products, sense of involvement).”

Polarization. At the same time, suggests the report, there’s greater polarization between high-end and “Main Street” products. More upscale brands are eliminating mid-range products, and consumers are buying fewer mid-priced luxury-type products: They cost too much and don’t have enough status or image value to justify an impulse or pleasure purchase.

Industry experts interviewed by Ipsos also suggest most small fine-jewelry manufacturers will probably disappear in the next 10 years, absorbed or put out of business by larger, competitive luxury brands and groups. “They aren’t saying there won’t be more new [jewelry] creators or designers, or that these won’t be successful,” noted Chasse. The forecast applies to “the small manufacturers who cater now to the middle class.” One reason, she noted, is that “in the search for authenticity and value-added features (i.e., service, product quality), consumers are increasingly turning from non-branded jewelry products to branded ones.”

Meanwhile, as consumer attitudes change and their purchases slow, there’s fierce and growing competition for them among luxury brands. “We can expect to see a smaller number of ‘super brands’ and brands offering more distinct products and unique designs, as they try to reassert their identify as competition increases and consumers seek traditional brand values of security and timelessness,” said Guarnaccia.

Changing strategies. Many watch and jewelry luxury brands are now revising marketing strategies, changes that will continue through mid-decade, at least. “The brands are trying to rebuild the splendor of luxury,” says Chassè.

They’re reasserting their distinctiveness and brand identify, with their own branded stores, innovative signature brands, and more aggressive communication and marketing strategies that focus on the brand or product. There’s increased control of production and distribution, especially in the watch industry. More are repositioning themselves or strengthening their market position and brand image through greater exclusively, an upgrade in materials and quality, and streamlining their range of products.

Emphasis will remain on innovation, though less radical and less frequent than in past years. With high-end products, especially watches, innovation is “being used to improve a product’s functionality,” says the report.

The Basel/Ipsos 2003/2004 Trend Report cautions that only the financially fit will survive this competition. “In the final analysis, the more powerful brands (be they individual brands or brands backed by large groups) seem better equipped to adopt the strategies mentioned above and thus ensure their supremacy,” it says. In the years ahead, the report suggests, the market may “even shift towards a simplified arena of super brands.” However, it warns, if that happens, it could hinder creativity and distinctiveness, leading to “a more standardized [product] offering.”