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Luxury
May 31, 2002 10:01 AM
By Martin Rapaport
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Luxury is a hot topic as the jewelry trade moves to develop more high-end products and brands. Some of the more sophisticated people in the diamond business have come to the conclusion that they are not really in the diamond business anymore. They are moving into the luxury business, learning how to create and sell a luxury product that happens to be diamond jewelry.
Groillers Dictionary defines luxury as 1. Pleasurable self-indulgent activity – an activity that gives great pleasure; especially one only rarely indulged in. 2. Nonessential Item – an item that is desirable but nonessential, and often expensive or hard to get. 3 Great comfort – expensive high quality surroundings and the great comfort they provide.
Most readers would agree that diamonds are a nonessential item that is desirable and hard to get. Yet, this may not be entirely true. Consider the mindset of a young woman about to be engaged. Is the diamond engagement ring that she has anticipated receiving her entire life a nonessential item?
While a diamond engagement ring may not have physical utility (i.e. you cannot eat it or use it to physically change things), it certainly has psychological and social utility as a universally recognized symbol of a man’s commitment to a woman. When one considers social context, the need of a man to give an engagement ring and the woman’s need to receive it are much greater than other needs. We should recognize that in the modern world, wealth has reached a level whereby physical utility is no longer an acceptable metric for need. Consumer needs transcend functional physical utility. Yesterday’s optional luxury has become today’s absolute necessity.
The Love Connection
The point here is that the cornerstone of diamond demand is the intimate relationship between man and woman and the symbolic meaning of the gift of a diamond. Diamond demand transcends luxury demand and diamonds are much more than simply another luxury product.
Consider the first definition of luxury – an activity that gives great pleasure; especially one rarely indulged in. An important aspect of diamond demand is that such demand is not necessarily for the diamond, but rather for the experience and emotional feeling that the gift giving activity generates. The emotional feelings generated at the moment when a man gives a woman a diamond are extremely powerful. We are not just selling diamonds we are selling the high that our customers get when they give and receive diamonds. The occasion itself may only last for a moment — but the memory of the occasion will last a lifetime.
Another aspect of luxury is that the harder it is to get a luxury product the more luxurious it is and the more people want it. Exclusivity drives demand for luxury products. In the world of normal products when you increase the price for something demand for it goes down. Some luxury products are different. Economists use the term conspicuous consumption to define products whose demand goes up as price increases. In other words, for certain luxury products higher prices increase demand because they make the products more exclusive.
Consider what happens when you project the idea of conspicuous consumption onto diamond jewelry brands. The brand creates and controls exclusivity. If and when the brand is properly positioned and product exclusivity properly managed strange things begin to happen. When you increase prices demand does not go down — it goes up. It is as if you have found a way to defy gravity and discovered the holy grail of unlimited profitability.
So what is luxury? Is it a product, an experience, or an idea? Optimal luxury is all of these things and more, all wrapped nicely together in a branded package. Undoubtedly, as the level of wealth in the world increases and consumer demand for utilitarian products is satiated, demand for luxury products will increase exponentially. Current definitions of luxury will be expanded as some luxury products will evolve into essential products. Branding will create new highly managed luxury markets where branded products are positioned and promoted in a way that encourages conspicuous consumption. As these luxury markets develop thy will create unusual selective demand that will impact the pricing and availability of various categories of high-end diamonds. Eventually, we will see a highly segregated and segmented multitiered market for diamond jewelry. One of the most exclusive and profitable segments will be the high-end branded jewelry sector. Firms that have the foresight, economic resources, and intellectual capacity to enter this sector will dominate the high-end of the jewelry market.
Beyond Luxury
Over the years — and thanks to De Beers — the basic generic diamond product has been very successfully branded as the symbol of commitment between a man and a woman. When a man gives a woman a fur coat or a watch her friends will gather round and talk about how good or how generous her man is. That is very nice and every woman appreciates this. But when a man gives a woman a diamond gift — now that is something special. If the woman is single her friends will gather round and say: “Wow, you got him. He has finally made a commitment to you.” The idea of commitment carries though to a married woman as well. It is as if the man is restating his love and commitment every time he gives her another diamond gift. The original commitment is revitalized and renewed.
The great power of the generic diamond brand is that it is broad, relating to all women, at all income levels. Diamonds and the message of commitment they transmit are not just for the rich. A woman getting a diamond gift from her boyfriend is excited about the message her boyfriend is sending her. As long as the diamond gift is age and income level appropriate, it does not matter if the woman is getting a diamond gift that costs $129.99 from Zales or $10,000 from Harry Winston, the magic works.
The diamond industry is at risk as it takes up the challenge posed by De Beers and enters a new era of downstream marketing and brand warfare. A hodgepodge of marketing and branding experts who do not really understand the promise of diamonds are about to introduce a wave of uncontrolled and uncoordinated marketing that will alter consumer perception of diamonds. If we are not careful the “diamond mush” that these well intentioned, but misguided, marketing experts heave onto the consumer mindset may end up turning diamonds into yet another homogenized luxury product in what is fast becoming an overcrowded, overexposed and overexploited luxury sector.
Maintaining Integrity
While it is clear that the diamond industry must compete against other luxury branded products for the disposable income of wealthy consumers we must be careful not to damage the generic diamond brand. Mercedes Benz cars, Dior clothing, Rolex watches and other luxury brands all have their brand messages. But that is it all they are luxury products – nothing more.
The challenge for the diamond industry is to move forward without damaging our strong generic diamond brand. New products and new diamond jewelry brands are an inevitable and positive development. Those that seek to evolve exclusive high-end luxury diamond jewelry brands should respect and build up the idea that diamonds are the ultimate gift of commitment. For that is the foundation upon which our entire industry is based.
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Tags:
Consumers, De Beers, Harry Winston, Jewelry, Luxury Products
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