The Real Meaning Of Luxury And Limitations Of The Affordable Luxury Model

Lew Frankfort is credited with coining the term “affordable luxury” in the mid-1980’s while he was repositioning Coach leather goods in lower price segments. Affordable luxury is an oxymoron that has of late been overused by Low Middle End watch companies from the Scandinavian minimalist wave.

While their promise is to make luxury accessible to commoners, the reality is less rosy as a close examination of their products reveals that the low-cost Japanese movements and tumble-barrel polishings allows them to profit from upmarks similar to the brands that they claim to undercut.

Claiming that a 200 USD watch is affordable luxury is like claiming that a cotton T-shirt is affordable luxury just because it covers the chest and shoulders like a cachemir sweater does.

Unfolding events will eventually bring out to light that there is no such thing as “affordable luxury”, because by definition luxury is defined by scarcity. Watch enthusiasts are often asked to justify why a watches costs more than a car or a piece of real estate, as if it was possible to give an account of how the separate components add up to the retail price.

The secret is that luxury retail prices are often determined from the top down: a brand first decides where it wants to position a product price wise, and ten figures out how it can invest what is left out of the commisions to manufacture said products. This is why we always recommend to watchmaking entrepreneurs to first determine their sales channel and target retail price, and then figure out what they can invest into manufacturing. As brand strategist Doctor Scott Galloway of NYU Stern illustrates, luxury watches act more as signifiers than as rationnally priced items: “This is not a timepiece. I have not wound it in five years. It’s my vain attempt to express Italian masculinity and signal that if you mate with me I am more likely to take care of your offspring than someone wearing a SWATCH watch.”

So by extension, an “affordable luxury” product would convey the message that its bearer can in fact NOT afford real luxury, and therefore defeats its own purpose. In the words of Ashok Som, Professor of Management at ESSEC: “…in the luxury industry, the more desirable the brand becomes, the more it sells but the more it sells, the less desirable it becomes! Brands get their “luxury” status due to their exclusivity. And sure enough, Coach was caught in the dilemma of being “true luxury” or “affordable luxury” compared to its competitor European brands such as Gucci and Prada. Experience taught Coach that Gucci and Prada were better at one thing in particular: creating a ‘dream factor’.”

And this is where brands need to put te emphasis: there is much more to gain from offering products as a gateway to a lifestyle, than just making penny-pinching claims on pricing. There is not limit to the extent of a customer’s loyalty when they feel that the brand delivers on the dream. In the words of Dr. Galloway “…as you move down the torso, the margins get better. Tesla is not an environmental car, it’s an attempt to tell people you can afford a $120,000 car. The core axiom of evolution is men paying $150K for cars that can go 160mph in domains where you can only go 55 makes no sense. And women will continue to pay $600 for ergonomically impossible shoes to try and solicit inbound offers from those same men.”

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