30 Gulf Marketing Review November 2009 November 2009 Gulf Marketing Review 31

THE GREAT Recession has claimed many victims, and among them is all things luxury. That may be how things appear on the surface. Dig a little deeper, however, and a different story emerges: luxury items that are truly exceptional continue to sell well, and that is true of luxury mobile phones too. But this is the one bright spot in an otherwise gloomy picture. The luxury market has changed, perhaps forever.

High Net Worth Individuals (HNWIs) have found a new sense of frugality that could be here to stay. Even those who still have the cash are giving up ostentatious lifestyles, opting instead for understated indulgence, except, of course, in the BRIC countries. Luxury is being redefined.

In a world recovering from doom and gloom, financial indulgence and personal pampering feel more like a crime than an aspiration. This leaves the world’s luxury brands in a precarious position.

As Milton Pedraza, the CEO of Luxury Institute, said: “It is a sombre environ-ment out there in terms of luxury because of the lack of money and the failure of the luxury industry to deliver on what consumers see as the fundamentals.”

Not all luxury brands are created equal, though: some are more equal than others. They are those that have always delivered on “the fundamentals”, or have adjusted to the new economic reality. What are those fundamentals and what do they mean for luxury mobile phones?

The big pictureAccording to Bain & Co, the global luxury sector declined 15 per cent and 20 per cent in Q1 09 and Q2 09, respectively, shrinking from $220 billion to $198 bil-lion. It forecasts an overall decline of 10 per cent in 2009. Since the beginning of the crisis, HNWIs have lost nearly $10 trillion. The impact has been enormous.

Everyone is now cautious. “The three-year view is a bit better but the bad news is it is not that much better,” said Tony Poulter, global head of consulting at PwC. “The message is: there is a long term but we are not going to see it dawning immediately.”

Unchecked spending has been checked. Imagine losing $400 million overnight. Financial consequences aside, the emo-tional shake-up will have left scars. Except in BRIC. The Russians and Chinese are itching to show off their wealth. For them, designer brands say “We have arrived”.

No wonder Louis Vuitton and Ermenegildo Zegna are preparing to open up shop in Ulan Bator next month, while Gucci earlier this year planted flags in both Azerbaijan and Russia.

Fizzle and sizzleWith luxury mobile phones, though, the news is mixed. Motorola for one has

Will consumers still connect with luxury mobiles when the recession is over?BLING, BLING…

INS IGHTS

©Cor

bis/

AFP

w

cancelled the launch of their Ivory E18 device, tentatively priced at $3,000. Last year, Bang & Olufsen shut their mobile phone business to trim costs.

On the other hand, players like Samsung and Sony Ericsson are going full steam ahead on their designer phones. Just last month in Milan, Samsung teamed up with Italian designer Giorgio Armani to launch a new Armani-designed smartphone.

In August, Sony Ericsson announced their Dolce & Gabbana fashionista phone named Jalou (envy), which is shorter than a lipstick and sports a built-in mir-ror. And S.T. DuPont has teamed up with Pantech to launch their own designer phones, while LG will follow up with more phones made in collaboration with Prada. Most of these luxury devices sell in the $1,000 range.

Not to be daunted, uber-premium mobile phone maker Vertu is pressing ahead with its 2009 range.

So, what’s really happening? Some are going north while others are heading south. According to Frank Nuovo, VP and chief of design at Vertu: “The concept is the same as a fine watch or a fabulous car. To be a true luxury product,

you have to look at making something that doesn’t have an 18-month shelf life.”

The way he sees it, a mere $2,000 phone is not “true” luxury. “If…something is made extraordinarily well there will always be a group interested in it.” And that is apparently what’s driving Vertu.

Their latest handset, launched in August this year, is the Ascent Ti, made of high-gloss carbon fibre bearing a sandblasted titanium surface. How much does it cost? A whopping $9,800.

What are the prospects of its success? According to a survey done by the Luxury Institute, HNWIs are now looking for real value, not just badge value. Genuinely superior quality, craftsmanship, exclu-sivity and brand heritage will become increasingly important for luxury brands, and those who deliver on these fronts exceptionally well will enjoy the fruits of their labour.

As proof, sales of British luxury car Rolls-Royce are looking up despite the recession, while sales of Mercedes and

BMW models are taking a nose-dive. Similarly for luxury fashion brand Hermès, whose hand bags start at $7,000, sales are up 10 per cent, while the demand for Coach’s $325 handbags has dropped.

One can only guess what the demand for the latest Vertu Signature range will be. The “sea of sapphire” colour used on its surface goes through a two-week treatment in a hot furnace at 2,000C°. This material gives the case of the phone an astonishing hardness, making it scratch proof against any material except diamond.

What does this mean? Luxury mobile phones will have to prove their added value to be able to survive and thrive in today’s market; simple badge value will not quite cut it. n

Uber premium: The aesthetic of Vertu mobile phones is drawn from watch and jewellery making

If something is made extraordinarily well, there will always a group of people interested in it

Abdul Karimstrategy director, Luciola