How Fashion Brands Abuse The Luxury Strategy


Don't Let This Be You: How Fashion Brands Abuse The Luxury Strategy

I have a feeling this is going to upset a lot of folks reading right now.

But this is a recurring issue that has sabotaged too many promising brands. It’s rare to see so much potential burned to the ground for so little payoff.


So let’s talk about the Luxury Strategy, and how soooo many fashion brands abuse it.

Before we get into it, I want to thank this week's sponsor: Segments Analytics.

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What Is The Luxury Strategy?

The Luxury Strategy is literally a book that outlines the “anti-laws” of luxury marketing. The authors of the book explicitly differentiate the Luxury Strategy from the Fashion Strategy.

The foundations of the strategy are 24 “anti-laws” of marketing. Luxury brands do things that go against many traditional marketing “best practices” from the classic CPG playbook.

Here are a few of the anti-laws:

  • Forget about positioning; luxury is not comparative.
  • Don’t pander to your customers’ wishes.
  • Keep non-enthusiasts out.
  • Make it difficult for clients to buy.

These laws yield something that looks and feels a lot different from your average mid-market consumer brand.

If a firm like Amazon is trying to get into every household in America, a luxury brand like Hermes is making folks jump through hoops to purchase certain high-demand items.


In my experience, fashion brands look to luxury brands with envy and admiration for a few reasons:


→ Luxury brands appear to have complete creative freedom (in reality, this is untrue). They dictate trends instead of following them.


→ The creative teams at luxury brands have the financial resources and creative freedom to produce…really cool stuff. And they don’t have to justify the ROI of these activities to get approval for them.


→ The founders and creatives within these brands are well compensated and often well respected as cultural tastemakers.


Fashion brands think “if I mimic the consumer-facing activities of these brands, I will become like them”.


This is bad logic. It’s not true. Mimicking luxury brands will run a boostrapped brand into financial ruin. Here’s why.

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What Is A Luxury Brand, Really?

A luxury brand is an entity that is willing to take a financial L in years zero through 20 in order to reap incredible financial benefits in years 21 and beyond.


Time is the secret ingredient in building a luxury brand. It takes time to convince the market that you deserve a position of expertise, status, and cultural credibility.


Today’s most successful luxury brands–Chanel, Hermes, Louis Vuitton–started out as a single artisan serving the elite. These artisans were the best at what they did; that expertise turned their wares into status symbols.


Many of these brands went through periods of obscurity and financial mismanagement before they were scooped up by business-minded folks.


There is a ton of survivorship bias in luxury. We don’t talk about these brands’ contemporaries, most of which no longer exist.


If your brand is self-funded and you need to make money in the near term, you cannot afford to position yourself as a luxury brand.


There is one exception: if you are a craftsperson producing high quality items yourself, or with a small workshop.


Set up shop in a place where a lot of rich people live, make connections with the locals, and build your credibility as a tastemaker in that community. Then, when you kick the bucket and your kid(s) take over the business, maybe they can sell it to LVMH for nine figures.


I don’t think that is the goal of most of you reading this though.


The founder(s) of a luxury brand rarely capture the majority of its value.

How Do Fashion Brands Abuse The Luxury Strategy?

“Never half-ass two things, whole-ass one thing.” - Ron Swanson


Fashion brands abuse the luxury strategy by applying it selectively. Unless you’re willing to go “all in”, the strategy won’t work. And going “all in” means at least two decades of financial losses or barely breaking even.


Fashion brands also tend to cherry-pick the aspects of the strategy that are most alienating to the US "heavy consumer" of fashion:


The core US customer for a lot of brands at the contemporary price point and above is between 38 and 65 years old with an annual household income of $150K+.


She's trying to look pretty, or she wants to be taken seriously at work. She’s probably at least a size 8 and doesn’t have a model’s proportions. She’s too busy working or caring for her family to cultivate a unique aesthetic POV or follow cool girl influencers.


Part of what’s being outsourced when one buys fashion is that curation; we shouldn’t shame the customer for it.

It’s ok (and probably even beneficial) to draw from a deep well of niche cultural references. But the finished product has to make the person who can afford to purchase it look and feel good.


The marketing of most luxury brands masks the fact that the majority of their big spenders are…not cool…and the casual customers who drive the majority of revenues are also…not cool.


But, at the same time, many fashion brands are unwilling to go “all in” on the luxury strategy because they want to support a certain level of recurring opex and personal take-home pay. For example:

  • They pursue wholesale growth at all costs, even when it means over-exposure
  • They run heavy promotions and “online sample sales”
  • They run production overseas at factories who work for multiple brands vs vertically integrated production
  • They don’t do much to super-serve VIPs, if they even know who their VIPs are
  • Most importantly: they insist on aggressive growth goals or want to make large cash withdrawals from the business each year, NOW.


As a result, these brands harm themselves twice: first, when they assume the luxury posture and alienate potential customers, and then again when they take deep markdowns to compensate for an inability to sell at full price.

Side note: true luxury brands don't go on sale, nor do they have outlet stores.

What To Do Instead

There is a “third way”. You don’t have to pander to the market to the extent that your unique POV as a brand is lost. But you also don’t have to be “luxury” to maintain that POV.


To navigate this path, you need to align your business operations with your primary sales channel. If you want to scale a new channel, you need to make space within your operations for that channel to thrive.


The recurring bugaboo here is eCommerce. If you want to grow an eCom business, you need a consistent pipeline of qualified new customers.


Meta Ads is one way to do this, but a lot of brands don’t want to do what’s necessary to scale the channel because it can require flexibility on how the brand is presented.


If you’re not going to use Meta, you can use PR/influencer or other tactics. But you can’t run the fashion marketing playbook from 2007 and expect it to grow your eCom business in 2024.


TL;DR: you can’t have your cake and eat it too. You can’t drive 20-30% top line and bottom line growth every year while exerting complete creative control over your brand and running an outdated playbook.

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