Opinion: The strategic approach to luxury investing

During a delightful conversation, a friend posed a question that perfectly encapsulates the intersection of luxury and investment: “How do you know if a luxury piece is truly an investment, something that can be worn and loved over the years?” She was referring to Chanel dresses and Hermès bags, quintessential examples of timeless luxury. This took me back to a roadshow I conducted across Asia, presenting to the continent’s wealthiest UHNWIs at the Four Seasons in Hong Kong, the Ritz-Carlton in Singapore, and the St. Regis in Malaysia about assessing the investment potential of luxury brands. The principles I shared with those investors are equally valuable for clients looking to invest in personal luxury pieces. Compelling brand story The story behind a brand reflects its core values. In Singapore, a young entrepreneur was torn between investing in two luxury brands. My advice was straightforward: Examine the brand story. A brand’s narrative must be client-centric, defining its emotional role in the client’s life. Consider Chanel’s story of elegance and independence. When you wear a Chanel dress, you make a statement of elegant independence. End-to-end client experience In Kuala Lumpur, an investor shared his fascination with the immersive experience at a Hermès store. The brand’s ability to provide a unique shopping experience, from the initial welcome to meticulous customer service, adds immense value to their products. When you purchase a Hermès Birkin, you buy into the story of Jane Birkin, who famously preferred a beat-up basket until the moment she shared a flight with the CEO of Hermès, who then created the Birkin bag for her – now the most iconic handbag. Continuous innovation and surprise Innovation, while respecting heritage, is crucial in maintaining a brand’s allure. In Hong Kong, I discussed with investors how brands like Louis Vuitton stay relevant by continually surprising their clients. This balance of innovation and tradition keeps clients excited and engaged. Louis Vuitton exemplifies this with its limited editions and innovative designs that keep its products in high demand. For consumers, investing in luxury pieces involves looking for brands with a compelling story, exceptional client experience, and continuous innovation. These elements ensure that your purchase will appreciate over time, both sentimentally and financially. For investors, evaluating luxury brands based on their storytelling, client experiences, and strategy of perpetual surprise signals high returns on investment. Brands that are “luxury in name only,” and confuse a high price point with luxury, will not prevail. Burberry’s catastrophic decline, Gucci’s inconsistent brand strategy, and Balenciaga’s self-destruction show that brands focusing on hype without substance won’t succeed. Whether investing in a Chanel dress or a stake in Hermès, the principles remain the same. By focusing on compelling stories, exceptional experiences, and continuous innovation, your investments could appreciate over time. The intersection of emotional value and financial return is where true luxury lies, making every piece a timeless investment. Understanding these principles allows both clients and investors to navigate the luxury market with confidence, ensuring their choices reflect true luxury and enduring value. I call this principle extreme value creation. Only brands that create extreme value consistently are worthy to gain the trust of clients and investors. Volatile brands without clear stories, depending on hype or short-term activations, won’t retain value. And if you ever see a brand discounting, run. Discounting is the most secure and fastest way to destroy the long-term value of a brand proposition. The more frequent the discounts, the less valuable the brand. Choose wisely. This is an opinion piece by Daniel Langer, CEO of Équité, recognized as one of the “Global Top Five Luxury Key Opinion Leaders to Watch.” He serves as an executive professor of luxury strategy and pricing at Pepperdine University in Malibu and as a professor of luxury at NYU, New York. Daniel has authored best-selling books on luxury management in English and Chinese, and is a respected global keynote speaker. Daniel conducts masterclasses on various luxury topics across the world. As a luxury expert featured on Bloomberg TV, Forbes, The Economist, and others; Daniel holds an MBA and a Ph.D. in luxury management, and has received education from Harvard Business School. Sign up for his masterclasses at the Jing Academy. Follow him: LinkedIn and Instagram. All opinions expressed in the column are his own and do not reflect the official position of Jing Daily.

Opinion: The strategic approach to luxury investing

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Published July 15, 2024

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Opinion: The strategic approach to luxury investing