The Hindu Business Line : Waste is out of fashion

Luxury is usually defined as nonessential, with a "built-in attribute of being trivial, or having few or no functional benefits over lower-priced competitors." Waste is a core element of conspicuous consumption, Thorstein Veblen had argued in Theory of the Leisure Class. No, luxury isn't trivial, says Mass Affluence by Paul Nunes and Brian Johnson (www.crosswordbookstores.com) .

"Waste is not only out of fashion; it is absolutely frowned upon. Gone are the potlatches that would bankrupt the chieftains of our day, and any trip to a Wal-Mart or an outlet mall would confirm that even among the rich, value is in."

For a practical definition of luxury, the authors draw upon the wisdom of economists - that luxury goods are those whose consumption goes up as income increases. "The definition articulates that luxury is not what one buys, but what one continues to buy ever more of as income increases, foregoing replacing a product with a more attractive substitute," explain Nunes and Johnson. "So selling real luxury is a design principle every maker can aspire to: an offering that not only is attractive, but also creates a need that is never fully satisfied."

Why else do you think DeBeers wooed "the other hand of women - the right one" with a collection of 16 rings? "Diamond marketers have done a phenomenal job of creating the compulsory diamond engagement ring and the ten-year anniversary band," notes the book. One may say that also of the Akshaya Tritiya, closer home.

Why can't there be a return on consumption for jewellery ownership, the authors ask, and go on to suggest, "What about small dividends recognising watch or jewellery wearers? For example, there could be complimentary drinks on certain nights at sporting events or social events for Rolex wearers." That way, the jewellery industry could add investment properties to its offerings in the face of consumer resistance to such buys as sunk costs.

The old rule was to `offer the masses new consumables and new investment opportunities.' The book rewrites the rule as, `Offer new consumables that perform like investment opportunities'. For instance, Allen-Edmonds, which sells $300 pairs of shoes to `a highly focussed demographic target: businessmen with an annual income exceeding $1,00,000'.

In the early 1980s, the company offered, `for as little as $95', to `recraft' the old shoes, removing `old soles, heels, welting, cork foot beds, and laces' and replacing them with `entirely new materials directly from the factory.' Affluent customers responded enthusiastically, because they appreciate "the company's ability to dramatically extend the useful life span of their shoes."

Every week, Allen-Edmonds recrafts 1,200 pairs of shoes per week, even as it produces about 7,000 new pairs. It is not unusual for customers to "re-craft the same pair of shoes five or six times"; and, "with margins around 50 per cent," the programme is "an important profit centre" for the firm.

"The promise of heirloom quality has long motivated the affluent to open their wallets." A premium watchmaker has this tag line: "You never own a Patek Philippe. You take care of it for the next generation." The authors urge companies to emulate this positioning, "by having in their portfolio some products of exceptional and lasting value." The secret is to make the product more durable, so that it is "able to deliver undiminished use over time" - the way `Waterman, Montblanc, and Montegrappa' did for their pens.

Timeless lessons.

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D. Murali