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« How big is your shortcut budget? | Main | Gripped in a free frenzy (or focused on scarcity and value) »

Is digital the end of luxury brands?

Luxury goods as we know them were invented/amplified/regulated by Colbert in the 1600s. At the beginning, luxury goods were better goods--better made, better leather, etc. This was actually a huge insight, and one that generated billions of dollars of revenue over the years.

Over time, as others figured out how to make things just as well as the 'luxury' brands could (the triumph of industrialism), the label on the item, the brand, became at least as important as what was made. The brand is a tribal signifier, a way of demonstrating good taste and a membership in the elite. People pay extra partly for the privilege of paying extra. For a very long time, a sale on luxury goods made no sense, because the fact that it wasn't on sale was precisely what made it a luxury good.

It's this selling of the logo, of Hermes or Chanel or Champagne that made the last fifty years of luxury production such an extraordinary opportunity. Add to this a growing cadre of the newly wealthy, eager for a badge, and it's nearly perfect. Feed the tribe, maintain the value of the logo and you actually get paid a premium for making the thing cost more. 

And then, the outlet stores showed up and Ralph Lauren danced the line between mass and class, selling logos big and small, at all price points. When anyone can make a nice shirt, which nice shirt should you pay extra for? H&M took this even further. There's still plenty of money being spent on the expensive, but the concentration of brand impact is diluting, quickly.

Here's what shifted just recently: In the post-industrial connection economy, we often value networks more than we value stuff. We'd rather have a working smart phone than a fancy car. We'd rather be invited to the right conferences than wear expensive shoes. Logos are worth less, easier to copy and not as valuable a tribal signifier as they were.

And yet...

And yet elites (of all kinds) still desire a way to demonstrate their inclusion into certain groups, groups that aren't open to all. And human beings still seek out the best of something, the item that carries with it the magic of a trained hand, of a bespoke origin and of the nostalgia for the special thing we remember.

I don't think the luxury industry will disappear, but without a doubt, it is changing. Charging more is one tactic, but it might not be the only one.

I'll be speaking on this in Paris in early July. The organizers of the event tell me that code SETH-GODIN-GUEST saves you (ironically) about 30%.

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