No matter what you call it, luxury that is quiet, gentle, and inconspicuous is shaping the near future for luxury brands. The trend is marked by downplayed elegance, along with the traditional requisites of expert tailoring and craftsmanship, the highest-caliber fabrications and materials, and elevated personalized service. Quiet luxury renounces prominent logos and ostentatious displays of wealth by embracing the understated luxury fundamentals of quality with a capital “Q.”

Yet, under the surface, the status that luxury brands represent still exerts a strong pull for many consumers – if not most. Entitlement and social status, referring to one’s rank or position within the social hierarchy, play a pivotal role in one’s self-identity. Owning and wearing luxury brands is an outer-directed expression of personal identity and values.

In other words, identity has both intrinsic (self-expression) and extrinsic (status) components. As Chris Gray, the Buycologist, says, “Luxury purchasing is an interplay of status and self-expression, not either/or, but both. The brands you buy reinforce your sense of self within different social contexts and situations. Nobody will look down on you for buying something for quality. Unlike status, quality is the one people will fess up to.”

Fulfilling Psychological Needs

INSEAD Professor David Dubois, author of “Fulfilling Social Needs Through Luxury Consumption” has done extensive research into luxury consumer behavior and motivations. He explains that two conflicting motives are at work in purchasing luxury items.

• Differentiation: The desire to differentiate oneself, “to be exclusive; to be different; to disassociate themselves from the common herd”
• Assimilation: The drive to assimilate by aligning or “branding” oneself as a member of the in-group

While the assimilation motive might seem to pertain primarily to those seeking to climb the social ladder, there’s safety in numbers and even those at the top of the ladder want to fit in with their tribe. Social signaling is a primary motive for everyone up and down the social hierarchy.

Shifting Tides

Conspicuous consumption and its polar opposite, quiet luxury, ebb and flow in a predictable pattern as the economy fluctuates. When times are good, the restraints come off and louder luxury brands are in vogue, as during the period following the 2008-2009 global recession. Gucci, Balenciaga, Michael Kors and Burberry crested the conspicuous consumption wave only to crash recently.

When the economy goes south, quiet luxury comes back into vogue. Brunello Cucinelli and Prada are riding that wave, up 24 percent and 10 percent respectively last year. Though tucked away within LVMH’s Fashion and Leather Goods reporting segment, quiet luxury brands Celine, Dior and Loro Piana are thriving. While Hermès’ Birkin and Kelly bags have ultra, top status-symbol ranking, the company maintains strict control of distribution, so Hermes’ exclusivity keeps the brand quiet.

Some brands, like Louis Vuitton, seem to have enough bandwidth to flow whether the tide is rolling in or out, but many others can get caught in a rip current when the tide turns.

Psychological Underpinnings

Dynamic growth in the luxury market and across cultures where different social norms apply makes it particularly hard for brands to calibrate their offerings to the current tides. Since 2019, Bain reports the personal luxury goods segment has advanced nearly 30 percent, up from roughly $300 billion (€281 billion) to $400 billion (€362 billion) in 2023. Bain expects it to reach between $585 to $629 billion by the end of the decade, so the tidal shifts will be even more dramatic.

“With the proliferation of luxury across diverse segments and markets, luxury consumption has taken on diverse, novel, and sometimes unexpected forms – within the traditional luxury domain, beyond traditional luxury, and even outside the realm of consumption altogether,” Professor Dubois observed in another paper studying the status-seeking dynamic in luxury consumption.

He wrote that consumers with less experience in the luxury realm, those he calls “luxury excursionists,” are typically from lower-economic tiers. They lean toward conspicuous consumption with prominent luxury logos. Those with greater luxury expertise tend toward quiet luxury brands “to disassociate themselves from the mainstream.”

That’s the general rule yet segmenting the target market for quiet versus loud luxury brands by traditional age or income demographics is difficult. For example, one’s political leanings align with their status-seeking behaviors. Wealthy conservatives tend to rely more on luxury brands to affirm their social status, i.e., conspicuous consumption, while liberals prefer to buy unique, creative quiet luxury brands or experiences to distinguish themselves. “In sum, conservatives want to be ‘better than;’ liberals want to be ‘different from,’” he observes.

Whether conservative or liberal, high-status individuals may reject brands that become too popular whether logo-emblazoned or not. This could put Louis Vuitton at risk as its classic, logo-heavy Neverfull canvas tote bags are ubiquitous. Luxury resale sites like The RealReal and Vestiarie Collective have made many hitherto out-of-reach luxury brands accessible to the masses. Now anyone with enough disposable income can afford a piece of luxury.

Add to that, high-net-worth consumers may turn their noses up at brands using aggressive marketing tactics believing them to be trying too hard. Then there’s also the danger of leaning too heavily on influencers and celebrity spokespeople. Established high-status consumers march to their own drummer and don’t follow the crowd, while younger consumers tend to be more influenced by influencers. But that may change as they mature.

Luxury Is An Attitude

Dubois points out that high-status individuals are increasingly looking beyond traditional luxury goods brands in pursuit of greater personal differentiation. This he calls “non-consumption” behaviors, i.e., experiential luxury, such as “investing in physical and affective resources to acquire cultural capital and status recognition that were traditionally attained through luxury.”

In 2023, experiential luxury, such as hospitality, fine dining, and cruises, grew 15 percent year-over-year, as compared with traditional luxury personal and home goods, which advanced only 3 percent. In addition, what Bain defined as “experienced-based goods,” including fine art, luxury cars, private jets and yachts, fine wines and spirits, and gourmet food, rose 10 percent.

Indulging in such non-consumption luxuries is more likely to yield admiration and envy from one’s social group, while Dubois warns of potential negative consequences of consuming and displaying luxury goods in other social contexts. “This dark side of luxury consumption merges at the psychological, social, and economic levels,” he maintains. These include:

• Feelings of being inauthentic as conspicuous consumption displays can reflect undue privilege and give people a feeling of “hubristic pride, which is often viewed as antisocial and selfish.” This can make people feel some portion of shame and guilt when purchasing expensive luxury goods. He also notes that these conflicted feelings particularly impact high-income luxury owners, perhaps because of their awareness of income inequality.
• On the social or interpersonal level, luxury consumers are perceived as less warm and friendly, making them less attractive as new friends. These perceptions may negatively impact those working in “warmth-oriented” or service job settings, creating a hurdle for luxury brands’ in-store personnel. Further, luxury consumers may be viewed negatively as more wasteful and materialistic. And it can harm women on the dating front because it signals to potential mates, she has high financial expectations.
• Luxury goods brands can face potential economic blowback from these negative psychological and social dimensions by diluting the brand’s appeal, a particular vulnerability as brands get too big and conspicuous.

“Luxury brand executives increasingly need to learn about an expanding number of factors that interact – and possibly conflict – in shaping consumption,” Dubois warns, adding, “The vehicles of the pursuit of status constantly change in step with evolving norms and values that prevail in specific groups or at specific points in time.”

Status Sells

In surveys, luxury consumers give various reasons why they buy luxury brands, typically those considered socially acceptable, like quality, durability, and craftsmanship. Few own up to status as a primary driver, yet Dubois’ research shows status signaling is a powerful drive for luxury purchases. “Consumers’ enduring desire for luxury largely derives from the need for status, that is respect, admiration and voluntary deference afforded by others.”

That drive is underscored by a recent survey by the Affluent Consumer Research Company (ACRC). When high-net-worth consumers were asked about the traits or qualities they expect from luxury brands, the majority responded with material quality (70 percent), durability/craftsmanship (61 percent), and innovation/originality (55 percent). Bringing up the rear were status and prestige associated with price point, at 25 percent and 26 respectively.

Yet when calibrated with consumers’ luxury purchase intent, status, prestige, and a brand’s relevance to a modern lifestyle, perhaps reflecting relevance to popular trends like quiet luxury, all were a far greater predictor of spending intention than other qualities.

ACRC’s lead researcher Chandler Mount stresses the difficulty in untangling consumers’ status motivations in surveys. “It’s tricky because consumers (and segments of consumers) may view status differently depending on the context. It could be a purchase driver for something visible like a car or clothing, but it could be an invisible driver for an experience like travel.”

Walking A Fine Line

No matter how it’s measured, the status value associated with luxury brands can’t be underestimated. It has a strong and enduring power, but it also creates tensions for consumers. “Our analysis of the drivers fueling the desire for luxury revealed this desire often stems from conflicting motives. At the heart of it is the need for status, a deeply ingrained and often unconscious force guiding thoughts, feelings and behavior about luxury brands,” Dubois stresses and warns luxury brands to walk a fine line to understand the conflicts and help resolve them.

“We found a common thread: the idea that the drivers, forms, and consequences of luxury consumption – all three dynamic elements of purchases – involve tensions requiring great finesse on the part of luxury brands as they try to approach, communicate with, and ultimately retain clients,” he concludes.

Contributed to Branding Strategy Insider by Pamela Danziger, Owner, Unity Marketing

At The Blake Project, we help clients worldwide, in all stages of development, define or redefine and articulate what makes them competitive at critical moments of change. Please email us to learn how we can help you compete differently.

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Licensing and Brand Education

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While Millennials indulge actively in luxury experiences – 54% spent on experiences in the past year – luxury goods take precedence, with 63% purchasing luxury goods. And 51% of Millennials expect to spend more on goods in the coming year, while 67% of GenXers and 80% of Boomers plan to spend less.

Underlying Millennials’ motivation for things over experiences is the status and prestige that come with them. A majority (54%) of Millennials surveyed are keen to display their wealth and accomplishments through luxury purchases and 70% are concerned about projecting the right image. And the status and prestige motivation was about 40% higher for Millennials than more mature consumers surveyed.

“I was surprised by the scale and importance of status to the Millennials and it’s more important to them than across the other generations,” shared BCG’s Pierre Dupreelle, managing director, partner and one of the leads in its Fashion & Luxury practice. “The perception is Millennials are all about the experiences, but they are the generation spending most on status luxury goods.”

In other words, after going underground as the quiet luxury trend emerged post-pandemic, conspicuous consumption may be coming back with a vengeance now that Millennials (aged 28 to 43 years) are reaching the threshold where their incomes and wealth start to peak.

However, it won’t be as easy as slapping a bold logo on goods since nearly three-fourths of Millennials surveyed also expressed a desire for an “understated approach to my possessions and lifestyle.”

Status Still Sells

The BCG survey was conducted among 2,000 affluent Millennials (household income of $250k, and in high-cost cities over $350k, and $1 million or more net worth). It also included a comparative sample of 300 affluent GenXers and 300 affluent Baby Boomers.

While Millennials give all the traditional reasons for purchasing luxury goods, like product quality reflected in materials and craftsmanship (79%), durability (78%) and value for money (69%), they are also driven strongly by other factors like brand recognition (70%), high ratings and review (70%) and scarcity (62%), which are far less significant to older generations. And sustainability (62%) and brand values or purpose (60%) also are more important for them than GenXers and Boomers.

In typical surveys, it’s hard to tease out the importance of status since few people are willing to own up to wanting luxury goods to signal status and prestige, so the survey used a series of attitudinal questions to uncover that motivation.

Besides wanting to make an impression on others and to show off their wealth and success, Millennials have a strong desire to invest in themselves (87%) – hearkening to the classic L’Oréal slogan “Because I’m worth it” – and they are highly inclined to be influenced by public figures they consider role models (63%).

The reason why Millennials are more outer than inner-directed in their luxury purchases, as compared with older generations, may be down to one thing – social media.

“This group grew up with social media, posting about how they look, what they wear, where they go on vacation, and how they feel,” said senior partner Jim Brennan, who works with Dupreelle on the investor side of BCG. “The influence of social media drives a lot of their behavior.”

Dupreelle also noted that compared with the older generations, Millennials were more likely to have grown up in more affluent households and been exposed to luxury brands at an early age, so they have a high level of luxury brand recognition and they want luxury brands’ earned status to rub off on them.

“This generation is more complex to connect with, especially with the need to manage the sense of exclusivity and scarcity,” observed Dupreelle. “It’s going to require a new way of thinking to connect with these consumers.”

Luxury brands must tread carefully as they try to align with the status and prestige drives of Millennials without making them feel too materialistic, acquisitive and inauthentic, never a good look for any consumer but most especially the socially-conscious and culturally-sensitive Millennials.

How To Navigate Millennial’s Drive For Status

Since the dawn of time, people have used symbols as a sign of one’s rank or position within the social hierarchy, the definition of social status. With the industrial age, such status symbols became more accessible to the masses, requiring artisans, designers and brands catering to a higher-class clientele to continually elevate the luxury status of their goods to distance and differentiate their offerings.

So the status of luxury brands – an intersection of brand reputation and the perceived social circles in which its customers move – is inextricably linked to a consumer’s desire to purchase a brand to hitch their social status to the luxury brand’s wagon.

“Status is one of the key central motivations that explains why people buy luxury,” shares David Dubois, Ph.D., who is associate professor in marketing at INSEAD and has made the study of consumers’ status motivation a focus in his extensive research.

“Obviously, nobody cares to admit they want to build their status by purchasing luxury goods, so they emphasize other things like craftsmanship, quality, etc., but status building is very important because people want respect in the eyes of others.”

Two conflicting motives

Complicating the desire for luxury brands to enhance one’s social status are two conflicting motivations that Dubois has unraveled in his research:

• Differentiation: The desire to differentiate oneself; be unique – “to be exclusive; to be different; to disassociate themselves from the ‘common herd’”
• Assimilation: The drive to assimilate by aligning or “branding” oneself as a member of the in-group

These competing motivations play out differently depending upon the circumstance. For example, one might purchase a Louis Vuitton handbag because the brand is popular with one’s peers, i.e. assimilation, but choose a style that nobody else has, i.e. differentiation.

And depending upon the cultural context, one motivation may be more prominent than the other. “Looking through a cultural lens, we find the need for uniqueness is strong in places like the U.S. and Western Europe, whereas the need for assimilation is stronger in China,” he observes, noting why some brands may falter exporting their brand of luxury into foreign markets.

Luxury brands’ differentiation value can be diminished if they grow too big or their logos are displayed too prominently. “Luxury is about low volume and high margins and if that slips, the brand goes down in status by diluting its differentiating uniqueness,” he observes. “The biggest risk to a luxury brand is to be spread too much.”

And while the assimilation motive might seem to pertain primarily to those seeking to climb the social ladder, even those at the top of the ladder want to fit into their tribe. Status signaling is a primary driver for luxury purchases to everyone up and down the social hierarchy.

‘Cogito, ergo sum’

An individual’s social status is critical to one’s personal identity and the brands they consume are a contributing factor in their identity, a variation on Descartes’ cogito, ego sum principle: “I consume, therefore I am.”

“Beyond being a signal of status, luxury brands are increasingly signals of identity. Are you a ‘Patagonia’ or a ‘Ralph Lauren’ person? And beyond being symbols of identity, they can become enablers of identity,” Dubois said.

That creates an opportunity for luxury brands to not just offer products but experiences to help craft one’s identity. He points to Panerai Xperiences Program, where for the price of a limited-edition Experiences watch, purchasers can participate in extreme sports, military excursions and other adventures. For example, Panerai collaborates with the U.S. Navy SEALs to put participants through rigorous training and immersive experiences in Florida.

Surely, being able to afford a Panerai watch says something about one’s social status, but being able to do what a Navy SEAL does takes status to a whole other level, not to mention the band-of-brothers’ camaraderie shared within the exclusive group.

Thus Panerai Xperiences meets and exceeds both the customers’ differentiation and assimilation motivations.

Psychological Risks

Despite consumers wanting the status that owning luxury brands confers, Dubois warns of a “dark side” to luxury consumption that could deter consumers. Luxury consumers at all income levels, even high-income consumers, may feel conflicted by being perceived as inauthentic and having undue privilege.

They can worry about being viewed as antisocial, selfish, wasteful and over-materialistic. Even thinking about buying a luxury product compared with a non-luxury equivalent can create a feeling of “hubristic pride.”

Thus, consumers must weigh the rewards of luxury purchasing against the psychological risks.

“Such tensions are a reminder that the vehicles of status-pursuit constantly change in step with evolving norms and values that prevail in specific groups or at specific points in time, and of consumers’ need to navigate the complicated maze of status meanings associated with a wide array of luxury and non-luxury behaviors,” he wrote in a paper entitled “The psychology of luxury consumption.”

New Respect For Aspirational Consumers

Some are born with the silver spoon of status in their mouths, but the vast majority of people who achieve financial success that makes luxury purchases possible start by aspiring to reach affluent status.

And virtually every penny luxury brands spend on marketing and advertising – a heavy investment indeed – is meant to build aspiration and desire for the brand and its products. Aspiration and luxury go inextricably together.

Yet the luxury industry uses the term “aspiration” in a disparaging way. So-called “aspirational consumers” are considered second-class customers, and “aspirational brands” are relegated to a lower tier and not in the same class as true-luxury brands.

This ignores the obvious: aspiration for status is essential to the luxury business model.

Embrace The Status Motivation

“Consumers’ enduring drive for luxury largely derives from the need for status, that is ‘respect, admiration and voluntary deference afforded by others,’” writes Dubois. “This need drives the way consumers select, use and decode signals associated with high status in the marketplace. Status ‘leaks’ from these valued signals to their depositaries,” i.e. the customers.

The BCG survey reveals a powerful drive among Millennials to display their wealth and accomplishments and to project the right image. By ignoring consumers’ status motivation in luxury purchasing or worse, looking down upon them for having it, luxury brands may be missing opportunities to connect with this generation, which Bain predicts will account for between 50% to 55% of global luxury sales by 2030.

But it’s going to take some finesse because of the conflicting differentiation and assimilation motives for consumers when purchasing luxury brands and the positive and potentially negative feelings such purchases may inspire.

“Given the large heterogeneity in what consumers consider as a luxury, tensions may emerge among different forms of luxury consumption as status symbols become increasingly complex and acquire conflicting meanings in the marketplace,” Dubois concludes.

Contributed to Branding Strategy Insider by Pamela Danziger, Owner, Unity Marketing

At The Blake Project, we help clients worldwide, in all stages of development, define or redefine and articulate what makes them competitive at critical moments of change. Please email us to learn how we can help you compete differently.

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Licensing and Brand Education

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Bernard Arnault, the mastermind behind the luxury juggernaut LVMH with a market cap of $475 billion and one who regularly swaps the title as the world’s richest man between Jeff Bezos and Elon Musk, seems to have found the answer. He is taking LVMH to the next step to shape pop culture.

He birthed the chicken – LVMH and its 75 Maisons of luxury brands – and now he is working on the egg – growing his empire of media properties and extending reach into Hollywood’s pop culture-defining entertainment industry.

Cultural Connections

Unlike other brands deeply embedded in popular culture, think Coca Cola, Levi’s, Apple or Nike, luxury brands operate on a different level. Because they live at the pinnacle of the market pyramid, luxury brands are by definition psychologically aspirational for most consumers.

Like other brands, luxury is a means for self-expression, but they come loaded with additional messages that resonate in a broader societal context signaling wealth and social status. At their core, luxury as a concept is a social construct framed by individual brands, widely recognized and often coveted. And not all luxury brands signal equally. Driving a Mercedes Benz sends one signal about the owner, driving a BMW, an Audi or a Landrover another.

Most luxury fashion brands have a tenuous hold on popular perception and have to reinvent themselves every season to please trend-driven customers. Yet a rare few have established a prominent place in the cultural milieu, including Hermès, Chanel and LVMH’s Louis Vuitton and Christian Dior. Their archetypal identities have been established not just through marketing and advertising, storytelling and legacy but with ties to the arts, creative culture and prominent cultural icons made famous through the media, personified by actors, artists and other prominent individuals and tastemakers.

Luxury has a co-dependent relationship with its loyal customers and pop culture at large, and Bernard Arnault knows better than anyone how to make it work for his and his luxury brands’ benefit. He is becoming an influential content impresario.

Arnault’s Media Empire

Arnault has been acquiring media properties since the early 90s, according to testimony he gave before the French Senate in 2022. The titles cover finance, daily news and classical music, including Les Echos, Le Parisien, Connaissance Des Arts, Investr and Radio Classique. They report under LVMH’s Other Activities segment, along with the company’s hospitality holdings, and are a rounding error in the company’s $94 billion (€86.2 billion) balance sheet.

Other Activities brought in a mere $353 million (€324) last year and lost more, $446 million (€409 million). Nonetheless, Arnault wants to add Paris Match to his media empire. Match is a weekly lifestyle magazine heavy on political and celebrity profiles. It’s known for the quality of its photojournalism, so Paris Match has natural ties to image-heavy luxury brands.

Arnault is said to be offering over $100 million to acquire Paris Match from parent company Lagardère. Business and political advisor Alain Minc shared with WSJ that owning media properties is a way for their owners to “feel the vibrations of society.” Instead, it’s a way for them to set the cultural vibrations in motion.

Strengthening Ties to Hollywood

In another culture-shaping move tied more directly to advancing the interest of LVMH’s luxury brand holdings, it just launched a division dedicated to deepening ties with the entertainment industry. It’s called the 22 Montaigne Entertainment group under Anish Melwani, chairman and CEO of LMVH North America. The group is partnering with U.S.-based Superconnector Studios to extend LVMH’s reach into audio, television, movies and other media.

The goal of 22 Montaigne Entertainment is to give producers a single point of contact to LVMH brands through the conduit of Superconnector Studios, whose stated mission is to help brands to “find new ways to reach customers and drive revenue in a world where ads have never been popular.”

Superconnector Studios was founded about a year ago by advertising veteran Jae Goodman and former CAA agent and producer John Kaplan. Positioned as a strategic business consultancy, not an advertising or production company, Goodman told Fast Company: “I think the real goal for Superconnector Studios is about making content that both attracts and engages a part of the overall business strategy for everyone from the largest companies in the world to startups by really leveraging the experience, expertise, and [industry] connections that we’ve developed over 20 years at the intersection of advertising and entertainment.”

Superconnector will work hand in hand with LVMH’s Melwani to go beyond product placements to content creation. Melwani was inspired by watching the Dior and I documentary he caught early on in his days with LVMH on a flight from Paris to his New York base – he joined LVMH in 2016 after working 16 years as a McKinsey senior partner. Having had similar projects cross his and other executives’ desks in the past — a film based on the Tilar J. Mazzeo book, The Widow Clicquot and a documentary on Tiffany & Co — it was time to create an easy way for producers to access LMVH brands and lend their creative storytelling expertise to the brands. “There are great storytellers in the entertainment business who are interested in telling stories that are connected to each Maison; we want to make it a little easier for them to find us,” he shared with Deadline, adding, “Entertainment storytelling is a different métier, a different skill than what we are good at.”

He knows the value to LVMH of blending the entertainment industry’s storytelling skill set with the company’s own product and marketing-specific storytelling skills. Describing 22 Montaigne Entertainment as an “experiment,” he doesn’t see LVMH going to Hollywood with its checkbook open to finance productions. Rather, Superconduct Studios are opening the door for producers to come to LVMH with their creative ideas. And given the autonomy that each of the LVMH Maison’s have in controlling their brand image and operations, they will make the final decision about moving a project forward, or not.

“22 Montaigne Entertainment is going to be an organizing vehicle to get projects from great storytellers to the right Maison,” Melwani said. “All the creative decisions, even the decision to participate or not, will stay with our Maisons because we incentivize them and we structure it so that they are the keepers of their Maison’s DNA, heritage and IP.”

Brand Storytelling Goes to the Next Level

The formation of 22 Montaigne Entertainment follows LVMH’s chief rival, Kering owner Francois-Henri Pinault’s purchase of a majority stake in Hollywood’s premiere talent agency Creative Artists Agency (CAA). The Pinault family holding company, Artemis, purchased 53 percent of CCA shares from private equity firm TPG, though no financial deals were reported.  

Kering, which owns Gucci, Balenciaga, Yves Saint Laurent and now a 30 percent share in Valentino, is an also-ran compared to LVMH, generating $21 billion (€19.6 billion) last year and with a compound annual growth rate (CAGR) of 3.4 percent from 2019 to 2023 compared with LVMH’s 10.6 percent.

And the Pinault CCA investment is a more traditional model, while LVMH’s alignment with Superconnector Studios is more ground-breaking, offering an innovative new ecosystem to engage with the entertainment industry.

Rising Star

Melwani admits that at these early stages 22, Montaigne Entertainment doesn’t yet have a clear vision for where it might be in ten years. He and his team will learn as they go, under the expert guidance of entertainment insiders like Superconnector’s Goodman and Kaplan. But one thing is certain: it is intended to extend the reach of LVMH and its stellar cast of luxury brands deeper into culture.

“At LVMH, we view each Maison as a house of stories, a distinct creator of culture. We embrace the belief that these narratives are meant to be experienced rather than simply told and our goal is to further leverage premium entertainment as a means to share the richness of these tales with our consumers,” Melwani concluded.

Contributed to Branding Strategy Insider by Pamela Danziger, Owner, Unity Marketing

At The Blake Project, we help clients worldwide, in all stages of development, define or redefine and articulate what makes them competitive at critical moments of change. Please email us to learn how we can help you compete differently.

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Licensing and Brand Education

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Lovesac’s LOVE +1.8% advance is remarkable, given that furniture retail revenues dropped 5.7% in 2023 to $75.2 billion from an historic high of $80 billion in 2022. And the home furnishings retail sector continued to slide in the first quarter 2024 from previous year, according to CNBC/NRF retail monitor.

Lovesac’s topline performance is even more remarkable when set against its competitive set. RH RH +1.3% just reported annual revenues were down 16% and Haverty’s were off 18%. Williams Sonoma’s Pottery Barn ended the year down 10% and its younger sibling West Elm dropped 19%. Arhaus bucked the trend with revenues advancing 5%, but still fell shy of Lovesac.

No Love From Wall Street

Yet Wall Street wasn’t happy with Lovesac’s results. Its stock price dipped from $24 and change last Tuesday before earnings to close just under $20 on Friday.

Despite a 17% gross profit improvement for the year, operating expenses rose 21% and net income dropped 10% to $24 million and it reported a 7% decline in adjusted EBITDA to $54 million.

In a statement, founder and CEO Shawn Nelson reassured investors that he has the company’s future well in hand:

“Interest in – and passion for – the Lovesac brand, from new and existing customers alike, continues to grow. We will fortify our momentum by doubling-down on what we do best: Strengthening our unique omni-channel infinity flywheel, reinforcing our designed for life platform, investing in genuine innovation and making the strategic investments necessary to profitably scale our brand and business for years to come.”

But then the instant-gratification investment community isn’t big on big pictures, so I reached out to Nelson to have a big-picture discussion around his new book Let Me Save You 25 Years: Mistakes, Miracles, and Lessons from the Lovesac Story, published by Forbes Books.

And I, for one, believed him when he said, “Lovesac enters fiscal 2025 in a position of strength with a truly massive opportunity ahead.”

A Different Kind Of Furniture Company

What confounds the investment community most about Lovesac is how different it is from traditional furniture companies. But that difference makes it such a compelling choice for its prime target customers – what Lovesac calls “young parent want-it-alls,” upper-middle income HENRY (high-earners-not-rich-yet) consumers aged 25 to 45.

From its beginning 25 years ago, Lovesac has been a youth-minded brand with Nelson creating beanbag chairs for his college buddies out of his parent’s basement. They were called beanbags, though they were filled with foam, not plastic beans.

As Nelson grew up, so did Lovesac. The original Sac beanbag chairs got bigger and softer and spawned ottoman “babies.” Sacs are still offered, although they bring in less than 10% of sales.

“We’re still called Lovesac even though we’ve escaped beanbags,” Nelson shared. “Our name is beautiful thing. If you hear it once, you’re not forgetting it. That’s powerful and it’s a name that can go lots of places”

The company’s current flagship is its Sactional line, a next-generation modular sectional coach with machine washable covers, which was launched in 2006. The success of that innovation opened the door for branded showrooms in 2014, an IPO in 2018, and in 2021, Lovesac added surround sound embedded into its Sactionals, calling it StealthTech.

It operates an inventory-light model with some 230 small, strategically placed showrooms in close proximity to its best customer prospects. This year, it will add another 30, as it sees a runway to more than 400 showrooms over the next five years.

Another advantage is Lovesac’s product line is focused, not spread over multiple categories, and it can deliver customized pieces within days, not weeks or months as typical for other furniture companies.

Besides its showrooms and direct-to-consumer online portal, Lovesac has partnered with Best Buy BBY -0.8% and Costco for temporary shop-in-shop presentations. Last year Costco hosted pop-up roadshows in nearly 150 locations and this year it will increase its Costco presence by almost 50%.

Designed For Life

What makes Lovesac an authentically disruptive furniture company is its “Designed for Life” philosophy. Rather than designing furniture to suit the season’s color and style trends – to look good – Lovesac designs furniture with a greater purpose.

A couch’s essential function is to be the central piece of furniture in a room where people gather and relax. In other words, people can live their full and often messy lives with kids, pets and pizza parties on their Lovesac.

“Lovesac Sactionals stand up to life better than our competitor’s couches do. If you are going to invest so much in a couch, then Lovesac is a much more practical purchase,” Nelson observed.

Sactionals are designed to last a lifetime and evolve as the customer’s needs change, which they always will. Sactionals can be added to, subtracted from and reconfigured. The covers can be washed and replaced repeatedly.

Sactionals aren’t cheap – a loveseat for two starts around $3,000 – but the price is easily justified by its design flexibility. It won’t end up in a landfill and an added value is that all fabric used in its Sactional and traditional Sac products are made from 100% repurposed plastic bottles.

Sactionals bring in nearly 90% of company sales and generate significant repeat and add-on purchases. Lovesac acquired 155,000 new customers this year, adding to the 134,000 new customers the previous year. And they can be expected to come back and buy more. Repeat customers accounted for 43% of the company’s transactions during the recent fiscal year.

For example, last year the company introduced an angled arm and back component, a step up from its original flat back and side design. That enhancement brought customers back for a comfort upgrade.

And this year the company will enhance the embedded surround sound Stealthtech offering. Customers that choose StealthTech generate nearly three- times the average Sactional order value.

A Bigger Long-Term Vision

Nelson sees great things in Lovesac’s future, as it has barely scratched the surface of its potential, holding only about 1% share of the total $41.7 billion couch, seating and chair addressable market. And its StealthTech Sactional gives it inroads into the rapidly growing $46.2 billion home audio market.

He plans to take the “Design for Life” philosophy into new categories shifting from a DTC business model to what he describes as a “Circle to Consumer” (CTC). Its fulcrum is designing other modular products that can evolve with customers’ lifestyles and that are built to last a lifetime.

The CTC model will be truly sustainable by eliminating waste at the manufacturing and consumer end of the product lifecycle. And it will help Lovesac continue to build long-term, ongoing relationships with its customers.

“We had the chicken before we had the egg. The chicken is the Sactionals; the egg is ‘Designed for Life.’ Now we will continue to invent ‘Design for Life’ products forever,” he boasted. And the company holds some 74 patents, proving it has the engineering competence to keep product innovations coming.

Brand Influences And Influencers

Besides serving as the company’s CEO and on its board, Nelson is Lovesac’s chief philosophy officer. He holds a Master’s degree in strategic design and management from NYC’s Parson, New School for Design and gives back as a graduate-level instructor there.

The late Steve Jobs inspires Nelson as a visionary entrepreneur and Apple as a design firm. And he has been mentored by Richard Branson.

After winning a $1 million prize on Branson’s The Rebel Billionaire show in 2005 – money he pumped back into Lovesac – he spent three months working at Virgin Atlantic and brought back what he learned there to Lovesac.

Designing A Different Kind Of Business

In his Let Me Save You Twenty-Five Years book, Nelson is very candid about the mistakes he made along the way, but as they say, you learn more from your failures than your successes.

“We probably could have gotten where we are ten years earlier, if I had known then what I know now,” he revealed.

“People get into business for a lot of different reasons. It’s all about how you’re wired and your motivation. Businesses can and should generate wealth, but for me, it has to transcend that: to become a force for good in the world beyond just being a money machine. It requires soul,” he continued.

His core idea is “to inspire humankind to buy better stuff so they’ll buy less stuff,” and he admits, “That’s a weird thing to hear from the CEO of a public company.”

“My calling is to use this corporate instrument to deliver products that are better because they were designed that way. And they may not be the cheapest, but even people on a budget will choose to afford them because they’re loaded with value.”

Nelson intends to do that with firm disciple – “We’re not international yet” – and to keep focused on creating the best. “There are companies a fraction of our size that have expanded in a million different categories. That’s not us.”

“We’re trying to build a brand that’s associated with the best stuff and if we do that, the natural outcome is sustainability,” he shared, as he envisions another twenty-five years or more ahead to realize his personal and company’s mission.

Contributed to Branding Strategy Insider by: Pamela Danziger, Owner, Unity Marketing

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Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Growth and Brand Education

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A lifestyle brand is generally defined as a brand that connects on a deep emotional level with customers by reflecting their values, aspirations and attitudes. In fact, this emotional IQ is so powerful that the customer can say the brand “gets me, understands me” and in some existential sense, “is me.”

A rare few reach that level, namely megabrands with mega-advertising budgets like Nike, Levi’s, Ralph Lauren, Patagonia, Wrangler Jeep, Louis Vuitton, and Apple. But far more brands claim the honor without having earned the right from the people who matter most: customers.

Living The Dream

One brand has reached lifestyle brand status, operating largely under the radar for years without extensive advertising or carefully calculated marketing strategies: Tommy Bahama. It’s a lifestyle brand embodying the authentic tropical island experience. It’s for those who work hard and play hard and who want to keep that vacation feeling all year long. The brand has succeeded by “putting a little sand into everything we do,” as CEO Doug Wood says.

Tommy Bahama covers all the bases that typically characterize a lifestyle brand, including apparel, home, spirits, restaurants and now a branded resort. Instead of following a top-down lifestyle marketing strategic playbook, Tommy Bahama let the brand grow organically bottom-up from its fashion roots into what it has become.

Island Lifestyle

Tommy Bahama was founded in 1993 by fashion industry buddies Bob Emfield, Tony Margolis, and Lucio Dalla Gasperina after lounging on the beach and dreaming of what life would be like if they could vacation forever. The brand’s flagship colorful silk men’s camp shirt was the initial foray.

“We make the greatest men’s silk camp shirt in the industry,” claims Wood and most would agree. “We have great fabrics and fit; we have quality and attention to detail. We don’t cut corners. That’s what kept us around for over 30 years. Our guests love it.”

Tommy Bahama became an immediate hit with those who wanted to experience a virtual tropical vacation. More casual men’s fashions followed under the same rubric and then demand grew for Tommy Bahama to dress the ladies too.

Today, men’s fashion remains the brand’s flagship, accounting for about two-thirds of its apparel business, with women’s making up the other one-third, but women’s is growing faster. “We think women’s can be as big if not bigger than men’s. The real upside for the brand is to keep building women’s,” he said.

And as the brand explores new categories in fashion, including advanced technical fabrication, men’s shorts, and pants, swimwear, and dresses, it is relying less on the camp shirt to bolster sales. Wood reflects that when he joined the company in 2001, the camp shirt accounted for about 80 percent of sales; now it is only about 5 percent. “We’re not a luxury brand, but certainly we are affordable luxury. You have to reach for us a little bit,” he maintains.

Opportunistically Experiential

Before anyone talked about jargony experiential retail, Tommy Bahama was doing it, and it happened by happenstance. Following the brand’s overnight success through wholesale distribution, in 1995  the founders decided it was time for a Tommy Bahama store. After scouting around for a suitable location, they found one in Naples, FL, conveniently located close by where they lived. The problem was the landlord offered them 10,000 square feet when all they needed was 2,000.

Impulsively and with no prior experience, they decided all that extra space would be great for a restaurant and bar. And so, the Tommy Bahama food and beverage division was born. That caught on quickly, and today the brand’s 21 food and beverage locations generate over $100 million in business. Typically, they are located next door to a Tommy Bahama retail store, which now numbers over 160 locations worldwide. And the company has plans to continue opening new Marlin Bar locations in fiscal 2024.

Interestingly, Wood notes that business in the stores and in the restaurants doesn’t necessarily connect; some days the stores may be down and the restaurants up or vice versa. “I’ve watched this trend for 23 years now and what happens in food and beverage doesn’t correlate with what happens in retail, but they work so well together.”

He credits the difference to the fact that people eat, and drink more often than they buy clothes, but in the end, “We win because the guests are choosing to spend their time with us in an environment, we created for them. That’s a great indicator to me of the brand’s strength.”

Taking Experiences To The Next Level

Playing to the brand’s success in food service, the next iteration is the Tommy Bahama resort, which opened last November. “To be a true lifestyle brand, you have to have products and experiences that allow guests to immerse themselves in your brand. The resort is simply an extension of that,” Wood says.

Located in the Southern California Santa Rosa Mountains, just outside Palm Springs, the newly renovated Tommy Bahama Miramonte Resort was originally opened in 1963 as the Earwan Gardens Hotel. The property is jointly owned by Oxford Industries, which acquired Tommy Bahama in 2003, and Lowe, the real estate development firm.

Lowe will lend operational support through its CoralTree Hospitality Division. Tommy Bahama’s executive vice president of restaurants, Robert Goldberg, who has an extensive resume in hospitality, including years with Hard Rock Cafe Group, is managing the resort from the brand side.

The resort includes all the required luxury resort amenities, including a spa, saltwater swimming pools, acres of olive trees and citrus groves, a new signature restaurant and bar, and a store offering exclusive products unavailable elsewhere.

“We’ve been dreaming of a resort for decades, but it had to be in the absolutely right location,” Wood observes. “It’s difficult to find a great retail space and even harder to find retail space with a restaurant opportunity. And it’s nearly impossible to find a resort property in the right market that is available to purchase.”

Wood expects the first Tommy Bahama resort to be a concept test with others to follow. “We’ve got to get this first one right because we are asking people to give us their most precious thing: their vacation,” he says.

“When someone comes to the website, they’re going to spend six or seven minutes with us. If they are coming to the store, they may average 15 to 30 minutes, and if they come to the restaurant, it may be 45 minutes to up to two hours. In the resort, we are asking them to spend three, five or seven nights with us. It’s a longer-term commitment.

“We believe the payoff will be huge, but there are downsides to this type of adventure. If we blow it, guests won’t come back. The resort raises the bar for the brand, and by innovating like this, we’ve grown and thrived over the last 30 years,” he explains.

Open For Business

Strategic brand licensing has allowed the Tommy Bahama brand to extend its island lifestyle further. Rather than use licensing to establish its lifestyle credentials as other brands might, its philosophy is that brand licensing only works after the brand is fully established, not before. And then, through the product-specific expertise of its licensees, it can broaden its reach and extend its vision into areas that matter for its customers, say, beach chairs.

Costco approached the company in 2009 with the idea of creating Tommy Bahama beach chairs. The co-branding idea didn’t sit well at first since the Costco warehouse image didn’t fit the brand; yet a beach chair was a match. So, the company took a chance and 20 million beach chairs later, it’s been a huge hit. “If you’re on a beach anywhere, you’re going to see one or many of our chairs,” Wood boasts and says the company will sell at least two million more chairs this year.

Airstream was another opportunistic licensing opportunity after it came to Tommy Bahama with an idea for branded RVs. “We designed the interiors and the look and feel of them, and it’s been crazy successful,” Wood says and adds that occasionally proud owners ask to park their RV in a store’s parking lot. They then give interested guests a quick tour. Talk about word-of-mouth marketing — priceless.

A selection of Tommy Bahama branded fine spirits, including vodkas, rye whiskey, rum, and gin, followed as did a high-end furniture collection with Lexington Home Brands that is now a $160 million business. “Furniture is the most expensive product we make, and we have licensed home stores in a number of locations. It’s been a phenomenal business for us,” Wood says.

The range of Tommy Bahama licensees includes indoor and outdoor furniture, bedding and bath linens, fabrics, leather goods and gifts, headwear, hosiery, sleepwear, shampoo, toiletries, fragrances, cigar accessories, and more.

“Last year, Tommy Bahama generated $880 million in revenues for Oxford Industries, but at retail, it is much closer to $1.7 billion, including all the things that we sell with the Tommy Bahama name on it,” Wood says and adds the company should do upwards of $900 million this year.

Natural Evolution

Becoming a lifestyle brand is an evolutionary process, not a carefully calculated strategy. It starts with a brand expression – the “style” in lifestyle that consumers naturally self-select and want to make a part of their lives – the “life.”

As with any natural evolution, it’s a living process with consumers determining how well the brand adapts to the retail environment. With fluid as the operative strategy, a living brand makes incremental changes, and when successive mutations work, the brand achieves more staying power. It’s the retail version of Darwin’s theory on natural selection.

Throughout the brand’s 30-year lifespan, it’s been guided by an imagined person – Tommy Bahama, a persona that the entire team breathes life into. They think and act like Tommy; what would Tommy do, and what would Tommy want?

“For us, it’s about trying to hit all the different parts of the person’s life where they want to bring the brand into their lives,” Wood concludes. At its core, a lifestyle brand is alive, not a theoretical construct that is run out of the marketing department. It’s a living, breathing embodiment of a person’s life, values, aspirations, and attitudes.

As Dr. Martina Olbert, arguably the world’s leading expert on brand meaning, says. “People don’t need brands to tell them how to live their lives. They just need to live their lives. And they only use brands to complement their lifestyles wherever they see fit — in ways that add value to them. And not the other way around.”

Contributed to Branding Strategy Insider by: Pamela Danziger, Owner, Unity Marketing

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