"It allows us to gain prime retail locations at relatively low costs," says Bernard Arnault, CEO of French firm LVMH, on being a pioneer in a new market. If you plan to target niche markets, it makes sense to aim for one that's on the rise. We look at three companies taking this approach.
Silver surfers, affluent Chinese, or the virgin territory of Mongolia – three companies explain why they plumped for a particular demographic in the luxury goods market.
When Targeting Niche Markets, Go for grey
With an ageing global population, and the spending power of 65-year-olds growing fast, designing products for this market makes sound common sense.
Add to that the fact that many older consumers are unable to access the internet – and coming up with an ultra user-friendly computer to help them get online seems like a no-brainer.
SimplicITy Computers is tapping into this market with its SimplicITy Envelope touchscreen computer. The Envelope has a screen split into four large triangular sections, one for each of the main functions – mail, internet browsing, documents and tutorials.
"All our research has shown that the vast majority of people initially only want a computer to send emails, browse the web, write documents and save photos. So, we start off with a computer that does just that," says Nigel Houghton, SimplicITy’s MD.
Make experience your currency
Johnnie Walker House opened in Shanghai's Sinan Mansions in 2011. Its aim was to attract wealthy Chinese businessmen who want to drink in not just the whisky itself, but also the history, brand and culture.
There are displays, events, lectures and masterclasses. Visitors come away with status-enhancing information they can use to impress their equally well-off peers.
Diageo says it has made a strategic investment in the future of the iconic Johnnie Walker brand, revolutionising the whisky experience in China and using innovative marketing to "open a new chapter in the enjoyment of whisky and whisky culture".
While Scotch sales are growing at 8% in Asia Pacific, Diageo's portfolio is growing at double that rate, gaining a share in every market across the Asia Pacific region. In China, the trend towards premium products has driven rapid growth in luxury brands, such as Johnnie Walker Blue Label.
Look far from the beaten path
Mongolia might seem far down the investment list for luxury goods companies. But French firm LVMH, which has opened two stores there, has a reputation for long-term thinking.
"Vuitton has always been a pioneer," says CEO Bernard Arnault, who has long made a crusade of bringing haute couture to the developing world.
By opting for Mongolia, Arnault isn't betting on the population, which numbers only 2.8 million and is outnumbered 16-to-1 by its livestock. Rather it is on the country's vast mineral wealth. The region includes China's richest city, Ordos, and has a culture that values the conspicuous display of wealth.
LVMH opened its first store in Ulan Bator in 2009, and has now been followed by Burberry, Zegna, Emporio Armani and Hugo Boss, who have set up shops in the same mall.
While there are risks for the pioneer, these are outweighed by being the first mover. "In particular, it allows us to gain prime retail locations at relatively low costs," observes Arnault. As his Ulan Bator store is already profitable, his move has paid off.