The anti-democratization of luxury

Everybody’s heard about the democratization of luxury, etc. etc. An interesting counter-narrative to this conventional wisdom could be written by someone, on the subject of how luxury resists democratization, and it might include a section on Tiffany’s.

In an article on Tiffany’s yestersday, The Wall Street Journal told the story of a silver charm bracelet, priced at around $100, that was introduced in 1997, “to address the then-emerging trend toward affordable luxury.” The bracelet was “a sensation.” That was good news for Tiffany’s. For a while.

Within a few years, the company’s managers became “concerned about the crowds in Tiffany’s suburban stores.” Company research found that “Tiffany’s brand was becoming too closely associated with inexpensive silver jewelry.”

So they started raising prices on the bracelets, first to $175. People kept by buying them.

This in and of itself is pretty interesting. Tiffany’s seems to have enjoyed amazing pricing power — as far as I can tell, that boost amounted to pure profit, and there was no improvement to the product, but people were buying anyway.

By 2004 the price was up to $250, and sales finallly died off. (Interesting to speculate how much of that was actually price-related and how much had to do with a fad running its course.) That, it seems, was Tiffany’s real goal: getting rid of the affordable-luxury riffraff, to protect their not-so-affordable luxury image. The Journal‘s Ellen Byron writes:

At its flagship New York store, Tiffany began inviting its best customers to observe artisans creating one-of-a-kind jewelry in its storied seventh-floor workshop, which is closed to the public.

Now, Tiffany can boast that its biggest sales growth in the U.S. came from sales and transactions over $20,000 and over $50,000. In the most recent quarter, sales in stores open at least a year grew 4% over the year before, with the newly renovated New York flagship posting a gain of 13%.

Still, as the piece notes, Tiffany’s challenge isn’t over, as it continues to walk a line between expanding (it’s up to 64 stores in the U.S.) and still seeming exclusive. Here’s a link to the whole article, but you have to be a subscriber for it to work — and in that case you’ve probably already read it.