The luxury industry is a notoriously hard nut to crack.
With the emphasis on quality and exclusivity, starting up a luxury business demands considerable investment. Most MBA graduates prefer to work with big name brands – Louis Vuitton, Gucci and Chanel – rather than break into the industry with their own business ventures.
While it is difficult, it's not impossible. BusinessBecause spoke to five MBA graduates who had done it to find out ten key steps to take when starting up your own luxury brand.
1. Know your industry
The luxury industry is not like other industries.
“Luxury is more curated, and more specifically tailored in its care, and communication,” says Mario Alberghini, a MBA graduate from Italy’s Bologna Business School who this month launched his own luxury menswear store - Le Tigre Uomo – in his native Puerto Rico.
“The style of the brand has to be well thought out, and messages have to be very consistent,” he says.
In the luxury sector, heritage is hugely important and competing with the top brands - some who’ve been around for over 100 years - is a challenge.
“It’s also harder than starting a business in other sectors because your target customers are in a higher price segment which is harder to reach,” says Sebastian Kumeth, who started up his high-end coat brand - KUMETH - after an MBA at Grenoble École de Management.
Although it is difficult, it is not impossible. If you have an idea for a luxury brand, where do you start?
2. Do your homework
“You have to start with research,” says Mario (pictured below). “Ask yourself what is the problem you are trying to solve; what need are you satisfying that has not been met or has significant room for improvement.”
“You need to know your market, product and consumer,” she says. “Through market research you can define your business model and identify your competitive advantage.”
3. Be Unique
“I found a niche where we serve to the modern woman’s needs,” says Esin Akan, an EMBA graduate from London Business School who set up her eponymous luxury business selling fully customizable handbags.
“We wanted to make one bag that you can take to the office, to an evening party and even to the gym, so you can feel stylish and confident in every setting,” she says.
4. Have a story to tell
“Storytelling is at the heart of luxury and having your own will help create your ‘heritage’,” she says.
Behind KUMETH coats is an inspirational story about the ancient Inuit tribes of the Canadian Arctic Circle whose meticulously designed parka-style coats identified each tribes-member by rank.
Sebastian calls it “selling the dream.”
5. Secure your investment
A unique product with an exciting story to tell will make you stand out to investors.
“You can look for the funds from seeds, angels, venture capitals or banks,” says Lily. “Every fund has its character. A good resource can be a big plus for your business.”
How much money you’ll need will depend on the product, but establishing good relationships with investors is crucial.
Networking is critically important at all stages of the business building process.
A decade-long career in fashion and luxury working for top brands like Levi and Burberry helped Esin (pictured below) develop a strong network of industry connections prior to her EMBA.
What she lacked, she made up for setting up her handbag label in the LBS start-up incubator.
“More than the space, it was about the people you were with,” she says.
Working from home and with a newborn baby to look after, Esin’s network of business connections has been a vital resource: “I outsource all the functions I’m not good at.”
7. Market your product
In the luxury industry you have to manage marketing channels with extra care.
While the use of social media may attract a new, younger customer-base, Sebastian warns that regular, more traditional clientele may be put off if their favorite brand loses its sense of exclusivity.
Another way to gain exposure is to find a celebrity to wear or carry your product.
“This is also tricky,” says Sebastian. “Firstly, you have to get them to wear it, then they have to somehow be photographed or interviewed with it on.”
8. The China Dilemma
China is a huge market. According to a 2015 Bain & Co report, Chinese consumers account for 31% of global luxury sales.
Yet going into China is not easy.
“You need need to be very well prepared,” Esin warns. “You need to protect yourself; know the market, get all your design rights and collaborate with the local authorities.”
9. Plan for the future
With increasing digitization and a consumer shift away from big brand names, new opportunities are beginning to arise in the industry.
10. Learn from your mistakes
“The biggest mistake is to have the fear of making mistakes,” says Sebastian.
The life of a luxury entrepreneur is full of minor setbacks and failures. The trick is to recover from them, learn from them and get out there and build your brand.