Speculation that Apple is set to launch a low-cost iPhone aimed at emerging markets highlights a dilemma facing many luxury and premium brands. Should luxury brands target the emerging middle class consumer and risk losing their exclusivity? Will the short-term gain in sales revenue undermine the brand’s long-term profitability? The trade-off between accessibility and exclusivity has emerged as a luxury dilemma.

Apple’s failure to capture market share in emerging markets can be certainly viewed as a lost opportunity. Millions of consumers in high-growth markets such as China and India belong to the newer affluent classes that are aspiring to owning luxury and premium brands. However, many brands are still not within the financial reach of these aspirational consumers. These are consumers who desire the performance and the aura of a luxury brand but at a lower price point. A low-cost iPhone would arguably give these consumers affordable access to owning an aspirational brand.
This raises the question whether a luxury brand can be democratic and exclusive. Traditionalists may argue that a luxury brand is no longer luxurious if exclusivity is compromised. This is a compelling argument but contemporary luxury has since created different levels of accessibility and thereby exclusivity. For example, teenagers can buy an Armani Exchange t-shirt for less than $30 whilst a Giorgio Armani suit has a retail price in excess of $1,500. Burberry is another example in which the brand has extended its appeal to a broader range of income and lifestyle segments. Burberry Brit appeals to the younger and fashion brand conscious whilst Burberry Prorsum serves the up-market segment that demands quality, heritage and style.

What is the glue that enables global luxury brands such as Armani and Burberry to reach out to essentially mass markets is their unique and distinctive brand story. Whether consumers purchase a Burberry fragrance, scarf or trench coat, they are buying into the intrinsic values of ‘Britishness’ that are integral to the brand’s DNA.

The increasing accessibility of luxury has created new market opportunities and this is of particular relevance in emerging markets. The democratisation of luxury opens a window of opportunity for consumers to gain a first and a very real-life interaction with the luxury brand. The battle to win over the future luxury consumer is based on building relationships early rather than later.

For example, Indian women who are pursuing successful careers may spend a significant proportion of their monthly salary on a selection of Chanel beauty products. This enables consumers to experience the aesthetics and dream value of a French luxury brand. It is these same consumers who will eventually trade-up to acquire more expensive Chanel items such as shoes and bags as soon as their financial situation improves.

For instance, Audi, BMW and Mercedes Benz have introduced models at the lower end of the price spectrum. The aspiring luxury consumer is able to access an affordable Audi A6 which could serve as a bridge to more luxurious models such as the R8 in the future.

As the luxury market continues to flourish in emerging markets, luxury brands need to strike the fine balance between accessibility and exclusivity. Luxury brands that engage and connect with the emerging luxury consumer will gain an early competitive advantage.
It would be a mistake for luxury brands to aim for the middle ground. However, if a brand is able to make luxury accessible to the emerging middle class consumer without eroding the aspirational appeal, the long-term rewards will be significant. Apple’s low-cost iPhone may indeed be a template for growth in emerging markets.