Wednesday 2 December 2009

Luxury Briefing: Google vs LVMH

Google vs. LVMH, by Alexander Gallé, is a column published originally in Luxury Briefing's December 2009 edition.

Google vs. LVMH
by Alexander Gallé

2009 will be remembered as the year luxury giants piled up the lawsuits against the internet giants. First came eBay, then Google.

In a recent column, I took eBay's side in the ebay vs. LVMH case, presenting eBay as a modern-day saviour of the free market system, the very thing that ensured the success of the luxury industry to begin with. Some readers responded that the basic flaw of the free market is that it only works in a 'perfect information' environment. Simply put, the point made is that true demand / supply equilibrium can only be achieved when consumers have all the information about the options at hand. This has long been the ground for accusations made against the advertising industry: that it distorts the information presented to the consumer.

In this column, I argue that what is true for goods and services is equally true for information: a free market in information ensures near-perfect information, much in the way that the free market ensures a near-perfect match between the supply of goods and services and what people actually want.

Let's imagine, for example, that a documentary comes out explaining some horrible method of producing everyone's favourite food. Having watched the documentary, opponents of the free market will immediately call for tough regulation to ensure new standards in food production.

What they are forgetting, however, is that the documentary itself is a product of free entreprise: a producer sees an opportunity to produce a documentary that everyone will want to watch - which means he will sell it to many TV channels and get a high return on his investment - and invests in getting the best possible information to make his case, invests in cameras, cameramen, etc. The documentary is made, lots of people see it and make up their own minds as to whether they still want to consume their favourite food. The market in everyone's favourite food is then adjusted accordingly. Problem solved.

Of course, not every product or service on the market deserves a documentary. Some things just require lots of press articles, or academic papers, or opinion pieces, or blogs, or other forms of cheaply-produced information. As the free market, via the web, supplies all this information, we find that some of it is very valuable, and some of it less so. A measure of information value is called for. That measure is relevance.

Enter Google: the search engine that ensures the highest possible relevance in relation to consumers' information requests.

A quick description of Google's services. Google has turned the web into a questions-and-answers medium. Users type a question in the form of keywords, and they receive an answer in the form of links to various websites that all claim to address the subject of enquiry.

Google's way of measuring relevance is two-fold.

First, the website publisher makes a claim in his website's meta-data that it is about a particular subject, by attaching keywords to it. Google measures the frequency of said keywords in relation to the website's actual content. If this frequency is high, the site is deemed more relevant.

Second, the website is linked to by other websites, by other people who find its content useful or interesting. Google values this type of relevance the way an academic paper is valued when many people refer to it in their own work: the more people quote you, the more important you become. According to Google, the more people link to you, the more important you become.

The usefulness of this method of sorting has proven itself by the very fact that Google became, without advertising or substantial PR activity, the preferred search-engine for hundreds of millions of web users. You only have to cast your mind back to the mid-to-late 90s - the pre-Google era - to see the value of this service, which is provided to the world in unlimited quantities entirely free.

Now, Google operates in a free market. Just as we do not expect bakers and butchers to provide bread and meat out of some charitable sense of duty to society, we do not expect Google to do this work unpaid either. Google's source of income is in the paid-for search results. Google makes no claim that this information is not paid for: the paid-for search results are separated, and highlighted in a different colour to the rest of the algorythm-generated content. It is, in other words, not Google undermining the integrity of the information by telling you this paid-for information is relevant to the keywords you entered, but the people who paid for it.

LVMH are now suing Google because some of the (mostly paid-for) search results come from vendors of counterfeit goods. But suing Google is suing the messenger, or the postal company, who delivered a letter with bad news. If LVMH is in the mood for suing, let them sue the people who paid for the keywords. If their claim is that there are too many to monitor, let them create their own search engine to track them all: the data is as accessible to them as it is to Google. They may not even need to do much of the tracking work themselves: if they think consumers are up for denouncing the vendors of counterfeit goods, let them create a simple peer-to-peer network that will enable consumers to report the vendors.

This will ensure that the information - the vital ingredient that ensures market recognition of the superior quality claimed by LVMH and other luxury brands - remains free-flowing and, of course, near-perfect. |

Thursday 3 September 2009

Luxury: the YouTube way

Luxury: the YouTube way is a column written by Alexander Gallé for Luxury Briefing's September 2009 edition.

Luxury the YouTube way
by Alexander Gallé

My last column (Ebay vs. Luxe) got quite a bit of response, and a few people seem to have taken to the argument's main point: Ebay is a free market and everyone benefits from keeping free markets free, including the luxury sector, which is itself a product of that free market.

However, quite a few responses were made along the lines of "yes, it may be a product of the free market, but now that it exists it should be protected from the free market where and when the latter is proven to be a threat to the sector".

This response assumes that today's luxury industry is the best it can possibly be, that no evolution in this sector is possible, that it is the final answer to the long evolutionary path that has taken it to this point. The outlook is akin to the one that argues human beings today are the be all and end all, the end point of the biological evolutionary path that has led to our current DNA structure. Are there that many people who believe today's luxury sector is providing the best possible version of anything a consumer might possibly want or need?

Let's illustrate how things could be improved, and how the digital mindset might be applied to such a goal.

Take the beer sector. Let's make a hypothetical assumption that we know who produces the best beer in the world: the Belgians.

So, now, let's look at how the Belgians got there.

Belgium produces an immense variety of beers. At last count, there were over 500 different brands of beer in Belgium. Nothing special, you may say, plenty of industries have over 500 different brands of the same product. But here's where Belgian beer is different to other industries: with those 500 brands of beer come 500 radically different beers! There are dark beers, light beers, white beers, double-fermented beers, triple-fermented beers, beers using different types of hops and different types of grain, beers using fruit juice before the second fermentation, beers adding fruit at the end of the fermentation process, beers sold with the yeast still in the bottle, cloudy beers, clear beers, beers produced by monks in a monastery, beers produced by chemists in a lab, etc.

In other words: Belgium is the YouTube of beer.

To explore the metaphor a little further: hundreds of independent producers make something they're happy with. Then, they look at what everyone else produces, and consider improving their product, or changing it somewhat to attract a different public. Then someone new comes along, and produces everything in a radically different way, it catches on and becomes a viral hit, and the story goes on. Just like on YouTube's comments pages, the feedback and counterfeedback among producers and consumers is the source of endless conversations. Sure, every now and then, a few producers might say: "That's not beer, that's something else". But others simply reply: "Who cares? It tastes nice and people seem to like it". Nobody will ever say "Here's a law that says you can't add cherries to your grains and hops". Freedom to do what you want with what you have in front of you is the essential driver behind the sector's evolution.

Looking at the overall effect of such a mindset, looking at the overall quality that this "Web-2.0-avant-la-lettre" model has brought to this particular sector, there can no doubt that, today, it is the free-market-led digital environment that contains within it the necessary culture of openness and freedom, that is the lifeblood of creation, adaptation, and just-do-it-ism, which produces the fertile ground of new ideas that will surely produce the next best thing, ensuring the only constant luxury should really be about: quality.

Tuesday 14 July 2009

Chêne Bleu: website and brand identity

Gallé launch website for the 'couture' French winemakers Chêne Bleu.

Branding Chêne Bleu and designing the website was an amazing experience, and a very steep learning curve.

In terms of brand communications there are, first of all, many deep and complex layers of information about the wine product itself and what Nicole and Xavier Rolet were trying to do with it. Talking about Chene Bleu means talking about:

- biodynamic wine principles
- altitude and its effects on sugar crystallisation
- pellicular maceration, a brand new technology that ensures perfect control over the skin contact i.e. contact between the skin of the grapes which contain the fermenting yeasts and the juice, which contains the sugars
- the use of propolis instead of sulphites to protect the vines against diseases, creating a rich and biodiverse eco-space for bees, insects and other bugs to actually thrive, ensuring the vines are stronger and more productive
- measuring the direction the winds come from; La Verriere is surrounded by forests, and overlooks Mont Ventoux, so different winds make a difference to the type of air the vines receive, which carries with it different pollens and perfumes from the various trees and plants
- developing methods for picking and moving small quantities of grapes from the vines to the winery to ensure the amount of time the skin is in contact with the juice is under control
- that, and much, much more...

Every single detail has been studied obsessively, discussed, intellectualised, brainstormed and worked tirelessly in order to get this amazingly complex brand identity known as Chêne Bleu, not just a wine, but a mission.

Aside from the product itself, there is a rich cultural package that comes with Chene Bleu. Ranging from medieval folklore, which two of the wines take their name from (Abélard and Héloïse), to the study of La Verrière's own history as a glassmaking atelier (Aliot was the name of the glass blower) and as a refuge for crusading knights before that...

I think we did a good job. The website is full of rich, interesting content, and the brand feels very consistent accross a range of media, i.e. on the labels, on the website, in the printed material, etc.

If you want to know what it's like meeting a team who are entirely taken over by the ideals of making the best possible wine, take a look at the Chêne Bleu website.

Wednesday 20 May 2009

Friday 15 May 2009

Luxury Briefing: eBay vs LVMH

eBay vs. LVMH, by Alexander Gallé, is a column published originally in Luxury Briefing's June 2009 edition.

This column may not be the most popular one I've ever written. Still, the court case between eBay and LVMH needs to be addressed by anyone who cares about the future of luxury as well as of the internet.

My argument, as a web designer for luxury brands, but also as an economist, is that the current legal route taken by LVMH is one of unsustainable laziness which will eventually lead to its own destruction.

The legal approach is very lazy indeed. First of all, the message it sends to the public is this: "The alternatives to buying LVMH's authentic products are so good that we now have to resort to legal ways to stop them from existing. There is no economic reason why someone would buy our products when the alternatives are just as good at a lower price".

Secondly, it seems LVMH is simply barking at the wrong tree because it's easier to pursue eBay than the counterfeiters. Getting eBay into trouble will not discourage the counterfeiters any more than closing your town's market square. The market, both buyers and sellers, will just move as far under the radar as it has to. Unfortunately for lawyers, the laws of the market are closer to the laws of nature than they are to anything they could draft up.

Finally, eBay is a platform for a free market. In fact, it represents a form of free market which the Western world has all but forgotten, to its detriment. When we argue against free markets, we argue against prosperity. Can you imagine the prosperity the world would experience if, say, farmers in Bolivia could trade their products directly on eBay, offering their products directly to the highest bidders worldwide? Such a system would create infinitely more wealth around the world than anything Fairtrade or CaféDirect could imagine in their wildest dreams...

More importantly for the luxury sector, these conditions eBay creates are the very same conditions that enabled luxury brands to start in the first place. The liberalism it stands for is the very same liberalism Europe saw in the 18th and 19th century, when many of our leading luxury brands started out. Free market liberalism is the very environment that enabled 19th century luxury brands to start out on the simple promise of unrivalled quality. Unrestricted worldwide trade is the very condition that enabled merchants and businessmen to offer great new products from around the world at prices reasonable enough to sustain a steady public.

eBay's liberal market model has enabled countless craftsmen, industrialists and artisans to find a niche in the world market for the products they create. Finding a sustainable niche is a conditio sine qua non for a sector driven by market-reducing values rather than lowest price. Values such as craftsmanship and excellence, for example, the very core of what the luxury industry is about. If we care about these values, we must ensure the free market continues to enable future generations of Louis Vuittons to say "I can do better than everyone of you and beat you on the price, too, and I'll prove it".

Only by addressing the economic methods that make counterfeiters so successful (i.e. they provide very good products at lower prices) will we ensure a healthy evolution of the industry's products, to produce even better products than we do today. That is why anyone who cares about luxury should support eBay.