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September 16, 2014

The ubiquity of everything. How the ‘sharing economy’ will destroy brand value.

by Howard Fox Chartered Marketer

If you have enough money, there is virtually nothing you cannot buy. The value of possessing some physical goods, I would contend however, is now reducing in some instances to only slightly above the value of the commoditised functionality the goods provide.

There was once a time, not that long ago, that arriving at your favourite purveyor of fine burritos late at night in a Ferrari, differentiated oneself as being in the economic elite. Certainly put you in the ‘1%’. And such differentiation was worth a premium. You remember – for the brand – all those attributes carefully crafted by us marketers.

No more. Could be that you have deadmau5 (a DJ of some not inconsequential repute), as your Uber driver, in his Ferrari.

Got a ride to Chipotle with my personal @Uber_TOR driver @deadmau5 ! Thanks for the ride. — Tucker Schreiber (@tuckerschreiber).

No need to buy the Ferrari yourself, to impress, then.

Want to really impress your neighbours in the Hamptons NY? Catch a helicopter using the latest flight sharing scheme: “We want to make it approachable and easy and transparent for young people who think only billionaires fly planes,” Evan Licht, general manager at “Blade” an app that facilitates booking helicopter trips from Manhattan to the Hamptons for just $450 a ride, reportedly told The New York Post. That is far less than the usual $3 000 beating the traffic to your Hamptons holiday-home normally costs, and is infinitely cheaper than watering and stabling your own helicopter in New York City.

Diamonds are forever. At least de Beers hopes so. But what if previously exclusive, extraordinarily expensive, diamond necklaces became accessible to the masses? – “The savvy approach to luxury, rent.” Or – “The look worthy of a princess – rent the Middleton earrings for only $160”. Accessible luxury means such “luxury” becomes far less differentiating for the limited few who truly can afford to own it outright.

The ideal type of luxury goods, such as top branded champagne, designer handbags, jewellery and luxury cars, are what are known to economists as ‘Veblen goods’, named after economist Thorstein Veblen, who famously identified the concepts of conspicuous consumption and status-seeking. Veblen goods are the holy grail of luxury brands because their desirability increases with an increased in price. In effect they are desirable because they are only accessible to those prepared to pay a high price. Conversely, decreasing their price (even through sharing apps or rental arrangements I contend) decreases peoples’ preference for buying them because they are no longer perceived as exclusive or high-status products.

What does this new-age, increased product-accessibility mean for brand owners? Consumer access to brands used to mean having to buy the actual associated physical good (excluding services and intangibles, obviously). Now that is no longer a requirement, and it doesn’t take much of an increase in accessibility to significantly reduce the exclusivity and thus differentiation of such branded goods. This could be crippling for luxury brand owners. More troubling is that brand owners lose control of their brands to others (e.g. such as the Blade app) who leverage the value of the brand to their own benefit, while reducing the brand’s exclusivity and brand premium to all other purchasers – to the clear determent of the actual brand owner.

I foresee brand owners resisting the sharing and rental of their branded goods to protect brand exclusivity. Lawyers, start your engines.


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