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Pioneering a Category 3 May 04 I’m not much of a customer for luxury goods and services – I fly coach and drive Hondas. In the late 1990s, however, I worked with Nokia in the creation of Vertu, the first company dedicated to the manufacture, sales, and service of a luxury high technology product. I’ve been following the ups and downs of this emerging category ever since. “Luxury high tech” has been a contradiction in terms since the first personal computers in 1977:
Ø “Luxury,” on the other hand, has a timeless element to it. The folks who make Patek Philippe watches advertise that it’s a timepiece to get passed down from one generation to the next – it’s the watch you buy for yourself but give to your grandson.
A couple of years ago, it was hard to imagine that a mobile phone or a digital camera could have this kind of heirloom quality. Today, you can buy a platinum Vertu “personal communicator” for $20,000 at a variety of retailers, from Neiman Marcus in the US to Harrods in the UK, or at Vertu’s own showrooms in places like Singapore and Paris. The innards of the product can be upgraded to guard against rapid obsolescence.
In February 2004, Vertu launched its second product line, the Ascent. Here’s a picture:
Vertu’s Ascent Collection
For a short time, Nokia’s Vertu had the luxury high tech market pretty much to itself. There was no other company integrating technology and luxury. In 2003, less than two years after Vertu pioneered the market, Sony entered the luxury high tech category when it launched its “Qualia” range of consumer electronics in Japan. At the end of April, these products came to a very beautiful showroom on Madison Avenue in New York. They range from a digital camera to a stereo to a television, united under a brand name and a purchasing experience. Now, instead of spending $400 for a Canon Elph Digital Camera at Best Buy, you can go to the Qualia showroom on Madison Avenue and talk to a Qualia client representative. She will introduce you to the Qualia 016, a $3900 miniature digital camera that comes in its own brushed aluminum attaché case.
Sony’s Qualia 016 Digital Camera
Qualia products will not be sold on the internet. The emphasis is not on convenience, but on service, and on being a member of an exclusive club. Qualia customers will receive invitations to concerts by Sony Music recording artists, a personal concierge, and a quarterly newsletter. Many luxury businesses aren’t that profitable on their own. While unit prices may be high, volumes are low. High fixed costs, like fancy sales offices on Rue Royale in Paris or Madison Avenue in New York, make the standalone business less attractive than one might imagine. As prices drop relentlessly in mass market consumer electronics, the attraction of a luxury technology business increases for a company like Sony. While Vertu appears completely separate from Nokia, Qualia is firmly embedded into Sony – it’s a sub-brand rather than a standalone. Perhaps some of Qualia’s class will rub off on its parent, enabling Sony to maintain its slim premium in mass market consumer products. Regardless of the eventual success of Sony’s Qualia or Nokia’s Vertu, we are witnessing the birth of a new market – the combination of luxury and high technology. Vertu pioneered the market. With Qualia, Sony is legitimizing it.
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