HÔM Sotheby’s International Realty Chair and CEO Mike Shapiro explores the market dynamics, opportunities, and potential risks and challenges involved with purchases and sales of luxury real estate in coastal Orange County, California.
Q: In this age of globalization and online sourcing, does brand still matter?
A: I’d argue that brand matters now more than ever. That’s because when faced with essentially limitless possibilities, the differentiators are often either brand recognition and reputation, or perceived exoticism or familiarity. For example, what a customer expects to receive at a fast food restaurant is consistency, whether it’s located in Southern California or South Korea. What a customer expects from Neiman Marcus is luxury, exclusivity, maybe surprise and delight or pampering. They can both be successful in positioning their brands, but for vastly different reasons, and intentionally so.
Q: What drives brand perception?
A: Companies have to work harder now to maintain brand control and ensure that what they do reflects who they say they are.
Take Sotheby’s — its business and brand were built on offering rare, unique, luxury items through its auction houses and today, the Sotheby’s name is synonymous with success. To that end, its real estate brokerages here and around the world have to support that brand identity in every way, from how we represent ourselves to how we represent our clients and their properties. Some people find this level of expectation intimidating — just like some people find it intimidating to shop in luxury stores — and that’s okay.
Luxury brands aren’t intended to be all things to all people and when they become that, they lose their unique identities. If a business has established a particular niche, served it well, and created and delivered on brand expectation, that’s the best kind of market differentiator. You never want to compromise or erode that perception if you’re in the luxury market.
Q: Which is more important — brand perception or brand reality?
A: Both are, because while brand perception may influence someone to choose a brand, if that brand doesn’t deliver on its promise — whether that promise is for luxury, quality, and rarity, or that promise is consistent-tasting burgers and fries — then the reality erodes the perception of the brand. There has to be something to back the brand.
Q: What differentiates luxury brands from high-end goods and services, and why do people pay more?
A: In our work, the answer to that is vital. Let’s look at one of the leading luxury brands in the world, Louis Vuitton. Undoubtedly, a handbag from Louis Vuitton is going to be of higher quality than a $50 purse from a big-box retailer.
But what about the higher-end handbag somewhere in between? Why would someone choose to spend several thousand dollars more for the luxury brand? In this example. while there’s an expectation of material excellence and craftsmanship with both, the justifications for the luxury brand are entirely emotional: desire, status, exclusivity. Put another way, the $50 purse gets you something to hold your wallet and keys for a few months. The higher-end handbag gets you quality and craftsmanship that should last several years. And the Louis Vuitton? That’s never simply about utility.
Q: How does that play out among luxury realtors?
A: For agencies in the highest-end luxury markets, like many niche markets in coastal Southern California, clients bring more to the table — the ability to buy or sell high-value properties. So the question becomes, what do they get in return?
As part of Sotheby’s International Realty, our clients have inherently higher expectations of our clients have inherently higher expectations of our service because of our Sotheby’s affiliation. What truly differentiates us, however, is that clients also get spectacular online and print marketing collateral, an uncompromising level of attention and care, and individualized strategies to target the world’s wealthiest buyers. Together, these add up to higher sales prices for their properties — the ultimate proof that we deliver on our brand promises.
From HÔM Sotheby’s International Realty