Vertu, maker of the $22,000 smartphone, is considering luxury wearables

   

Last month was a special one for Max Pogliani: Not only did it mark his first anniversary as Vertu's CEO, but it also saw the launch of his very own baby, the Android-powered Signature Touch. This new phone's up-to-date specs have already silenced critics; and despite the luxury market's slowdown, the Italian exec said his team's already ahead of budget in the first half of this year. Vertu's not stopping there, as it plans to expand its portfolio with an even more affordable smartphone, as well as new accessories like audio products and maybe even smart wearables.

Vertu's hand-assembled phones are currently offered in three tiers: the Signature feature phone line (powered by Nokia's Series 40 OS), the mid-range Android line (the Constellation) and the aforementioned high-end Signature Touch Android line. They all feature a varying amount of premium materials like calf leather, alligator skin, lizard skin, ceramic, sapphire (for the screen), titanium, ruby and sometimes gold; and they go through rigorous durability tests as well. The Signature Touch benefits further from camera tuning by Hasselblad and wallpapers from the National Gallery (London), on top of the pre-existing ringtones plus notification sounds produced by the London Symphony Orchestra.

The company's next mission is to refresh and reposition its mid-range phones; but interestingly, it's also considering an entry-level smartphone that would still be "truly Vertu." Pogliani, who reports to chairman and Nokia veteran Anssi Vanjoki on a weekly basis, likened this to Porsche offering the 911 and the Boxster side by side: Both are priced very differently, but are quite good in their own right, and their satisfied owners wouldn't judge those who bought the other model.

"Technology will be more and more a merging factor and not a differentiation point."

"For me, there is space to further segment, provided that the product we put in the range will make sense in the overall spectrum, and will not cannibalize the products that are already there," the CEO said during our interview in Hong Kong. "Technology will be more and more a merging factor and not a differentiation point. The key things will be more working on the design, materials and services part. There, we will differentiate the models, hence the product offer and therefore the price points."

Don't misunderstand the expansion of Vertu's Android offerings, though. Pogliani assured us that feature phones would live on with new variants to come, as many Vertu customers still prefer using their phones just for calls, enjoying weeklong battery life and appreciating the series' classic design. According to the exec, the voice-centric Signature series still makes up 30 percent of his overall sales.

Pogliani didn't mention how much the potential entry model would cost, but as a reference, the mid-range Constellation starts from about $6,000, while the more premium Signature Touch has a $10,300 base model. Funnily enough, the comparatively basic Signature phones start at a staggering $16,150, which is mainly due to the extra precious materials used -- especially for the buttons -- plus the extra work put into polishing and assembling them. If you're flush with cash, a maxed-out, off-the-rack Signature costs $168,450, and you can pay even more for customization; but it's still a feature phone, of course.

It's worth remembering that those prices cover more than just the hardware and the software. These luxury phones come with Vertu's services, which include personalized lifestyle-content curation, exclusive access to special events and venues, Silent Circle communication encryption and one year's worth of concierge service -- with the premium models offering a dedicated agent, a feature that Pogliani implemented shortly after his appointment. To extend the concierge service, you can pay £2,000, or about $3,400, per year for the classic service, or double that to keep your dedicated agent.

Alternatively, some customers -- which, according to Pogliani, generally include the likes of entrepreneurs and opinion leaders -- already have multiple years of concierge subscription through buying numerous Vertu phones. As to why anyone would buy a single Vertu phone, let alone several, that's something the rest of the population still struggles to comprehend. Echoing his predecessor, Pogliani pointed out that those buying multiple Vertus are no different from people who collect cars, watches, suits, wines or any other luxury item. And, over the years, these customers have apparently become more sophisticated. They are developing a lot of understanding behind the luxury brands they patronize, and they yearn for "something with real substance" rather than items made just for the sake of showing off.

"The essence of luxury: It's something that you absolutely don't need, but if you are into it, you can't live without it."

"Since they are exceptional people, they want to have access to exceptional things -- things which are a little bit beyond the ordinary things that everybody can have -- when it comes to something which is with them day and night," the CEO continued. "Nobody has to buy a Vertu phone. You don't need a Vertu phone, but if you like it -- if you appreciate quality craftsmanship and design, and also services and technology -- then you buy a Vertu phone. Like [how] you buy a Bentley car or a luxury watch. You don't need a Bentley car to go from A to B, but it's much better to do it in a Bentley car than in another car.

"That's the essence of luxury: It's something that you absolutely don't need, but if you are into it, you can't live without it. That's my personal definition."

Pogliani added that this shift in consumers' attitude toward luxury is most apparent in China, which remains one of Vertu's biggest markets alongside Russia. While folks in other emerging luxury markets like Japan took 20 years to develop this discernment in their purchasing choice, their Chinese counterparts needed just two to three years to do the same. And despite the local luxury market's hiccup due to China's ongoing crackdown on corruption, Pogliani sees healthier and more sustainable growth moving forward, which will be mutually beneficial for the brands and the Chinese economy.

With the launch of the Signature Touch, Vertu's also starting to offer more advanced accessories instead of just cases and pens. We had a go with the company's aluminum over-ear headphones co-developed with Bang & Olufsen, and while their $750 price tag is much higher than their mainstream premium counterparts, the sound quality, noise isolation and comfort were superb. Vertu's new aluminum Bluetooth speaker also looked and sounded pretty good, but it's harder to justify its $600 price when companies like Bose and Logitech can offer similar performance at one-third of the cost. We'd stick with the headphones for that kind of money. Then you've also got the Qi wireless charger that works with the Signature Touch, but with its single function and aluminum/leather design, the $600 price is hard to stomach. On the other hand, owners can proudly tell their friends that they have the world's most expensive wireless charging pad lying on their desk.

Unlike most of our readers, Vertu's customers aren't early adopters of technology.

In an era where the word "wearables" is buzzing, it's no surprise that Vertu is exploring this space as well, but Pogliani is in no hurry. Unlike most of our readers, Vertu's customers aren't early adopters of technology, so it needs to find out if they even want a smart wearable for what it is today. The CEO referred to the segmentation study his team conducted last year -- the largest Vertu had ever done -- to look at the markets from the luxury consumption and the technology consumption perspectives, in order to match and identify segments that are sizable enough to build a specific product proposition.

"So we will do the same for the accessories and extensions, and see if there is a demand and an opportunity and a credibility for us to develop in this space," the CEO said, while implying that he wanted more truly practical functions on wearables. "For example, if we launch ourselves into luxury watches, it will probably not be very well accepted because we have no credibility in that area yet.

"Product differentiation should start from a very well-established competence and recognition of this competence in the core business where you are. From there, you can start to differentiate, but step by step, I believe," he said.

One major market that Vertu has yet to properly tackle is the US. Right now, the phone maker graces the country with just one boutique in each of these cities: New York, Las Vegas and Los Angeles; and elsewhere, it is represented by local retail partners. But things are about to change. For one, there's apparently an "exponential" growth in demand for the Signature Touch in the US, partly due to its wide range of supported LTE and HSPA bands.

Pogliani also believes the recently announced five-year deal with Bentley will help boost Vertu's stateside reputation, as the British automaker has a big presence across the pond. Compared to its previous seven-year partnership with Ferrari (in which all seven limited edition models were sold out), Vertu will see a deeper integration with its new pal, going beyond design collaboration to actually making the phone a part of the car -- something that wasn't possible with Ferrari, for various reasons. The first of the five "Vertu for Bentley" phones is due in October, and chances are it'll be a fancy variant of the Signature Touch.

No matter who Vertu hooks up with, the truth remains that it is still by far the leader in the luxury phone market -- one that it pioneered as far back as 1998. Some brands, like Dior, Aesir and Mobiado have long given up, whereas those that are still around like TAG Heuer, Gresso, Tonino Lamborghini and Savelli struggle to win us over with their lazy specs and occasional lack of soul. It shouldn't be that hard to get the basics right, but if the luxury consumers have truly evolved, then these other players have a serious amount of catching up to do -- especially with Vertu now ready to take a bigger bite out of this niche market.