but for interactivity (Skype, instant messaging), content creation (blogs, YouTube), co-creation (Wikipedia), and collaboration (screen sharing). This is also the world of Second Life, where your alter ego can live, work, party, interact, and forge relationships with others online.

This is the world of Web 2.0. And it is really giving the luxury brands—which are still trying to get to grips with Web 1.0—something to think about. Web 2.0 shifts power to consumers. They create content; they say what they think. There is now a two-way dialogue and an unfettered exchange of opinions, reviews, and information.

It is this apparent rise of people power that is making the luxury brands balk; they are scared that they may lose control of their brand. When a handbag costs US$ 100 to make, but sells for US$ 5000, the brand is far too precious to simply give away.

“I'm sympathetic to their reasons for hesitating,” says Julia Rubinic, group director for the retail sector at the digital marketing agency Organic. “Luxury brands are experts at controlling their image and their brand equity. They have a real fear of losing control. It's like in the film Pretty Woman when Julia Roberts walks into the store on Rodeo Drive dressed like a prostitute—you can't control who comes to an online store or talks about your brand on a blog or customer forum.”

Yet talk of control still implies a top-down, we-know-best-and-we-won't-listen-to-you attitude. But Web 2.0 is changing the dynamics of customer-company interactions. In the near future, a brand's equity may not rely on how well it is controlled, but how well it is shared.

“Luxury brands have many advantages in the Web 2.0 space,” says Rubinic. “A lot of 2.0 revolves around passion points. Luxury brands are also positioned to excite passions. They haven't got a lot to fear, really, as they are a premium product, so the fear of not delivering quality is unlikely. If the luxury brands don't panic and work smart (they need to watch, not interrupt, and not try to control conversations and interactions) they should really benefit from Web 2.0.”

“I'm excited about Web 2.0,” says Cecilia Pagkalinawan, director of web & e-commerce at Frette, the luxury linen company. “Bandwidth is no longer an issue so richer images and user experience can be offered to our customers. Instant gratification and satisfaction is important to the luxury customer and I think the Web is perfect for this. As long as we maintain the great care and attention we lavish on our products and offer the same attention to our online customers, everything should work out fine.”

“Before Web 2.0 you couldn't put an experience online that represented their brand,” agrees Joe Chung, CEO of e-commerce software provider Allurent. “Now it is time to take advantage, but take advantage of the whole range of technologies and experience out there, including the relationships and networking aspects. Like it or not, all brands are losing control. There's been a shift in the communication model. Around 2.5% of people on the Internet are talking to the remaining 97.5%. That sounds like a low percentage, but it is actually pretty good. Everyone is influenced by blogs.”

Chung suggests that luxury brands have a great opportunity to take some initiative and build authentic communities around their brands. He imagines how a customer who has just bought a handbag in store is invited to join an online club, giving them privileges, invitations to previews, private events, and interactions with like-minded handbag buyers. Such exclusive offerings are a first step for luxury brands into the world of Web 2.0.

User-to-user communities that are owned and managed by the brands themselves are important, but what about everything—the blogs, the YouTube videos, the Second Life discussions—that is beyond the control of the brand?

“Brands must get away from the idea of control. They need to participate,” says Chung. “They need to read what people say, be part of the dialogue, spot trends, be part of the early wave. As trend setting moves to the Internet they need to be part of that.”

“You need to give fans that delightful nugget that will get them talking,” adds Julia Rubinic, stressing how fan sites and blogs are a powerful marketing tool if brands treat them with respect and openness.

“We plan on adding 'user generated' content on our site from interior designers,” notes Cecilia Pagkalinawan. “I personally think user-to-user communities are better left on their own. We will probably sponsor and advertise on these communities or blogs in the future but we don't want to 'own' them. I think 'owning' them contradicts the free spirited independence which makes these sites credible to consumers.”

Nevertheless, Pagkalinawan likes to keep an open mind. “The key to succeeding with Web 2.0 is to be constantly fluid and open to change.” Luxury brands, entrenched in heritage and tradition, may find it hard, but it is the only way they will survive in the 21st century.