It turns out that the luxury consumer businesses are feeling the pinch of recession, and I think they only have themselves to blame for hurting their brands.
The purchase habits of the well-to-do were supposed to be inured to the ups and downs of the economy in which the rest of us live. They could afford expensive stuff, or so the brutal logic went, so they would keep buying zillion-dollar handbags, watches, and yachts, while we scrimped on the mac & cheese.
Only not so much.
- Category growth slowing: It'll shrink to 2% this year from 6.5% a year ago, according to one management consulting firm
- Flat operating margins: An Italian trade group (yes, the place from which much luxury originates) says many operating margins are, in fact, falling
- Stagnant stock prices: Earnings forecasts have been slashed, and at least one bank won't rate a single luxury stock a "buy"
- Reduced orders: Big retailers are reducing their orders of new merchandise
Granted, the biggie luxe groups turned in solid revenues for the first half of 2007, but change is in the air.
- Expansion is planned for markets that are still minting the newly-rich, like Russia and China
- "Mass affluence"” brand extensions are going to swamp retail tables around the world
- Trends will start to emerge that...gasp!...stay au courant for more than a single fashion season
I think they've got it all wrong.
Luxury is not a synonym for excess, or at least it wasn't always so. It used to label a category of products and services that cost more because they did more, whether through design, workmanship, service, support; luxe items cost more because there was less of it, and what was available was somehow unique. And arguably better than the cheaper stuff...not just from an imagined, perceptual basis, but really so.
Somewhere along the line, the category got Trump-ified into merchandise that was expensive because, well, it's expensive.
Luxury branding has not focused on the traditions that once drove the category, but rather on the imaginary lifestyle achievable through purchase. The marketing centered not on luxe items, but on consumers’ fantasies of luxe lifestyles.
And pricing has become the sole qualifier of this brand attribute, focusing the category on those consumers who were able (and willing) to spend the money required to realize it. Funny...prices are supposed to be the deciders for commodity products...
You can just see it in the branding that has come out of the category over the last decade or so:
- Watch ads that all look identical, down to the time displayed on the faces (10:09 seems to be the most important thing luxury watch brands have to tell us)
- Handbag ads that are also mostly identical, and focus more on the oddity of the handbag model than on the model of handbag itself
- Luxury resorts that are all equally perfect, devoid of any visitors, and promise the everyone that they can get away from everyone else
- Brand extensions in everything from sun-glasses to bottles of vodka, and none of it substantiated with any credible or relevant why
Luxury can't afford to become a purchase category limited to flush up-markets. Real brand integrity and strength come from providing motivators for purchase (and use) irrespective of economic condition. Luxury should perform, last, and benefit far better than lesser-priced items.
Only right now, it's only luxury if you can afford it. Forget why.