Luxury: The Party Is So Over.

The cold, hard light of day?

The announcement last week that certain blue-chip luxury brands were implementing modest price reductions in an effort to get the wealthy spending this holiday season couldn't help but remind me of the five stages of grief: denial, anger, bargaining, depression and acceptance. Let me explain. Not too long ago, industry leaders sought to reassure us that luxury would do just fine thanks to that elusive creature, the ultra-high net worth individual. These individuals were 'recession-proof' we were told and therefore they would continue to spend lavishly regardless of the state of the economy. We didn't realize it then but we may very well have been witnessing the first of the five stages of grief, denial.

When the ultra-high net worth individuals failed to materialize on the doorsteps of the luxury boutiques of Avenue Montaigne and Fifth Avenue, we were told that luxury as an industry would do just fine thanks to the healthy appetite for luxury goods in emerging markets. So what if mature markets in the U.S. and Europe fell into recession and even the very wealthy began to curb their spending? Luxury brands had expanded aggressively over the past ten years, opening stores and outposts in emerging markets such as China and India. Their economies were still growing at a brisk pace and so these customers would continue to snap up Western luxury goods, thereby keeping luxury industry profits buoyed. I believe that sounds like the third stage of grief known as bargaining: "I may no longer be able to sell a lot of luxury goods in Europe, the U.S. and Japan, but just let me sell a lot throughout Asia and it will all be O.K."

Now it seems the luxury sector is moving to contain the damage by offering customers price reductions ranging between 8 and 10 per cent. That may not seem like much but price reductions are considered anathema to many 'purists' in the industry. It all boils down to the psychology of spending. The fear is that even a modest price reduction might trigger the opposite of the desired effect - it could turn luxury customers away if they perceive the price reduction as 'cheapening' the brand. Or, if you prefer, it is the retail application of the old Groucho Marx line: 'I don't care to belong to a club that accepts people like me as members.' I don't know, but to me when a top-tier luxury brand reduces its prices during prime shopping season, this sounds a lot like the fifth and final stage of grief, acceptance.

You may have noticed that I've skipped over the second and fourth stages of grief (anger and depression respectively). That's because I can only speculate about what happens in the sleek boardrooms of Paris and Milan when disappointing quarterly sales reports trickle in and the cold, hard light of day sets in. Attempts at light-hearted commentary aside, as we enter what is likely to be a deep and far-reaching recession, what the industry needs is clear-eyed leadership, not fairy tales. I personally would love to see luxury go back to its roots - timelessness, craftsmanship and impeccable quality. By all means embrace modernity but cut back on the celebrity worship and the bling-bling associations, which arguably cheapen a brand's image far more than a modest price reduction. Give us a solid reason to spend our hard-earned cash and we will.

Sincerely,

The Luxe Chronicles

Comments

[Helene]

Yet again Ms. P&C, we see eye to eye on matters as crucial as the future of the luxury industry. Separated at birth perhaps? I say, quite possibly!

Sincerely,

Helene

[Ms. P&C]

Could not agree more! No one is recession-proof, and luxury brands were fools to think so. Yes, there will always be a "true" luxury customer, but that will be the same customer it's always been - it's sad that they've been disregarded for so long, only to have the brands come back to them now that times are tough. If it were me, I'd be insulted.

This segment of fashion should definitely scale back! For years these brands have been making up soft sales by opening new store fronts and creating lower price-point items. All this has done is de-value the brand.

Yes, let's get back to the basics: craftsmanship, limited runs, understated elegance...and please, no more bling!