A guide to luxury brand success in economic downturns
First the story was that luxury was omnipotent and luxury consumers were immune. Even affluents were trading up, they said, and luxury could do no wrong. Now the story is that luxury has lost its lustre and even the wealthiest are bailing out. Makes for great headlines.
Neither was, or is, an absolute truth. The luxury market, and wealth segments, are very dynamic entities, comprising different products and services categories, and different segments of wealth, respectively, that respond differently to economic cycles. These responses are driven by both consumer effective demand and psychology. It is true that things are never as good, or as bad, thankfully, as we make them out to be.
Even consumers, reporting their expenditures, past and future, and their attitudes and sentiments, tend to get it very wrong most of the time. For proof, go no further than current political polls. Try to correlate consumer sentiment indices with retail sales over a long period of time. It is tough to achieve. That is not to say these are not useful exercises conducted by well-intentioned professionals, and may be good indicators of consumer perceptions at the time. Overall, however, we believe that current rumours of luxury's demise are greatly exaggerated – as exaggerated as the previous estimates of never-ending growth.