The days that should bring a new luxury
No one remembers where the problems of the luxury market started. The roots go as deep as the success of the first “democratic luxury” brands, like Chanel and Dior. It also be about the strange mix between recession (2001-2004, 2007-2009) and fast economic growth we all saw this past decade. The certain thing is that luxury sells to a lot more people than the exclusive high-class. The size of the luxury market has nothing to do with what it was a half of a century ago.
It really looks like the major brands “have lost it”, selling cheap things or big bucks and discounting luxury items until the difference between the two categories is impossible to see. “Signature” shoes, using low-end materials, are sold for – let’s say – $199.99 and the upper middle-class employee will choose these over those priced at $249.99, which are, in fact, the discounted “good stuff”, but it’s just a bit “over the budget”.
There are two trends that contribute to the compromising of the luxury market. The unprecedented financial results masked them, and some of the darker aspects were even reasons to boast at stockholders for some of the brands.
The first is the dissolution of major brands by expanding their names to consumers with lower income than those of “signature lines”, still maintaining the full name, or at least a significant part of it. After the Armani jeans and the “Chinese” t-shirts from Versace, the latest victim of this dissolution is Givenchy, a former noble and classy brand, which recently launched its Redux line.
The second trend is involving a brand in areas where there was no previous expertise, a move that affects the name’s credibility. Armani may mean today anything, from mobile phones and TV sets to luxury suits, t-shirts, hangers and hotels. The exclusive spirit was left behind and the Armani Exchange website intensively promotes items priced under $100. In a similar manner, the former aristocratic tailors from Kiton involve in sport lines, perfumes, shoes and furniture.
All this could have been forgiven, eventually, but the peak of the crisis last summer revealed a lot of the gluttony that came to describe the attitude of many luxury producers and retailers. Another blow to the brands’ credibility. Let us just remember a few of the figures published by the US media at the end of 2008: the classic red gown from Valentino dropped from almost $3,000 to less than 1,000, the Loro Piana jackets that used to be over 2,000 dollars collapsed to $329, while the black satin shirts from Comme des Garcons reached a bottom price of 129 dollars. Louboutin shoes were discounted by 40% while various Marc Jacobs items were at half-price. A Ralph Lauren dress could be bought for the rough equivalent of two Happy Meals at McDonald’s, as New York Times informed at the time.
Dior was the first house to forget the principles of their founder and blocked in court those retailers who tried to discount their merchandise, so that their image wouldn’t suffer. Next were the wars between LVMH and the online luxury traders, aimed both at fighting counterfeits and against the much lower online prices, explained by the lack of expenses with finely trained personnel, luxury locations and so on. The campaign against the Internet retailers makes even more sense when we remember that the Wall Street wives moved online so they wouldn’t be finger pointed in stores as spouses of those who destroyed the economy.
We’ll add two more boulders on the already hunched back of the luxury market. First – producing amounts way beyond any “exclusivity” standards. The fast raise of the “Asian Tigers”, followed by the explosive consumption in the former Communist block and the skyrocketing Chinese, Japanese and Indian markets represented a new gold rush for luxury producers.
Despite all efforts to see their client pleased, brands faced a new problem: there was no exclusivity, but figures were sky-high, so no one really bothered. Uneducated clients preferred to buy the same suit and the same timepiece as their neighbors and brands provided it. As the education level among consumers increased, sales started to decrease. In their search of unique products, clients faced a lack of option. The penetration on niche brands was and still is at a low level on all new markets. The lack of option turned into a refuse to buy and was one of the reasons that led to the current blockage.
The second major problem is the quality of materials employed in producing luxury goods. Regardless how much some may try, there are simply not enough vicuña llamas, crocodiles and snaked to maintain high fabric standards for production levels close to the mass market. Bernard Arnault tries in vain to explain that his group’s products are “quality”. For one – it’s just quality, not luxury. Second: Everyone knows “they don’t do things like they used to”. There are no longer “immortal” suits and luggage, even though there are still respectable names on the market and prices make the buying just as much of an effort as it was in our grandparents’ time.
It’s not just the quality of fabrics that matters, it’s also about the invasion of cheap fabrics. A timepiece producer may insist that the ceramics and stainless steel are just as good as platinum and gold. But the intention is always the same: to address to more clients with lower income. The final blow to the market came from Armani, whose “resurrection” was widely applauded by the media. The two Emporio and two “signature” collections recently presented in Milan prove that he’s still lost between “accessibility” and “exclusivity”. But the worst thing was the flood of plastic in his creations. It would be a laugh, if it wasn’t a cry.
There are no solutions “at hand”. Some retailers begun to order lower stocks, hoping that less availability may mean more sales in full-price periods. But then came the producers, unhappy with lower sales, even though for more money. The reaction Jimmy Choo has was iconic: a mass-market “exclusive” collection for H&M. It says it all.