What if it’s not the crisis?

empty wallet


Everyone points at the financial crisis as main cause for the poor sales on the luxury segment. It is only partly true. The main issue neither begin, nor end with the stuck credits. The entire luxury industry entered a time of lament, instead of adopting firm statements, of making moves towards the new values and the new communication principles – more than enough to re-open the thick wallets and regain the lost gifts and incentives budgets.


The crisis of the luxury producers is just as real as the huge demand in the past few years can be called “normal”. Returning to exclusive luxury, designed for one small part of the public, was just a matter of time. Losing the “aspirational” clients – forced to cut down expenses, due to a higher dose of uncertainty in the near future to the narrowing of career ascension opportunities – is just as important in the aftermath of each financial quarter as the global financial predicament  and the (very few) sounding bankruptcies,


In their race for profit, some of the high-end brands begun to launch “affordable luxury” products. At about the same time, mass-market producers started to sell “luxury items” within their brands. The general mishmash completely confused a significant part of the consumers. The true quality of a product consists in tradition and heritage, in choosing the best fabrics and employing the best handcraft worldwide. This adds up to a generic term, “expertise”. To be an expert, in other words. One can be an expert in an area. Maybe in two fields, if the two are related. But one cannot sign altogether toilet seats and purses, men suits and furniture, appliances and hotels. The market will recognize any merit, any talent and skill, but will never turn designers and brands into Gods. Consider, at least, that many clients own spending accounts larger than the annual income of a luxury company (not conglomerate, though…). Can anyone imagine Warren Buffet on his knees in front of a shoemaker, whatever his name?


The reaction to the financial crisis was so poor that one can’t help asking: what good are those PR and advertising budgets for? The general drop of the luxury market is anywhere between 6% and 20%, depending on the segment and the continent. The crisis forgot Australia in its rush towards Japan, or so it seems. At the same time, the latest Wealth Survey conducted by the Luxury Institute indicates that 29% of the luxury consumers “said that recent discounting of upscale goods has lowered the perception of luxury”. Under these circumstances, with almost one third of the customers feeling “betrayed” and “disappointed”, a 6 to 20% drop in sales translated in the incredible ability to make almost lost client return to the same luxury retailers that fooled them the first time. They come back to pay 5,000 $ for a bag that was sold for 6 to 8 weeks for only 1,500$ and, more than anything, the client KNOWS that the bag costs only 1,000 $, (production, transport, taxes and expenses included). Well, that’s quite a performance!


Still, what feels wrong with the market?


The luxury segment is too crowded, many say. The market is stuck partly because people prefer to postpone a purchase instead of being forced to make a choice between endless rows of similar products, with different brands. If it’s not an emergency, or at least a real need, the decision is postponed. And, when the time comes, the oldest, firmest, richest and most noble of the brands will be the first to come to mind.


Another reason is that the “worth it” expression lost its meaning along the way. Many products have outrageous prices and offer almost nothing in exchange. Their presence is the abusive effect of a marketing stunt, and its only virtue is the compromised signature of a former “must-have” designer. All luxury clients demand quality above all standards, exclusivity, fine handcrafting, and the luxury producers still respond: “Better thank us for still selling you our stuff!”.


Finally – the position assumed by brands and the communication strategies. This is where everything goes wrong. The thick wallets are still there, so is the family spending budget (maybe a minor adjustment here and there), taking into account the average spending of the past few years and the new needs that may have risen. When a millionaire loses his timepiece while diving for a shark-safari, he / she doesn’t rush to the nearest shop to buy a 5$ piece of Chinese junk watch. They may buy a new 8,000 or 80,000 watch the same day or any other day, depending on the size of their collection of timepieces. When a new model is launched, it will sell, but it has to be “worth it”.


Maybe the comments made so far on the market were not loud enough. Or maybe there aren’t enough ears to hear: social responsibility, ecology and sustainability are the new holy laws of the market!


The trend that started on the oil market 15 years ago and hit the diamonds market in the early days of the new millennium in now peaking in the luxury industry. Do you employ poor people in China, India, Azerbaijan, Korea, Taiwan or Pakistan, give them insignificant wages and crowd them into dirty workshops? You’re compromised! Did you lay off the elders in a Tibetan village in order to build a textile mill? Your very existence is denied! Did you pay a bribe for the administration in a dictatorship state, in order to exploit the country’s resources? You’re an accomplice in a genocide!


Maybe all luxury producers are guilty of a sin or another. But the sin must stay a secret (a leak is the worst communication error ever!) and must be compensated, sometimes even with anticipation, before the sin is (or is not) committed. Tender and nurturing gestures towards the Mother Nature and its human babies must convince everyone that your luxury business does the entire planet a huge service. Any new limousine must pay for five scholarships for smart, yet poor Namibians. Each bag must pay a tax for transforming a waste dump in an environmental-friendly recycling center. Gold and platinum watches must chip in for the search for a cure for cancer or AIDS and the freedom of expression must be financed via every pair of fine shoes you’ll ever wear.


Why? Because the rich got tired of being pointed at for each and every purchase. “The world’s coming to an end  and they still throw money out the window”, the newspapers will shout. This way, the rich did not buy a car, he helped a country benefit from the native intelligence of its young citizens… And, anyway, why should the spouse be the one who’s always in the spotlight at charity balls? This luxury purchase was, in fact, “direct financing”!


It’s true that the “middle class millionaires” stopped spending, fearing for their future financial security. But the resources are still there, in the REAL market. There, where the money is and is always enough. Luxury producers must do just a few simple things: accept that the TRUE luxury is ONLY for a handful of people, offer something that’s “worth the money” and put a moral accent on the luxury purchase. No discounts, no market floods, no racing for “profit at all costs”. Something simple, noble, exclusive, unique maybe, to comfort those rich who got tired of the always accelerating rhythms of everyday living.


Radu Rizea