In times of slump, the rich often get richer even as the poor get poorer. So it might follow that luxury brands would hover above the economic crisis. They haven’t. In the wake of the financial downturn, no category was left untouched, including luxury. But while the sector suffered, industry experts say it didn’t hurt too much.
“You have two kinds of luxury shoppers,” says T.B. “Mac” McClelland Jr., president and CEO of The Luxury Marketing Council in the Middle East. “You have the affluent shoppers who have the money to buy whatever they want, and the aspirational shoppers, who want to be there but aren’t there yet. During the crisis, aspirational shoppers kind of dried up, but the truly affluent – high net-worth individuals with $1 million or above of disposable income – continue to spend.”
Luxury brands have used a variety of approaches to weather the economic crisis: Collaborations with other brands, a return to authenticity, adjusting prices, and finding more ways to engage with their loyal customer base.
Nicola Giorgi, general manager of Hogan, a luxury clothing and accessories brand, says the label ensures the products don’t become obsolete quickly, and that this was all the more important during the crisis. “Typically, women were buying a lot of bags a few years ago, but during the crisis, women were buying bags that were more iconic, bags that could last 10 to 20 years,” says Giorgi.
Giorgi adds that Hogan became more conscious about its prices, and was more accurate in pricing and defining the inner value of its products. In addition, different marketing channels came into play. ”Internet was playing an important role in our development,” says Giorgi. “Our strategy wasn’t only made of advertising. We instead continued to grow on the Internet, because we can be focused on individual customers there, and the relationship with the customer on the Internet is much stronger than with advertising.”
While advertising tends to take a backseat to public relations in the world of luxury marketing, McClelland says that any marketing strategy undertaken by a luxury brand should be “surgical.”
“Let’s say there are 5 million people in the UAE, and your target audience for a $5,000 handbag is 250,000 people,” he says. “Why market to 5 million instead of surgically going after 250,000? The customer relationship management that takes places has to be continuous.”
Youssef Naaman, managing director of atelier, a Leo Burnett division specializing in fashion and luxury brands, says the most important thing brands can do when weathering a crisis is to go back to their roots. “Brands need to be truthful,” Naaman says. “If we have consumers who are not interested in vales and stories and heritage, that doesn’t mean brands shouldn’t be truthful to their values. This is where a brand has a responsibility not to abide my materialistic trends. If you stick to a brand purpose and have a brand story, this is how you create desire.”
