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Sunday, November 08, 2009

"Luxury Shame" a byproduct of the recession

According to the consulting group Bain & Co, shoppers are suffering from "luxury shame". These results appear in its latest report about the global luxury industry.

The WSJ (sorry subscription only) covers this research and has a fascinating article about the trials and tribulations of the luxury suppliers.

Guilt has really increased in the last year, says the brand strategist Martin Lindstrom.

Why am I talking about this? Well, it is an extreme example of the impact of the recession on consumer behaviour, something all marketers should be interested in understanding. Secondly, the 50-plus are significant purchasers of luxury goods so a large number of this generation are experiencing this phenomenon.

Apparently some luxury brands are emphasising marketing tactics they hope will be an antidote to the guilt syndrome. Things like promising to channel profits to a charity, as shoe brand Cole Haan recently did with its offer to get a 15% discount on a new pair of shoes when you donate an old pair to a designated charity.

The good old catch-all of promise of saving the planet from climate change is another wheeze being used to make people feel better, like the Swedish clothing brand Filippa K that opened a second-hand store in Stockholm that sells used clothes of its own brand for at least 50% off.

What seems like a much more commercial approach is encouraging Internet shopping (i.e. let people get the luxury buzz at home instead of in the store, away from the scorn of the poor). Not surprising that there has been an estimated 20% jump in online luxury sales this year (according to Bain & Co).

In the same week as the “luxury shame” story was being covered in the media there was news that, Milan's Versace Group announced that it would cut 26% of its worldwide workforce and consolidate its operations in an effort to return to profitability by 2011. The fashion house has also made plans to close all three of its stores in Japan due to poor sales, though the company's business is successful elsewhere in East Asia.

“We’re reviewing in a comprehensive way the whole structure of the company,” said the company’s chief executive - that sounds bad.

Next time you open a magazine that is full of ads for luxury watches, jewelry, holidays etc that are the same campaigns as were used pre-recession, just think what a total waste of promotional spend. Most of the luxury brands are still living in a state of denial. Dick Stroud

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