If that’s not bad enough, Chanel announced that it is laying off 200 people in Paris. Chanel! That surprised everyone I spoke to in the industry. For one thing, Chanel is not masstige — it wasn’t catering to the masses, the part of the market said to be most impacted by the recession. For another thing, it’s French — meaning layoffs have to meet the stiff criteria of French social laws and union rules. And finally, it’s privately held — meaning the company wasn’t under shareholder pressure for short-term results and could therefore take a longer-term perspective. And still, they were compelled to let 200 people go. (The employees laid off were on fixed-term or temporary contracts.)
It seems we’ve got an unmitigated disaster on our hands.The New Year toasts I heard amounted to “let’s just get through it.” So, if you’re an emerging designer or independent retailer, just how do you do that? Here’s some advice I have gleaned from seasoned luxury goods executives:
1. Hoard cash. The consumer is doing it and business folk should too. Why? Because you still can’t trust the banks. In this regard a big debt may be better than a small one. A small one can be easily called in by a bank in trouble, larger debts are more complicated to reclaim — particularly if it is going to force a business into bankruptcy. One executive I spoke to said that anyone with an open line of credit should take all the money, pay the interest, and keep it in a separate cash account.
2. Negotiate, negotiate, negotiate. If you rent space, call the landlord. If you’re a manufacturer, call the factory. If you’re an advertiser, rip up your contracts and start over. Now is the time to re-evaluate terms.
3. Cut costs. I’ll be closely watching the Oscars this year. I’m curious to see if luxury companies will be as open with their pocket books as in past awards seasons. The conventional wisdom had become that the money was well-spent because of the number of images generated by the red carpet and then seen around the world. And certainly, getting a dress on Uma Thurman helped Prada achieve household brand-name recognition, but that was 14 years ago. Does anyone really care anymore? Aren’t consumers, particularly luxury consumers, all-too-aware of the games being played behind the scenes and doesn’t that detract from the impact? Also expect more ad campaigns to be shot in studios, not on location and expect to see fewer of them. Even if you’re not courting celebrities or producing massive ad campaigns there are smaller costs that can be cut in marketing, promotions and expenses.
Lauren Goldstein Crowe is co-author of a book on Jimmy Choo to be published by Bloomsbury later this year