Friday Column | How to Survive the Recession

Stars take to the red carpet, surrounded by paparazzi

LONDON, United Kingdom – According to analysts, we’ve just come through the worst holiday selling season in 40 years.

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

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  1. It’s a LIQUIDITY CRISIS! Hoarding cash that you don’t need to will make everyone have more liquidity problems. Are you trying to devalue your currency?

    Jen from Farmington, CT, United States
  2. very interesting. i wonder if i will feel the tweaks, the cuts (like the ad campaigns as you mention) or if it will be done with enough finesse.
    how will magazines fair? if advertising budgets are slashed (frankly, i haven’t opened a US vogue in a while, but last time i did, they had some very incongruous advertisers), and if readers decide to curtail that area of entertainment, magazines will be hit from both sides. the internet isn’t helping matters.

  3. Lauren Goldstein Crowe back on the blogosphere, what a happy surprise! I’ve missed you ever since you left

  4. All this is very true. I beleive a lot of companies sease the opportunity ( in Europe @ least and specially France) to apply social measures they couln’t during growth times.
    on the other hand, people were talking about a financial crisis turning into economical crisis… my god… press talked so much about it that the economical crisis has been anticipated by an emotional one…
    that’s worse… a lot of measures are being taken in companies before anything happens! that’s were recession becomes historical… it’s like economical terror… the fact of talking about it is enough to turn us in the dark!

    Mag chamoun dotremont from Blandain, 03, Belgium
  5. Let’s be realistic. This huge crisis has been generated by an enormous misunderstanding: finance was born (and it’s still supposed) to support industry and commerce, to finance their operations, to feed them and to let them grow. Finance should not be a game played apart.
    So my receip for the fashion world and -why not?- for the post-downturn industry is: focus on quality, utility, smartness, design; but the main challenge will be to mix them in the correct way, giving to the product (or to the service) the correct balance between all those features and, most importantly, the pricing strategies. Pricing should reflect a honest and evident value-for-the-money, pricing should not be a tease anymore for the savvy customer.
    In other words, I believe that the new drivers for the upcoming manufacturing industry (especially for design and image oriented firms) will be “reality”, instead of “fiction”, “true money”, instead of “credit lines”, “timeless style”, instead of “to-die-in-6-months”.
    The honest will survive, the fake won’t.
    Regarding your “cut the costs” point: I do not totally agree with you since cutting the wrong costs could lead to tremendous mistakes. For example, cutting design costs for a design-orietnted firm, or cutting R&D for a consumer electronic one, would certainly determine losing the pace of the smarter competitors. So, try to cut useless stuff is fine, but be aware of cutting some vital parts. Keep investing in the hard times and you’ll be the first to smile when the good times will show up again.