NEW YORK, United States — As the recession wears on, luxury companies are beginning to realise they will have to do more than cut costs in order to survive this downturn. Indeed, for many brands, a fundamental repositioning and reevaluation of their long-standing strategies may be in order.
In this kind of environment, many luxury executives turn to the New York-based Luxury Marketing Council, where their membership enables them to share in the insights and learnings of more than 800 peers and colleagues from across the sector, representing companies as diverse as Bergdorf Goodman, The Carlyle Hotel, and Steinway & Sons, the legendary piano manufacturer. The Council's reach has also grown in recent years to include international chapters in London and Sao Paolo.
I caught up with the Council's CEO Greg Furman via e-mail to get his take on the rapidly changing economic and consumer environment, and the implication for luxury brands everywhere.
BoF: You have spoken out against the notion that luxury is dead. Why do you so vehemently believe in the strong future for luxury?
Because what makes true luxury "luxury" is what Mr. Stanley Marcus called: "The impact of the hand: the best that mind of man can imagine and the hand of man create."
Bespoke services or products will always be able to command a premium price by those with the education and wallet to know the best when they see it. The great luxury brands have weathered greater threats over time than this recession. They will continue to do so. Look at Hermès and Louis Vuitton, who are still showing profits in these toughest of times. They "stick to their knitting" in every way and are rewarded by the market and the most sophisticated buyers.
BoF: Okay, even if luxury is not dead, its much-debated definition has certainly changed. How do you define luxury now and why?
The definition of luxury is changing. The words that I hear most now are Experience (unique and memorable); Story (the ability to talk about a great product or experience that is truly unique); Value (bespoke craft as in a Brioni or Chanel suit will always last, style-wise and wear-wise); Wellness (it's no longer about ‘stuff'; it's about how wonderful products or experience make us and our families and loved ones feel); Service (not the same old same old; see Jack Mitchell's Hug Your Customers for the definitive point of view on this); Time(all of us, rich or poor, desire more of it and the most affluent require a new sensitivity and respect for their time as a favored client's time in all transactions, in person and on-line); The simple things (dry fire wood; an hour's spa treatment; a run in the park; quiet time on the screened porch; time with family and friends, a great meal or bottle of wine).
BoF: Suzy Menkes of the IHT recently convened a conference in New Delhi to discuss the notion of Sustainable Luxury. While it's clear that this is of emerging importance to consumers, no major brands seem to have fully addressed this yet. What would you advise major luxury brands to do?
We've done four events in the last 18 months on this topic. Suffice it to say that for luxury brands (as the disparity between the haves and have-nots increases) behaving well—sociologically, politically, environmentally—is in the spotlight as never before.
Luxury brands are in a fishbowl and some of them don't even know it, yet. Those that think they can just do well by doing good without, in a sophisticated way, publicising their contributions to the community are in for an unpleasant wake-up call.
BoF: Another emerging market trend is everything related to the luxury of wellness. What are the big opportunities here?
As baby boomers continue to get 'younger', wellness-spiritual, material, psychological, physical-will be one of the biggest value-drivers to tap into for luxury brands. American Express, in their research, has defined four stages of luxury:
Acquisitive - The bigger the brand the better; the costlier the better; conspicuous to be desired and relatively clueless about price/value and what constitutes true luxury other than price and bragging rights (Russia, Mainland China)
Inquisitive - Reliant on authorities, almost slavishly; wanting to know; self educating; not showy or ostentatious; governed by middle class values (the United States 15 years ago)
Authoritative - Wanting the unique, the bespoke, the ability to tell a story about a great product or service, wanting to be part of the decision (no longer slavish as pertains to ‘authorities'), wanting above all value—that which lasts—and great style (U.S., Europe, Japan, Hong Kong today)
Meditative - Wanting an experience or product that enhances one's sense of self worth and provides a personal ‘lift' in wearing, using or recalling this ‘something great' - look at many of the cutting edge hotels and some of the luxury shops - they're looking as much like zen temples - completely spare and elegant - appealing to all senses and minimal minimal - as they are hotels and ‘store' - that satisfaction that comes from knowing one knows rather than wanting every else to know one knows - no need to tout, no need to display - only to enjoy the ‘buzz' of great stuff, great experiences and share that satisfaction - "spiritual" doesn't cut it - but that inner sense of "all's right with the world because one's efforts have taken one to this point and, recession, no recession - "ain't life grand" (U.S., Europe, Japan, Hong Kong today, either mostly "there" or moving "there")
BoF: Finally, what else is on your mind for the luxury industry as we look ahead to the rest of 2009. Things are still pretty gloomy out there...do you foresee a turnaround anytime soon?
Barons, the contrarians, say daylight will come at end of third quarter of 2009.
On the other hand, Booz & Company say it will be two years and that 2009 and 2010 will show back-to-back periods of 30 to 40 percent drops in gross revenues across all segments of luxury. Noone will be immune and perhaps 50 percent of local luxury brands will disappear. Even those with deep pockets will need to consolidating and divest fallow brands.
What I'm seeing is a sea change in the ways the European brands are thinking about marketing. As the recession continues, luxury brands are experiencing a wake up call from a market which continues to be soft. For the first time in many years, even brands that have been determined to continue to pursue their strategy of 'great product, major investments in advertising' are rethinking the viability of this old-world approach and exploring tactics that are more like those employed by consumer packaged-goods companies, and could be described as ‘American'.
CEO Talk is BoF’s forum for in-depth discussions with the fashion industry’s global decision makers, conducted by founder and editor-in-chief Imran Amed.
This interview has been edited and condensed.