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Research reveals luxury consumption to rise despite recession

Isaac Mostovicz writes that luxury consumers are spending more and getting smarter about it...

American Express Publishing recently released a some new research on luxury consumers around the world. They surveyed people with an average consumer income of $520,000 to look at the impact of the recession on luxury consumer consciousness.

The research predicts that luxury consumption will rise by $28 billion over the next year because of a number of factors, including decreasing guilt over luxury spending (a drop from 54% to 45% was reported) and an increase in the mean incomes of the affluent with 400,000 new households joining the ranks of the wealthy for the first time since 2007. The percentage of luxury consumers saying they like the recognition of being wealthy has also increased by 12%.

The report goes on to say that this is due to the fact that consumer interests and attitudes towards luxury goods have also changed hand in hand with people’s need to adapt financially during the recession. The success of such an endeavor is reflected in this rise of consumer confidence. Dr. Jim Taylor, vice Chairman of the Harrison Group says:

“Interest in luxury is trending up, but this interest is qualitatively different from the unbridled enthusiasm that characterized the ‘glutonomy’ of the mid-2000s.  People take pride in the way they have managed their finances and family through the recession.” Dr. Taylor explained, adding, “we are decidedly not seeing the return of the old economy.”

This trend in value and quality can be seen in previous blogs of mine on finding value and watches.

In addition to this, more and more people are buying because they are happy than in order to be happy. Consumers are also becoming more immune to persuasive marketing strategies and are instead doing their own research. This not only shows us the continued importance for value and quality but also another facet to this new breed of luxury consumer, that of a connoisseur consumer.

Today it’s more about “what I need or what my family needs.”  It is no longer about keeping up with the Jones.  In a sense, today’s affluent have become pioneers of the new “Econo-Me.” They feel they’re in complete control and can’t be convinced to buy what they don’t want or need.  Their decisions will be their decisions, based on sound reasoning.

Gone are the past-times of retail therapy and gone is the pre-recession breed of the ‘gluttonous’ consumer. Emerging now is a stronger, more dynamic and smarter breed of luxury consumer. A blog by Deidre Woollard on Luxist recommends luxury brands to follow this trend and shift their digital conversations away from price and more into emotion. This will certainly be a good move as the report calls this recession an ‘Emotional Recession’ and these signs as a potential ‘Emotional [road to] Recovery.’  However, marketing to these connoisseur consumers are harder than ever, as Woollard highlights:

Customers want what is classic, quality and a known quantity. And yet, they want to be surprised, they want to be dazzled, they want thrills. They want choice, but not too much choice, deals but not discounts. It’s all a bit confusing for brands trying to maintain consistency while creating the excitement luxury consumers need to see.

It then becomes more important than ever for luxury brands to pay attention to the Theta and Lambda personas, because while luxury consumers may evolve and marketing strategies may change, Thetas and Lambdas alike will always remain as they are, albeit just more specialized than ever in knowing what they want.

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In case you missed it… Janus Thinking featured in Luxist

Isaac Mostovicz writes...

I recently wrote a guest post on Luxist about Theta and Lambda luxury and satisfying the needless need. You can read it here.

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The allure of the past: Why backstory is important in luxury

Isaac Mostovicz writes that an item's historical significance can sometimes be its greatest luxury attraction...

For $700,000 you could own historically significant chimney piece heads. They’re not just any chimney piece heads. According to Luxist, it’s:

An extremely rare, important and well-preserved neo-Gothic terracotta chimney piece commissioned for Franz Joseph I, Emperor of Austria, King of Bohemia and King of Hungary, in the late 19th century

For potential buyers, the most important aspect of this is not the craftsmanship, or even how the chimney piece heads look. The most important aspect is its age and royal associations.

A Theta personality will be attracted to this because of the piece’s backstory. This piece serves no purpose other than to be put on display. Thetas gravitate toward luxury items that can be added to their existing personal picture and sense of unity. Thetas would see this item as fulfilling that need.

Thetas look for benefits that improve their social standing. Thetas look for recognition. As I mentioned above, this item would be bought and immediately put on display. A Theta personality would take great pride in showing off this historically significant item off to their friends and others who he perceives as also being part of his desired social circle.

The two guards on the chimney are engraved with a staying that Theta personalities would find great significance in:

Two knights standing on Corinthian columns flank the mantelpiece, which also bears the Emperor’s motto Viribus Unitis, “With united forces.”

Thetas seek unity within themselves, so it is likely that a Theta will attach some personal significance to this phrasing, which would make the item more attractive. Also, because the item is so old, it will likely become some kind of personal adage for the Theta personality.

Ultimately it will be the item’s rarity that will be the most items most attractive feature. Thetas will link their status to the rarity of the product. According to their worldview, if the product is rare, it would imply to anyone viewing it, that the owner, too, is unique.

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Luxury designers are optimistic about recovery

Isaac Mostovicz writes that the optimism expressed by top luxe designers bodes well for the industry's speedy recovery...

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Here’s an interesting interview in the Wall Street Journal with Carolina Herrera that I caught via Luxist. Like most in the luxe business, she, too, felt the pinch from a faltering global economy. But now she sees things changing.

I saw the impact in the beginning. I saw it with the women who used to come to the boutique to buy. They bought less. All the information in the newspapers makes them nervous. When you see a lot of people losing their jobs and they have children to send to school and other commitments, then you think [more before] buying.

…..

Lately, it has been better. At one point, I used to see the people who used to buy a lot, and they were a little concerned about buying. Now they are shopping again.

It’s good to see major players in the luxury scene express this level of optimism publicly, not just retailers. She explained a bit about what her strategy was during the worst of the recession.

During the downturn, she has had to walk a fine line, trying to cater to frugal consumers without damaging quality or image. … Ms Herrera responded by cutting prices about 10% and making tweaks to trim costs. She is also expanding her lower-priced CH Carolina Herrera line, adding 17 standalone shops this year to the current 48.

Her strategy speaks to an interest in not alienating a core Theta personality customer. If Ms Herrera had reduced her prices to 15% or 20%, her brand may begin to be seen as masstige. This would alienate both Theta personalities and any potential Lambda personality as a client.

Because she resisted that, her brand’s position is in good position to grow more as the recession fades.

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Is the ‘masstige’ market recession-proof?

Isaac Mostovicz writes that the 'masstige' market's rebound could be helped by Theta personalities looking for long-lasting quality items...

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A major casualty of the global recession has been the luxury industry. Sales are down across the board and those who are buying luxury goods are buying far fewer goods than before.

Many companies are rethinking their business strategies, i.e. Gianni Versace SpA closing its Japanese stores, which I’ve previously written about.

But the doom-and-gloom of the luxury market seems not to have trickled down to the ‘masstige’ — mass-market luxury — market.

Though not officially a “masstige” brand — and the brand outright rejects it — Hermes has done well for itself in the recession. Its bags have reached mass-market, and against the backdrop of a global recession, the company has begun crafting expansion plans. Luxist reports:

The Financial Times recently talked with Patrick Thomas the CEO of the luxury brand who has said the brand has held off on expanding as fast as they could because they don’t want to squander the legacy of the company’s history. Thomas refers to it as a “capital sin” to use the image of the company to try and make short term money.

The ‘masstige’ market is tailored to Theta personalities. Even in a recession, where resources are strained, they will seek out quality items. Though the focus on quality will be more to do with the comfort of knowing the item will last for a long time.

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