The new Louis Vuitton flagship store opened in London last week. Situated on Bond Street and designed by Peter Marino, the multi-million pound “boutique fantasque” seeks to be like a home to well-heeled “collectors,” which speaks to both Theta and Lambda personalities. There’s currently a special exhibition of the 24 collections Marc Jacobs has designed since he first arrived at LV. Akin to that of a fashionista’s walk down memory lane, the whole effect is ‘expensive, quirky, glamorous – and totally contemporary’, writes Hilary Alexander, Fashion Director at the Telegraph.

When asked by Alexander about possible issues concerning the economic recession on the store’s opening, Jacobs replies “I know for a fact that business is good.” He goes on to say:

Louis Vuitton is a unique organisation: the products never go on sale, nor are they sold at duty-free shops. We create what people desire. And I love that commitment to quality.

Perhaps it’s this uncompromising nature that continues to maintain the brand’s revenue, despite the state of today’s economy. However, this approach only works for truly innovative, unique and long standing brands like LV. Not all designers can be so uncompromising. As seen in a previous post of mine on designers’ optimism, fashion designer and entrepreneur Carolina Herrera talked about the difficulty of maintaining the brand and its customers with the need to cut costs. Slashing prices on luxury brands is always dangerous as you risk jeopardizing the brand’s integrity and exclusivity. There are ways around this, as proven by the likes of Tiffany and Co. who avoided slashing prices by decreasing inventory levels instead.

Describing himself as a ‘collaborator’ and not a director, Jacobs dismisses the thought of a couture collection or the possibility of designing costumes for films, stating that the “ready-to-wear [lines] is pretty much at couture level, anyway.” Clear on the direction he wishes to take the brand towards, Jacobs plans to launch the first ever Louis Vuitton fragrance.

By maintaining a high standard of quality, Louis Vuitton has managed to thrive, not just survive, during this global economic recession. As the economy improves, they’ll hopefully be able to keep it up.

Signs of life  in the beleaguered luxury market continue. First it was in Europe’s yacht docks, where mid-sized yacht sales are picking up steam.

Then in Silicon Valley, where luxury vehicles are seeing month-on-month increases in sales. And more recently across America’s upscale department stores, which are seeing sales jumps of around 7 per cent.

Now in London there are reports that the luxury commercial property market is heating up once again. The Financial Times has details:

The Royal Borough of Kensington and Chelsea has sold land overlooking Holland Park in London for more than £100m to a joint venture between the Duke of Westminster’s Grosvenor Estate and Native Land, underlining the scale of the recovery for luxury residential property.

It’s important to watch what happens after this deal. Is this the start of a trend, or a one-off event? If it becomes a trend, then London’s luxury property market could recover quickly than most other luxe industries.

Thanks to the recovering global economy, the world’s wealthiest individuals have regained their mega-spending confidence. Evidence of this can be found in the sudden up-tick in the number of mega-yachts being sold.

According to this Bloomberg article, boats over 100 feet are selling “very strongly”. Simon Clare, head of marketing for Princess Yacht, spoke to Bloomberg about the phenomena:

“Boats over 100 feet are selling very strongly as the very wealthy feel the crisis less and tend to buy bigger and more modern boats”.

The recovery in sales is very welcome, considering the beating the yacht industry took the previous year. International Boat Industry magazine found that European yacht sales plunged about 50 percent in 2009.

But who is buying these yachts? Juergen Tracht, head of Germany’s aquatic sports industry association offers some insight:

“Typical buyers for these boat categories like medium-sized entrepreneurs usually pay them with savings, and they still haven’t reached the level prior to the meltdown during the crisis”.

At first look, it doesn’t appear these are the Lambda personalities who were freely buying mega-yachts before the recession. But look at it another way: Many are still trying to recover their financial footing.

The people who are buying now are the people who feel compelled to set themselves apart from their friends, even if the size and price of the items is less than in earlier years. That is the mark of a true Lambda.

There’s an interesting story in the New York Times today about the coming bonuses that rescued banks will begin doling out to its employees. Setting aside the furor over whether it’s the right thing to do, I want to look at what happens after the money is awarded.

The article suggests that those who get the bonuses will indeed accept them. However it will be a quiet affair, not a flashy, borderline show-off event. Purchases made with bank bonus money are treated with secrecy, as one New York Times reporter found:

In the Hamptons, where real estate agents court bankers looking for summer homes, the sales are also expected to be a boon for contractors, movers and groundskeepers. “A community like the Hamptons depends on house trades,” said Diane Saatchi, an agent with Saunders and Associates who just sold a home to a banker for $4.9 million. “Don’t ask to talk to him about it, because he won’t,” Ms. Saatchi said of the buyer, deflecting a reporter. “They don’t want anyone to know they are buying.” That includes the banker’s extended family, she explained, because he is worried they will ask him for money.

A by-product of the global recession has been how people feel about wealth. More specifically, how people feel about individuals who have great wealth.

Instead of being seen as the fruits of hard work and business savvy, it’s instead being seen as a sign of extreme greed and selfishness. It’s too early to tell if this will be a short-term side effect, or if the public psyche has been forever altered by it.

The torrent of populist rage against bankers enriching themselves in the midst of a global recession has had an impact inside the banks, according to the article:

“Bankers are being told by their bosses to be careful,” said Janet Hanson, who was an executive at Goldman Sachs for 14 years and is a founding member of 85 Broads, a professional women’s networking organization. “I mean, how does it look if you got a $1 million bonus from Goldman Sachs and you are sporting around in a new Audi TT? People will hate you.” (To deflect criticism, Goldman announced last week it would pay its top 30 executives in stock only.)

As the global economy continues to recover, it will be very interesting to see what the longer term affects that the recession will have on people’s perception of wealth.

Was the rage and, at comes, contempt, because others around were suffering? Or is it the build-up of years of frustration? If it’s the latter, then perhaps we will see this phenomenon continue, long after the economy has fully recovered.

While we’ve looked in many directions for the best ways for companies to respond to (and thrive in) the financial crisis, we have not yet looked to history for a potential solution. How did luxury companies survive the Great Depression of the 1930s? A very interesting piece in Slate’s The Big Money blog tells us that the response then, “the selling of utility over luxury, craftsmanship over status, quality over excess,” is something that luxury marketers today should take to heart.

Utility, craftsmanship and quality are characteristics that trend more towards Lambdas, who seek achievement and uniqueness, but that’s not to say that Thetas (who seek affiliation and control) will appreciate an item less because its flashiness and showiness have been scaled back. Thetas are of course free to use luxury in any way they like, but if it’s to show off in order to fit in, they may find the groups they’re trying to fit into shrinking or less willing to accept them, it being unseemly to be ostentationsly wealthy during the recession.

What kinds of ad campaigns can we expect to match this greater focus on product quality? The article’s author, Karl Taro Greenfeld, suggests a ‘playbook’:

Find your heritage, your traditional values, your long commitment to craft and quality—or make up those attributes if you have to—and then retire the marketing campaign of shirtless models sipping Cristal in the back of a G4, and replace that with an austere, calligraphy typeface of your brand logo and then, below that, something like, “Family Owned Since the Reign of Xerxes.” Or, expect more shots of the product, less of the luxury lifestyle. The goal becomes to communicate the workmanship and quality of that $5,000 handbag, rather than just the buy-in to a cooler class.

This is an interesting observation and I believe we’re already seeing it in the marketing materials of many famous luxury brands. Whether these brands will ‘change back’ to displaying more conspicuous luxury after the recession ends remains to be seen.

The diamond industry may be beginning to recover, according to De Beers executives who spoke at the Diamond Town Hall Meeting at the Antwerp World Diamond Centre earlier this month.

Gareth Penny, De Beers managing director, said “diamond inventories have fallen to levels which have justified increasing the mining production of the De Beers mines after it had been reduced by some 90 percent in the first quarter of the year.” He also said “The demand for De Beers rough diamonds is picking up,” and that “De Beers production is increasing to keep pace with demand. Retail sales have also shown an improvement.”

He noted that in the period from 1970 to 2009 there were four major recessions in the US, and in the five year period following each, rough prices rose sharply. Penny expects the same to happen this time. I do hope he’s right, and that demand truly is rising. It would be all too easy for him to just tell the crowd at the town hall (including sightholders) things they want to hear.

Photo by Hamza Hydri

The Wall Street Journal’s Wealth Blog recently posted about how true luxury — “goods that are rare, expertly made and sold to a select few” — is on the rise in spite of the recession. The wealthy seem to appreciate the exclusivity of luxury, and the economic climate has widened the gap between those who can afford to spend on true luxury and those who can’t. In a recent survey of private jet owners, 94% defined luxury as ‘for one’s self’ rather than for the masses. This is in line with my my thinking, that luxury depends on how the individual interprets it.

While I didn’t have the chance to research this for my PhD, my feeling is that Lambda personalities are the early birds and will be the early majority to start spending on luxury again. I hope to have the opportunity to research in the future whether the purchasing cycle from early birds to late comers follows from Lambda to Theta. My colleague Randy has observed that Lambdas tend to spend more than Thetas on similar offers. Theta buyers buy smaller diamonds, for example.

We are now seeing Lambda consumers interested in bespoke (and more expensive) purchases while Thetas will potentially follow later. This could be explained by the yearning of the Lambda for novelty while Theta look for social affiliation so the society has to be created first so they can join it.

It seems that the economic crisis has put many luxury shoppers into a state of shock. We can’t forget that luxury is what makes us human: it allows us to choose. People learned quickly how to overcome this shock.
Lambdas have already started but Theta will follow. Thus all the claims that the cheaper stuff is out is premature. People will go back to Burberry but it will take some time since the more expensive things will be sold first. However, if we talk about an economic recovery in 2010, luxury recovery will start earlier, maybe in 2009.

It’s a little bit ‘religious-y’, but I recently came across this article on things we can learn about marketing from Christianity, and I found it rather interesting. The author’s tips (focus your effort where you’ll have the greatest returns, focus on your best customers and prospects, and focus on having an excellent product or service) resonate particularly when consumers are proving more difficult to reach as they cut back on their luxury spending.

How bad is the recession getting? Amid reports of declining luxury spending, we’re continuing to see reports about ‘luxury shame”–people feeling embarassed about their conspicuous consumption. Fortunately they are still spending money, but if things continue to decline, they may stop spending and decide that it doesn’t make sense to have luxury as their only religion.

Unbranded shopping bags, secret shopping parties at homes, purchases made to look like gifts–these are the lengths to which people are going to hide their spending from their husbands, wives and the public this holiday season.

The New York Times and the Daily Beast have both recently run articles about how people who don’t want to be seen as insensitive to the financial crisis are finding more discrete ways to spend money. Who are these people (mostly women judging from the reports), and what do their new habits say about luxury?

I believe that many of these women are classic Thetas–they seek affiliation and control, and want to contextualize themselves in a group of like-minded women (a group that often gets together and has these secret shopping parties.). They are not acting like Lambdas, who seek achievement and uniqueness and want to stand out.

Said an editor at Allure, a likely Theta:

Shopping is almost embarrassing, and a little vulgar right now.

Despite this sentiment, people are still going out of their way to consume luxury secretly; there’s still demand for it. Thetas are seeking it out on their own–perhaps more attention should be placed on reaching Lambdas during the recession to unlock their desire for things they need.

Does the recession we’re entering (or have been in for a long time now, depending upon whom you ask) spell the end of luxury spending? Of course not, but it has forced both luxury good makers and retailers to change their strategies, often for the worse.

Some luxury retailers, like Bergdorf Goodman, are reaching out, cold calling potential customers to personally invite them to the store. And some luxury good makers are reducing the quality of their products rather than raising their prices. Bulgari has stopped polishing the underside of a $10,000 watch and is using less expensive packaging.

I don’t think this is a sensible course of action. In my opinion, it’s more harmful to a brand to lower its quality than to raise its prices. There will always be price insensitive customers, it just becomes a little more difficult to find them during a recession. The marketing has to be better. Tarnishing the brand will make it more difficult for the brand to recover when business returns to “normal.”