Why Some Luxury Brands Thrived in the U.S. Despite the Recession

Barney’s New York

The United States is home to the biggest luxury market in the world. Not only is it a primary market for luxury consumption, but also home to some of the world’s best luxury hospitality brands.

Recently the US retail market was hit by recession, yet some niche luxury brands managed to thrive. It seems paradoxical that companies selling shoes for more than $1000 a pair flourished, but it was luxury brands that managed to lead recovery post-recession.

While the tight wallets of the majority of the population are generally cause for concern in a bad economy, the spending of the wealthy has continued to contribute to overall economic recovery. Luxury clients have decided to buy again, regularly, as brands continue to surprise with innovative marketing ideas. The recession years sparked some of the most creative marketing strategies by luxury brands, in a bid to get consumers back into stores.

Behind such pioneering marketing strategies lies a thorough understanding of the customer. Marketers profile the luxury customer, what they buy, where they shop, how much they spend and most importantly, why they buy? What are their attitudes and motivations to buy in a tough economic environment?

As per the Brand Finance® Global 500 report, the global downturn has spawned a new breed of recession proof and aspirational “Alphabrands” which buyers turn to for quality regardless of the economic conditions. Resisting the trend for consumers to look to lower end products during times of economic uncertainty, results show that consumers are increasingly eager to indulge in high quality cutting edge design and couture.

Some of the world’s top fashion chains have experienced soaring profits with big brands such as Louis Vuitton ($US 4.9 billion), Hermès ($US 3.4 billion) and Polo Ralph Lauren ($US 3.3 billion) increasing their brand value. (Brand Finance Global 500 report)

With a good understanding of this shopping psychology, luxury brands have come up with some interesting ways to keep the luxury market going strong. Most of the successful approaches taken by luxury brands during the recent recession in the US can be broadly grouped into three different categories:

Playing on Heritage

In recent years, luxury brands have been introducing their iconic lines in innovative ways, drawing upon their rich heritage stories. It was during the recession that Hermès debuted its first men’s store, in a Madison Avenue townhouse in New York City.

It was their first ever store dedicated exclusively to men. The company is one of a handful of luxury brands that have not only battered the global financial crisis but thrived. Rather than reduce prices or follow trends, Hermès decided to focus on what it does best: produce expensive but everlasting classics with impeccable quality that will last a lifetime.

As the experience of Hermès and a few other brands shows, the crisis hasn’t killed the luxury market but has led buyers to become more discerning. They have moved away from bling, loud colors and fat logos to the classics. Instead of a multiple expensive bags a year, a shopper might now buy only one but that one will be special and timeless and that is where the heritage of a brand plays an important role.

Brands have understood this and have been emphasizing on their history and craftsmanship. Louis Vuitton has been organizing “The Art of Craftsmanship” events where they have been selling their trunks, a product from where the company actually originated.

Cartier has already unveiled their 2013 limited edition called Crash, a line with significant that was first introduced in 1967 by Cartier London. “Persistence of Memory”, the famous artwork by the surreal artist Salvador Dali, was the inspiration behind this and now of course we see this being introduced again as a line especially designed for women.

By keeping a rare and timeless item, makes it more desirable and gives the consumer a reason invest in the good.

Pioneering Digital Media

Luxury brands have finally embraced social media as another avenue to connect with their customers while still maintaining their brand image.

Tory Burch as a brand was created in 2004 and experienced high growth throughout the tough economic times. This is a brand that has shown that with a good product and creative marketing, growth is possible even in recession. The development of their signature flat ballerina “Reva”, introduced in 2006, changed the course of events for Tory Burch.

One of the most important marketing tools used by this brand have been digital. In 2009, they re-launched their web-site and since, social media has fueled their global expansion. Toryburch.com was launched immediately after opening its first shop in downtown Manhattan, and now the online sales generate more revenue than any of their stores.

Oscar de la Renta also uses social media through its @OscarPRGirl Twitter account, penned by Erika Bearman, director of communications, the content includes fashion, yoga, the atelier, music and summering in the Hamptons. The focus was not just their brand, but targeting people with a certain lifestyle and adding value to them. This was a way to connect and maintain relationships with their current and potential customers.

One of the most creative use of social media was by Coach in 2010 which also managed to drive sales. Coach describes Poppy Project as “an online art project … fueled by attention, conversations and tweets.” Participants – mostly fashion bloggers – were rewarded with the chance to win products from the Poppy luxury line.

Coach created a unique method to influence niche online communities and reward them for diffusing the word about new campaigns and products in unique, interactive ways. This helped Coach maintain relationships with their advocates (the bloggers) while introducing new audiences to the brand through the advocate’s participation and promotion on social media.

Constant Innovation

With a tough economy and erratic consumer buying behavior to start with, luxury marketers were forced to be creative. As a result, there emerged some game-changing ideas that forever changed the luxury industry.

In 2010, around Thanksgiving shopping season, Chase Card Services, a division of JPMorgan Chase & Co. and Continental Airlines opened the “Continental VIP Lounge from Chase, an exclusive retreat for Continental Chase Cardmembers.” This was a brilliant way of taking customer service to another level by a luxury mall.

This unique VIP lounge offers an array of hospitality features like free bag check, complimentary gift wrapping, comfortable massage chairs, free WiFi and HDTVs that broadcast sports games and other popular programming. Guests can also enjoy a caffeine pick-me-up, relaxing hot herbal tea or holiday-themed refreshments and access a mobile phone charger at the VIP Lounge’s convenient charging station.

In addition, the customers are invited to special events, gourmet spread, can receive foot-rubs and hand massages. Now which shopper has the time to think about recession?

In 2011, Alexander McQueen’s used its “Savage Beauty” exhibit in the Metropolitan Museum of Art in New York as a way to further elaborate the brand’s history and align the brand with quality. The design, craftsmanship, art and detail that go into the making were highlighted in this exhibit.

There were consumers from all over the world who flocked to the Met to see this exhibit. Alexander McQueen’s death likely sparked even more curiosity from museum-goers. Using a museum as a venue was a more sophisticated and artistic way to add to the value of this brand forever.

Ralph Lauren has been lauded as one of the most successful brands during recession. In 2010, they opened a 22,000-square-foot store at Madison Avenue and 72nd Street in Manhattan. The store, built to resemble a mansion, is the brand’s largest women’s store that also features home collections and new lines of lingerie and fine jewelry.

Of course, most of the shoppers are affluent tourists but that’s not the only reason for the store’s existence. With the opulent and glamorous building and the dazzling products, it’s also a classic brand building effort. This store is meant to excite more regular shoppers too.

Even during recession “everyone wants a slice of luxury” and brands that have understood this have thrived.

To further investigate marketing on Luxury Society, we invite your to explore the related materials as follows:

- 4 Luxury Marketing Ideas for 2013
- Does It Make a Difference to Consumers if a Brand is Premium or Luxury?
- The Multi-Facets of Luxury Retailing