Could 2009 be good year for luxury?

I may not agree with a banker friend who said to me ‘luxury is dead’ – but I do, like most of us, understand the sentiment. The very word ‘luxury’ seems more inappropriate than ever. So, surely 2009 holds nothing but trouble for our industry?

Or, perhaps it’s not all bad. Trade is down, but not for everyone. There will be consolidation, but it is already clear there will be winners as well as losers. New opportunities are already emerging. It is always thus in seismic moments such as these. The Chinese use two characters to write the word ‘crisis’ – one to signify danger, the other, opportunity.

For me, this recession comes as a relief. We had been living through a phony war for much of 2008 and I had grown weary of hearing comments like, ‘The rich will not be affected because they are, well, rich’ — almost as annoying as being told ‘luxury is dead’.

I adopted the view that the sooner we’re into this recession and getting a sense of where we are headed, the sooner we can plan and come out the other end.

Not that this is anything more than cold comfort now that we are in the thick of it.

So what to do, in light of the volatility of the last quarter of 2008 and the ongoing credit crunch, which make forward-planning so difficult? Must we ‘redefine luxury’? Should we cut our prices? Should we go quiet? No, no and no. The solution isn’t to become apologetic, nor to go down-market, and we are stuck with the word ‘luxury’, for better or for worse.

I believe we have no other option but to turn our attention to the go back to the basics. This means recessionary good practice in the short-term, followed by a sustained period of focusing anew on some essential principles. If we can do that, the best of us will be well-equipped not merely to survive, but to benefit from the inevitable (yes, inevitable) upswing. The long-term macro picture is as positive as before, and the in-built advantages of luxury remain as compelling as ever.

The obvious short-term measures – cutting costs, marking down excess stock, renegotiating contracts, pausing on investments, boosting footfall and thinking defensively (always good for the psyche in a downturn) — are not only necessary for survival, but will, in my view, incur a number of overdue improvements to how some do business. Managing excess stock, to give but one example, will, I hope, henceforth be taken more seriously.

Next, I recommend focusing on the big, fundamental concerns that have been and will continue to be important to luxury — something I call the Luxury Basics. As those who have followed my past discussions know, I have long felt that during the good years some brands lost sight of these basics:

1. The role of discernment is paramount. When people buy less, discernment comes to count for more. Sophistication can’t be unlearnt. So while it is true that our clients are making economies (or wish to be seen as doing as much), they will not economise on good taste. They might buy less (maybe much less), but will not compromise on quality when it comes to true luxury. Why? Because to do so represents poor value for money. A Bill Amberg bag will last longer, look chic with more, lift an outfit (including the Topshop belt or the H&M; skirt) and most importantly, enable a customer to demonstrate that they know what’s what.

2. We need to deliver real value whilst taking our own values seriously: Conversely, cyclical periods like these expose those who have relied too heavily on image alone, those who have trimmed product quality, expanded too quickly or diversified too far beyond their core competence. Why spend even half of what you would on a respected brand on another that cuts no ice with your peers or that is too frivolous? It becomes no more than ‘luxury junk’ (a chilling phrase I read a few days ago). We all give the nod to these sentiments. But the real challenge is to make a change at a deeper level, rather than a typically ‘fashion’ reaction to gloomy times.

3. Product provenance cannot be underestimated: Desire for knowledge about a product’s provenance has been increasing in importance for a long time. It has been part of what I call the shifting tectonic plates of consumer tastes and attitudes, in which ever-more sophisticated customers flex their muscles against the old-style brand control. Some have been able to get away with paying it lip service. Not any more.

4. In retail, the human touch will be more important than ever: Many have fallen far short where service is concerned, having forgotten how to listen to and treat customers. This notion is broadly acknowledged — yet so few have really taken it seriously. According to a recent study by Google, 40 percent of affluent online shoppers in North America find the luxury in-store experience uncomfortable. Now is the time to address this.

5. Seize the opportunity for online innovation: As part of the solution, being creative and seizing once more the desire to innovate is essential. History teaches us that some of the best ideas are generated during downturns. Embracing technology will be more important than ever. This includes ecommerce, where our sector is still under-developed. However, the online opportunity isn’t just in sales. The internet is where so much else that is critical to the industry is played out. It is, crucially, where consumers go for information before buying: seeking reviews and recommendations, checking price and value (indeed, including the swiftly growing private sale, auction and markdown sites). It is also where some customers turn to discuss brands and share views. Through considered use of social media, we can benefit from this dialogue. Online consumers are opting for convenience, flexibility, and transparency. Not all want nor enjoy shopping in-store; nor are they after an online replication of that experience. Luckily for us, the things that make for a successful online strategy are fundamentally akin to those we need to apply to everything we do.

In a nutshell, the Luxury Basics call for us to learn once again the things that made our brands great when they were founded: treating the customer as the most important part of our offering and never forgetting that we must deliver real value with truly exceptional products.

All this is easily articulated, but markedly less easy to do. Those who already know this and those who can adapt quickly will, I believe, not only survive, but prosper. Many of our customers were already disillusioned or unimpressed by much of what was happening in our sector long before this crisis.

If we can recapture their imagination and trust and in the process improve professionally and commercially as businesses, then perhaps we will look back at 2009 as the start of a transforming period for luxury.

Guy Salter, Guest Contributor