One of the most important tenets of branding relates to pricing and nowhere is that of more importance today than with luxury goods. As manufacturers and retailers of high price high image branded products seek to get back into affluent consumers lives post recession many are finding a less than welcoming door mat.
Luxury goods took a huge hit during the recession and to survive retailers of such brands began to discount previously only full price products to move inventory. Retailers like Saks Fifth Avenue and Neiman's put top designer brands on sale that had never seen a price rack before. I know I was one of thousands of shoppers who enjoyed the bargains. However, two things occurred. Consumers got a good idea of how much the mark-ups are on luxury goods and they also decided that mass luxury brands were too "common" (now referred to as commodity luxury) and they could do without more.
Further, once you discount goods it is very hard to bring them back up to full price especially with very savvy consumers. So now mass luxury brands are suffering and finding it hard to get those high margain price points for their goods.
In a recent affluent consumer study it was determined that rich consumers are not as interested in paying full price for much of anything, (except for a few items discussed later) and that their opinion of lower image oriented stores has dramatically increased and so has the pursuit of bargains. Many more shop vigorously online to find the items they want at the best price fueling more and more discount luxury goods online sites. Also importantly for branders, paying more for a high image brand because it is more fashionable or stylish isn't cutting it. Marketers will have to find more emotionally driven demonstrable ways to lure consumers to their products. In essence going back to "pure branding".
The only area where consumers are willing to pay top dollar is limited availability products. If there are very few of something and it is of especially high quality, affluent consumers are willing to shell out the big bucks. Exclusivity is back. Brands like Hermes which never over-expanded during the robust income years, have virtually been unaffected by the recent major recession.
One of the profound issues that is facing luxury goods companies is that from the 1980's onward they took the path to pursue aspirational consumers on the way up financially. They introduced many lower level products under the high level brand name to increase sales and profitability. Many marketers like myself expressed concern with this strategy but luxury brands raked in profits for nearly two decades or more before being hit by a ton of bricks. Now, recovering those lost sales may be very difficult if even possible and aspirational consumers are a changed bunch with a lot less money and need for luxury goods in their lives.
One strategy may be that brands now considered "commodity luxury" will start introducing more elite and more exclusive products available in fewer locations under new sub-brands. Just going exclusive under current brand names may not work well with today's consumers who are increasingly sceptical of and less influenced by luxury brand advertising and marketing in general.
Watching out for you everyday.
Eli
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