When the recession hit, in 2008-2009, many rushed to predict the slow, agonizing death of the luxury market. Yet, here we are, four to five years into the future and this market niche still appears to be thriving. Which are the specific segments of the luxury goods market that managed to successfully sail through the murky waters of the GFC? And, perhaps more importantly, how did they manage to do it? in the following, we offer a cursory analysis of the six top luxury market segments that managed to survive the recession.
#1 Luxury Fashion
The 2013 meeting of Europe’s first luxury lobby group, the European Cultural and Creative Industries Alliance, marked a momentous event in the world of luxury in the European Union. It was the very first time that Europe recognized that high-end products are a bastion of cultural and creative industries. Speakers at the event explained that, while the Eurozone had stagnated during the recession, China’s buoyant growth had spurred on the growth of Europe’s luxury goods industry to a two-digit number. And the numbers certainly look good, according to The Guardian: Yves Saint Laurent saw a 59 per cent increase in yearly sales, up to EUR65 million. Bottega Veneta also saw a boost of 47 per cent, up to EUR300 million, while Louis Vuitton boosted its yearly sales profits to EUR6 billion – that’s over GBP6 million in luxury purses sold per hour!
#2 Fine Art
On first glance, it can’t quite be said that the luxury art market has survived the recession unscathed and came out at the other end with no sign of battering. It’s perfectly true that the recession changed and challenged the world of art auctions. Ed Winkleman, of the Winkleman Gallery in Chelsea, New York, for instance, explains that the one major change brought on by the financial crisis is the fact that collectors are no longer sure of the actual worth of the works’ market value. However, he also goes on to add that, while the contemporary art market is marred by a degree of uncertainty, the classical market is one of those luxury market segments that’s resolutely stable. Winkleman also says that the reason for which the market has continued to thrive, even during the recession and its wake, is the presence of active, returning mid-price collectors. During the boom of the market, such collectors were “priced out”, yet now, that the market is more settled and stable, they have returned.
#3 Affordable Luxury
The above term might seem contradictory – however, the recession has certainly created a favorable context for affordable luxury. How would such a category of products be defined? It’s relatively simple – and it always involves a comparison between two distinct luxury market segments. Compare, for instance, a mid-range luxury chocolate boutique to a top luxury brand, or an affordable luxury vacation in the United States to one spent in Europe. While products and services in the former category might have a hard time selling at the moment, those in the latter have every chance to thrive. In fact, numerous financial advisors are counseling their entrepreneurially-minded clients to consider starting such a business: a small operation, catering to the rich, but thrifty, who haven’t lost their penchant for luxury during the recession, but might buy more cautiously now than before.
#4 Financial and Insurance
Back after the federal government had launched the Troubled Asset Relief Program (also known as the much-maligned corporate bail out), the financial and insurance industries were a far cry from their former luxury-focused selves. Gone were the days when lavish meetings, incentives, long-term investment, and luxury properties were the norm. By 2011, however, the industries seemed to have bounce back, according to Meetings & Conventions. For one thing, numerous brands have resumed their habit of meeting at luxury properties such as the Ritz-Carlton and Mandarin Oriental. For another, the top-performing brands in both insurance and financial are back to doing everything in their power to convince their clients that they can associate quality with their brand identities. This, in turn, has led to the resurgence of the life vs. term insurance debate, with more and more investors choosing to move away from the term insurance-only approach and toward having more variation in their portfolios.
#5 Luxury Goods e-Commerce
Back in 2012, consulting firm Bain & Company was foretelling good times ahead for the luxury good sales sector, forecasting a 6.7 per cent increase by the end of that year, with over EUR200 billion in sales within the course of that single year. They restated their forecast at that year’s conference held by the Italian luxury goods industry, where they also said they expected further global sales growth by the mid twenty-teens. What is the root cause behind such optimism? On the one hand, the strong luxury goods sales catalyst that is China, and, on the other, the growing popularity of digital technologies, with social media, mobile interaction, and e-commerce at the forefront. Of course, China did play its part in the digital luxury sales revolution, with 20 per cent of global sales and 50 per cent of consumers based in the Asian super-power and all over the Asian continent, respectively.
#6 Luxury Cars
The luxury automotive industry has also seen some significant changes during the recession, as well as in its wake. That’s largely because consumer attitudes and mentalities have shifted and, with them, the brands and makers saw themselves obligated to a paradigm shift. The biggest challenge post-recession, for luxury car producers, has been to understand that the reason for which a consumer might spring for such a purchase has been altered; similarly, the factors determining buyers to opt for a luxury car has changed. According to Nancy Hubbell, prestige communications manager at Lexus, before the GFC, buyers would want to make a status statement by buying a Lexus. Post-recession, however, their focus turned to proving they’ve made a good decision and a sound investment, even if the price tag on their car of choice might seem steep for some. Hubbell also explained that the reason for which Lexus has traditionally done well in times of financial trouble is the fact that it continues to emphasize the brand’s quality and luxury status.