The great actor-director Orson Welles reckoned living in the lap of luxury was terrific except “you never know when luxury is going to stand up”.
Given the growing list of adverse world events, luxury should be halfway out the door now. Two actual wars and two possible – the Houthis and China versus Taiwan – plus a Trump-load of aggro building in the United States should surely focus consumers’ minds beyond the latest It handbag and more bling for one’s Crocs.
Global inflation is still gnawing the economic scenery and China’s growth mode has gone from “charge!” to “a cup of tea and a lie-down”. The global labour shortage is undiminished, as are energy prices and housing unaffordability. An Armani blazer can warm one up only so much.
Accordingly, signs had begun to emerge that the US$390 billion (NZ$640 billion) luxury personal goods sector was in decline. Amid slowing sales and profit warnings, brand merchants were changing ownership at massive discounts. Saks Fifth Avenue couldn’t pay its suppliers for several months.
This made sense, as pandemic lockdowns had pumped sales to outlandish heights. Unable to spend on travel, dining and entertainment, consumers splurged record amounts on high-end merchandise.
Greed-flation had nothing on luxe-flation. Luxury goods’ prices rose 25-33% from 2019-22, according to various analysts. Chanel near doubled the price of its headline handbag to NZ$16,000 in that period.
The post-lockdown consumer focus from stuff to experiences and lifestyle meant the super-solvent were now more likely to compare notes on their blood glucose implant apps than their new Louboutin slingbacks.
Luxury conglomerate LVMH was bumped from its long-held throne as Europe’s richest company by weight-loss drug manufacturer Novo Nordisk – proving, as the Times tartly observed, that one can never be too rich or too thin.
Beautifully made, long-lasting goods logically cost more to produce, but the margins have long since transcended the merely predatory. Surely, the confidence trick of a “designer” premium was finally due a dose of perspective?
That, as they say in the trade, was so last month. Now, it appears luxury has resumed its well-upholstered seat. Accounting giant EY says only a third of affluent spenders expect to reduce their luxury spend; the rest reckon they’ll spend the same or even more.
The consumer reset to caution has only reinforced the appetite for heritage brands like Hermès and Cartier, most cantering lucratively upwards. Fashion is struggling but luxury fashion’s growth trajectory is back around 5-7%.
The initial deceleration was down to some brands over-luxe-flating. Even those rich enough to repeat-buy Chanel smelt a rat when exactly the same purse doubled in price. The Times has reported Burberry in strife, instancing the flop of its new signature “Knight” bag ($5000) – a slouchy, pouchy affair accessorised with a matching faux foxtail ($1000). (No, me neither). It was so out with normal Burberry prices that even habitués failed to see its charm.
Here’s the fun bit, though. While cheapy chains like JCPenney can back down and trumpet reduced “pre-Covid prices!”, your Louis Vuittons can do no such thing. Luxury brands can never discount their own goods. The status must be maintained, literally at all costs.
Pity the poor dah-lings, stuck with all those drooping fox bits, which they can’t now even quietly incinerate because of new anti-waste laws and terrible publicity. Upcycling has yet to qualify as a marketable luxury attribute.
What they can do, however, is bring in similar items at – say it quietly – lower price points, as Porsche famously did with its Boxsters and Cayennes.
One could, of course, buy one of these Boxster purses. But, my dear, who would visit Chanel and be seen to settle for its Pam’s products?
