The term bling-bling was created by hip-hop artists on the eve of the new millennium and soon entered the vernacular to mean all things flashy and elaborate as the swelling global economy led to avarice and ostentatious consumer behavior.
But what will the new market realities mean to luxury brands. Will the reversal of fortunes result in a protracted period of austerity?
Previous economic downturns have taught us that at the beginning of a recession, even wealthy people refrain from purchasing luxury brands for four key reasons:
1. To demonstrate prudence (it simply makes sense to spend less when earning less)
2. To avoid appearing ostentatious (no one likes a show-off – especially when times are tough)
3. To wait for a bargain (why buy now when luxury goods and services may soon be sold at steep discount?)
4. To wait to be rewarded (luxury purchases are gifts to ourselves for doing well, but when recession strikes we have to wait for a new reason to be prize-worthy)
Certainly the current economic turmoil has tempered the appetite for aspirational brands in the near-term as evidenced by the recent Christmas shopping season. And it is likely that some of the over-the-top luxury brands may never recover. Clearly, the luxury balloon -- where high prices actually encouraged sales -- has burst.
However, the smart luxury brands will find ways to increase value rather than lower prices.
I attended the Global Luxury Forum at the Ritz Carlton in Moscow on December 8th and heard some very interesting comments by senior luxury brand executives. In addition to the consensus that Russia may recover faster as a market for luxury goods, the major recurring theme was that the proposition of luxury for luxury sake is no longer sustainable. Instead the focus must be on quality and understated luxury.
“Luxury today should not become obnoxious,” said Nathalie Guedj, the CEO luxury Spanish jeweler Carrera y Carrera and former CEO of Van Cleef & Arpels. “The value of luxury is not to show off. Luxury should focus on truth and value.” Ms. Guedj advised luxury brands to focus on what they are really good at and to deliver it. “There is an opportunity if you are the best,” preached Guedj.
I believe that brands with pedigrees, the ones with great stories, which have demonstrated that over time they retain their value, will survive and even prosper over the next several years.
Consumers will not abandon luxury. However, luxury brands that historically have appealed only to emotion and impulse (just look at what is on offer at airport duty-free shops) will now need to take a more whole brain approach to branding. In addition to the emotional appeal, consumers will also require a rational promise to justify their purchases. Words like durable, practical, value and quality may begin to feature more prominently in the brand stories of luxury goods manufacturers. And luxury brand logos will hidden away as a mark of quality rather than tatted-up as a stamp of affluence.
Another interesting insight discussed at the Global Luxury Forum was the concept of “spot luxury” – where, rather than draping themselves from head to toe in luxury brands, consumers will now mix and match luxury with more sensible or utilitarian purchases – like a Gucci handbag with an H&M blouse and a Zara skirt.
I guess that means that “new money” will soon be acting like the “old money” I witnessed growing up in Boston – where Rolex watches peaked out from under well worn cuffs and it was not uncommon to find a vintage Mercedes sitting under army blankets in the garage.
So is it the end of bling-bling? Only time will tell. But for now, I suspect more people will be wearing their luxury logos on the inside (where they belong).