How the Downturn Will Affect High-End Retail

January 28, 2008

I was asked today to comment for a story on the impact of the economic downturn on the luxury market.  I focused my comments on luxury brands and retailers.

I view the current situation for luxury brands and retailers as a “pause” in the long term growth trend of the luxury segment domestically and worldwide.

  • I am optimistic that the financial and housing markets will work through the current situation and we will see a return to confidence, but with a more reasonable expectation of growth.
  • The consumer impact is likely to be mostly on the aspirational buyer segment in the short term.
  • The high-end will continue to spend.  Their events, functions, etc., will continue and they will buy what they need to look the part.
  • I think we’ll see a moderation of conspicuously wealthy looks as people feel less comfortable “looking wealthy” when so many are struggling.

Today’s situation calls for luxury brands and retailers to focus intensely on

  • Talent:  acquisition, development and retention
  • Product:  design and development
  • Marketing:  refining the message and exploring web 2.0 options
  • Customer Care:  building the relationship with every interaction

The danger is for companies focused on short term results.  They are likely to slash budgets for talent management, product development, marketing, and customer care.

Companies must, of course, plan for less growth in the short term, closely control inventory levels, and hold or reduce all non-essential spending.  However, the companies with a long-term view will continue to invest in the critical areas of talent, product, marketing, and customer care.  These companies will emerge from the current “pause” with fiercely loyal employees and customer champions.

Mike Osorio, your Dare to be Contagious! strategist  

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