The recession didn't pull any punches. It was ruthless. Many brands found themselves grappling for survival - and as the challenging economic environment continues, some of the worlds oldest and best-loved brands have had to confront some harsh realities - including possible closure.
One of Britain's oldest fashion brands and a victim of the downturn, Jaeger, has just been sold in a rescue deal while Aquascutum, the 160-year-old British clothing retailer has been put into administration. Two years ago, Escada, the German luxury fashion brand, filed for bankruptcy protection before it was rescued by an Indian Investment company whilst high-end jewellery maker Bulgari changed ownership to save it from buckling under a massive deficit.
Gary Harwood, one of the founders and directors of leading strategic branding and communication design consultancy, HKLM says luxury brands were once believed to be impervious to the vagaries of the economy because they 'belonged' to the uber-wealthy with apparent limitless reserves. "We know that's no longer valid," he said.
"But paradoxically, some other luxury brands have posted results that defy the economic contraction. Look at the 25% increase in sales for Louis Vuitton Moet Hennessy for the first quarter 2012, a 21% profit increase for New York-based leather goods and accessories brand, Coach and a 21% year-on-year increase in sales for Burberry. What are they doing right? And when normality prevails, will it be the 'old' normal or a new capitalism? "
Harwood says that during the recent years of conspicuous consumption, many luxury brands diversified and expanded their product offering. Car makers produced pencil cases and umbrellas, shoe designers for the rich and famous branched out into jewellery and brand name perfumes proliferated. The survival strategy of some brands has also been to create different market segments to leverage their appeal - witness Coach, which launched its Poppy line of accessories in 2009 at a discount of around 30% to its signature range to cater for the aspirations (and the wallets) of a younger demographic. "Whilst diversification can be a good thing - it can broaden the range of consumers but it can also be a dangerous route, threatening brand equity and diluting value.
"A luxury brand is very expensive, exclusive and very rare - not meant for everyone. When it ceases to be these things, then it's lost its exclusive cachet. Commoditising luxury brands and making them more accessible to the middle market puts them at risk of becoming ordinary, common and less desirable. And the more available a brand is, the less luxurious it becomes."
Not everyone agrees. London-based top-end shoe brand, Jimmy Choo, doesn't see diversification as brand erosion but rather as brand extension. It went full tilt during the recession, adding to its handbag and eyeware ranges and developing a fragrance and exploring branded accessories such as jewellery, watches and swimwear, all the while maintaining that it was being disciplined in retaining the full DNA of the brand. "Does a $1200 pair of Jimmy Choo heels have the same cachet as $125 dollar plastic 'jelly' sandals from the same brand?" asks Harwood. "Where's the exclusivity, the rarity?"
The temptation for many luxury brands in the tough times has been to discount their offering and to curtail perceived 'extras'. Hindsight will demonstrate that it won't be the discounters, but rather the brands that invested in brand-building that will be in pole position when the recovery comes, he said.
Marketing is often the first to feel the knife, yet in a downturn, brands and particularly luxury brands, need to maintain their communications momentum. If cutbacks are necessary, then the more costly above-the-line advertising should be sacrificed for greater investment in PR which provides a more real, respectable and relevant value-add. Investment in PR is an investment in reputation - and reputation is everything.
One luxury brand that has continued to invest in building its brand despite the economic uncertainties has been Singita game reserves. Harwood, who has been involved in building the brand over many years, says that when many of its competitors were cutting back and discounting to lure guests, Singita worked on making its offering even more exclusive.
"What's even more interesting, is that the brand's investment in 'modern conservation' which requires a specific focus on keeping tourism, the community and conservation in a constructive and positively enhancing balance, has been a huge driver of growth - against the trend," he said. Accolades and awards have followed the brand positioning, with Singita Grumeti Reserves Tanzania coming out top in the influential Travel & Leisure Magazine's "World's Top 100 Hotels", Singita Sabi Sand ranked number two and Singita Kruger National Park taking top honours for the Best Hotel Spa in Africa and the Middle East.
Harwood says Singita embodies the evolution of luxury branding, where ethical and sustainability have become key brand propositions. "For Singita, this has meant continuing to build the brand on a low impact, low volume, high return platform - but the same premise can be applied to any luxury brand whether it's a car marque, a fashion label or a range of jewellery."
But he stressed that luxury brands couldn't afford to be distracted from their core business. "Luxury offerings need to be promoted as being a wise investment rather than an expensive treat, so the emphasis has to be on value delivery. Luxury brands should continue to upgrade all aspects of the overall brand experience to make it even more desirable.
"There are green shoots appearing on the economic landscape. Who'll take the high ground? A new breed of consumer will emerge - wiser, smarter, more discerning and more than a little stung by history - and they will demand more from their brands. Brands will have to provide meaningful answers and luxury brands in particular, will have to be seen to be even more authentic, honourable, respectful, charitable and sincere.
"Those brands that weren't distracted from their core business and which invested in building their reputation and their brand, both internally and externally, will be on the podium before the others are even in the starting blocks."
HKLM is a strategic brand and communication design consultancy specialising in emerging markets, that conceptualises and delivers media neutral, business focused solutions to client challenges.- more....
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