The purpose of this report is to predict the future of luxury brand retailers. The current economic climate within the luxury retail industry will be examined and particular attention will be paid towards the adjustments made by luxury brands to adapt to changes within the economic climate.
What is a Luxury Brand?
Jackson and Haid (2002) proposed that luxury brands have a heightened status that affords a capability for their owners to charge premium prices. These brands obtain a desirability that exceeds their function and provides the user a distinguished status through ownership. Their appeal and desirability is a result of their constructed rarity in availability and ...view middle of the document...
Max Mara’s net profit almost halved in 2008, dropping to £17.9m from £39.6m (Weir 2009). The company claimed last year’s performance can be blamed on “the inevitable reduction” of customer spend (Weir 2009). Two particularly weak firms, Christian Lacroix and Escada, filed for bankruptcy earlier this year (The Economist 2009).
The recession has rapidly changed the trend to trade up, and people are waiving expensive purchases. Some executives have claimed to expect a lasting shift in customers’ preferences, towards discretion and value (LVMH in the 2009).
With the luxury brand sector now entrenched in recession, even leading luxury brands have been forced to make cut backs (Danet et al 2008). Bulgari has cut costs in departments where it hopes customers won’t notice, leaving the backside of watchbands unpolished and introducing lower-cost boxes and bottles for its perfume line (Danet et al 2008). These newsworthy changes are introducing new risks to luxury brands’ long-term value.
Because most consumers become more...