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Luxe Redux

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The Tiffany approach, then, seems the paradigm. It is remarkable how little has changed from Great Depression to Great Recession. It turns out, we have lived through the End of Excess before—luxury firms hope that excess is like a zombie that you can't really kill—and so we have some idea how luxury firms survive. Luxury brands today, one after another, are making this "flight to quality," lest they fall away like so many Vionnets. "We are seeing the consumer move away from the prestige purchase, the blingy, the flash, to quality," says Mary Beth Whitfield, senior vice president of the consulting firm Retail Forward. "Consumers will still resonate with something that is marketed as premium or classic."

That is the playbook: Find your heritage, your traditional values, your long commitment to craft and quality—or make up those attributes if you have to—and then retire the marketing campaign of shirtless models sipping Cristal in the back of a G4, and replace that with an austere, calligraphy typeface of your brand logo and then, below that, something like, "Family Owned Since the Reign of Xerxes." Or, expect more shots of the product, less of the luxury lifestyle. The goal becomes to communicate the workmanship and quality of that $5,000 handbag, rather than just the buy-in to a cooler class. Thomas Frank, author of the advertising cultural history The Conquest of Cool, observes that "What happens in hard times, traditionally, is the advertising switches to product centric quality, some really tangible aspect of the product." Hermes, which has traditionally featured its product prominently in its campaigns, often at the exclusion of models and celebrities, would seem to have beaten its competition to showing the Birkin. "Hermes will be fine," says David Wolfe. "They're in the right place. But I don't know how a luxury brand that has been chasing that whole red-carpet thing is going to reposition itself."

Gucci and Prada would seem to fall into the latter category. So what's a Gucci to do? "We are going to emphasize family values passed down from generation to generation," says Robert Triefus, director of worldwide marketing for Gucci. "We believe our clients are wanting the reassurance of that near-90-year history." Can Gucci really make that work? The Gucci group eked out a 4.5 percent increase in sales in the fourth quarter of 2008, and fell 3.4 percent in the first quarter of 2009. But the outlook is less sanguine, even with this renewed belief in its own history, and there were troubling numbers buried amid the generally solid performance: The Gucci Group's superluxury leather-goods maker Bottega Venetta posted a 2.3 percent decline in the fourth quarter. Bottega Venetta, which dates to the mid-'60s yet has only been introduced to global consumers by Gucci in the last decade, faces a difficult challenge. Even Gucci insiders wonder how you position yourself as having stood for quality and history when your history, in most consumers' minds, goes back to W's first term.

The brands refuse to admit this, but they are all looking at tweaking not just the message but also the product, considering where they can lose the buckles, zipper, or extra pleat or where they can switch from alpaca to cashmere. They are looking to sell their less-costly diffusion lines, their D&G instead of Dolce, their DKNY instead of Donna Karan, to make up for some of that vanished higher-end revenue. "For sure, the consumer is going to be more picky here," says Mimma Viglezio of Gucci. "You're not going to see it in our product, of course, but some companies are going to try to focus on value, on bargains."

The larger question is whether consumers are just shell-shocked and will really return to the front lines of luxury retailing or if consumer behavior has fundamentally changed. It is unlikely that we have reversed the trends of capitalism, that Thorstein Veblen's "invidious comparison" no longer applies. But what if the status we seek, the expression we hope to make through our purchases, has fundamentally shifted? That is the view of some in the luxury business, that a large swath of the luxury consumer is not merely skittish but gone—financially unable to purchase or, having traded down to a more moderately priced good, found the drop-off in quality to be negligible. How, then, do you convince the affluent consumer to stay loyal to the premium brands? "With these luxury brands," says Thomas Frank, "what they have been selling is the lifestyle and mystique of the brand. They have to find a new way to make that proposition enticing. ... The question is, can they market themselves as something else?"

Michael Silverstein of the Boston Consulting Group believes that luxury brands traditionally have competed on three dimensions—technology, function, and emotion—and says that the battle is now shifting more toward technology and function, away from Frank's "lifestyle and mystique." "The best companies, Silverstein explains, "are investing in technical and functional capability." BMW is certainly making that investment. Jack Pitney, the head of global marketing for BMW, which has actually expanded market share since the financial crisis began, talks about BMW being a technology and environmentally friendly company—while reminding that the BMW is still the "ultimate driving machine." The company's response to the current crisis consists of both that message and, eventually, new products reflecting that message. Pitney is emphatic that the BMW culture of high-technology and fuel efficiency-especially a new generation of high-performance diesel engines—will drive away yesterday's notion of BMW as a status symbol and vehicle of choice for certain type of aspiring alpha-male. "Brands that have substance and integrity and that are authentic and recognize what has brought them the success and don't deviate from that will weather any economic recession best," Pitney says. "What luxury products do need to do in the short term is to allow customers to rationalize their making that investment in a premium product. You need to make them feel good about the fact that they've gotten value, that it's a smart buy."


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