Customer loyalty in a financial maelstrom

As the financial world has loped from the state of bad to the continent of worse over the past year, the luxury sector has largely retained a comfortable level of buoyancy. Many brands, including Burberry, Hermès and Louis Vuitton, have recently celebrated strong operating profit results and industry leaders remain cautiously confident. This success comes despite the predictions of the ne’ersayers who, from the first Wall Street wobble, portended doom for purveyors of all things glittering, fizzing, revving or packaged in small boxes.

While it would be easy to thumb noses at the killjoys, the reality is that the impact of plummeting stocks, sliding property prices, job cuts and diminished bonuses will inevitably trickle down to high-end retailers. Quite beyond the implications of there being less money around, it has now become simply unfashionable to be seen splashing cash in the way that has been witnessed in the recent past.

This been on the cards for some time, even before the current financial maelstrom, with consumers ‘buying up’ but buying less and demanding more for their money. For a number of years now early-adopters have been asking where products are sourced, how they are made, what materials have been used, and under what conditions. And after all, beyond the closets and ambitions of the oh-so-dated WAG, there is only so much ‘stuff’ that an individual can either contemplate acquiring or accommodate in their living space. This means choosing the very best available, but in reduced volume.

So how to keep customers on-side in these consumption-weary times? The answer is not to panic-buy crystal balls to see what may lie ahead. Instead, a canny strategy would be to look back and return to a time before the heady days of ready-credit and stratospheric bonuses. Embrace the basic principles of luxury: quality, desirability, integrity, craftsmanship, great design and value. Brands need to respond to these criteria and give consumers a product they can believe in from a name they trust.

For the most part, all but the most aspirational buyers of luxury of the past 15 years still have money, and will continue to make discretionary purchases. The need to wear a watch, shoes, a winter coat or drive a car does not disappear just because times are tough. However it may be the case that the consumer will also ask more questions before making the transaction. Many shoppers who over time have traded up to the luxury arena have now become used to a high level of quality. They will still opt to acquire items at the apex of their personal spending power, but with the intention of treasuring it rather than buying into disposable or gimmicky options.

The reason for the quiet but steady confidence of many luxury brands is that this is what many have always provided – in many cases surviving through adversities ranging from world wars to global depressions. Luxury is much about longevity, and the classic appeal of a Cartier Tank watch, Hermès Kelly bag or Montblanc pen can provide value far beyond that of any fashion piece by dint of the enduring appeal of these items. By the same token the best of the luxury brands will also continue to innovate. In the current climate, when lazy, copycat design and throw-away workmanship will no longer suffice, the winners will be those who stay true to the principles of luxury while producing iconic and desirable designs for the future.