Economic weakness in key
markets dims luxury sales
Consumers warm to unique craftsmanship
Of the 13 categories tracked in the
BrandZ™ Top 100 Most Valuable
Global Brands, luxury declined
most in Brand Value, with a 6
percent drop compared with a 16
percent rise a year ago.
Following a strong recovery from the global
financial crisis, the pace of sales flattened
for several reasons, including the economic
slowdown in China, Brazil and Russia. In
addition, China's anti-corruption regulations
trimmed luxury gift giving in that country.
Changing values and attitudes about
consumption also impacted luxury brands.
Some consumers, particularly millennials,
viewed luxury products as expensive
indulgences inconsistent with their desire to
live in a modest and sustainable way.
In addition, luxury brands limited efforts
to reach a mass audience and instead
reaffirmed exclusivity as a vital characteristic
of luxury. Instead of offering trinkets
at entry-level price points to widen
accessibility, brands relied on content, such
as live streaming fashion shows, to introduce
new customers to the brand experience.
This resurgence of exclusivity created
an opportunity for more ubiquitous and
popularly priced luxury brands like Michael
Kors. Sold both at its own locations and
in department stores in over 85 countries,
Michael Kors entered the BrandZ™ Luxury
Top 10 for the first time this year.
Meanwhile, new luxury markets emerged –
in Mexico, Turkey and Nigeria, for example.
And brands also targeted the large and
fast-growing demographic made up of
international travelers who purchase luxury
at airport shops.
The slowdown of the Chinese economy
especially impacted Prada. With one-third
of its sales coming from the Asia-Pacific
region, Prada's annual profits and brand
value dropped. Both Louis Vuitton and
Gucci, which expanded rapidly in China,
were impacted by the economic slowdown
and the anti-corruption regulations that
dampened official gift giving.
In contrast, Hermès was less affected by
China's economic slowdown, perhaps
because the brand is a relative newcomer to
China, and also because of its more discreet
designs. Without the logo emphasis that had
characterized some of its competitors, it
better fit the more reserved mood of today's
Chinese consumers. Jewelry was popular
in Asia because of its timelessness and
Because of the price transparency created
by the Internet, many brands harmonized
their prices across regions. Some brands
harmonized prices to slow the grey market
of goods purchased in Europe, at relatively
lower prices, for sale in China at a profit.
While these actions protected brand equity
by eliminating large price differences across
markets, they also trimmed lucrative margins
in certain markets. Chanel lowered retail
prices in Hong Kong and China while raising
prices in Europe. Other luxury brands, such
as Cartier, Patek Philippe and Burberry, took
Changing ideas of luxury
For many post-recession luxury consumers,
it was acceptable to purchase and enjoy
luxury but not to be profligate and
ostentatious. Even shoppers who typically
had purchased an expensive leather bag
every season instead looked for durability,
adopting an attitude that The Futures
Company calls "considered consumption."
Durability came in the form of a wellmade
leather bag from a famous brand,
for example, or a bag from a lesser-known
brand recognized by only those "in the
know" for unique design and craftsmanship.
One example of these small but growing
brands was The Row, whose creative head
left to take on the job at Hermès.
To satisfy the consumer desire for more
discreet luxury, some of the large brand
houses introduced more understated
designs and promoted their artisan roots.
Burberry personalized perfume by etching
the user's initials on the bottle.
New products and
Brands responded to these trends both
with new products and communications.
Burberry expanded the link between
fashion shows and music with Burberry
Acoustic, a project that promotes young
musicians. While Burberry continued to be
a communication innovator, other brands
began to catch up.
Louis Vuitton created a campaign around
travel, connecting the brand with its
heritage in fine luggage. Its Fondation Louis
Vuitton art museum in Paris, designed by
the renowned architect Frank Gehry, was
among the most notable expressions of
brand experience. Rather than sponsoring
an existing art exhibition, Louis Vuitton
curated its own collection.
Louis Vuitton also released a campaign
called Series 1. Produced by a collective
of photographers rather than a single
photographer, the campaign created
variety and more of a local feel rather than
a global statement. The brand also built
Louis Vuitton hotels, for the ultimate brand
Under the leadership of a new design
head, Tiffany reinvented some of
its traditional collection to meet
contemporary tastes. While still a brand
known for gift purchasing, it appealed to
women desiring to purchase jewelry for
themselves. The T collection – bracelets
and other items featuring the Tiffany "T"
created a new access point to the brand
while maintaining exclusivity.
Matching the social mood of the times,
Tiffany introduced a line of men's wedding
bands and engagement rings for samesex
couples. The initiative benefited from
both the increase in same-sex marriages
and the growing men's fashion market.
Chanel made headlines at Paris Fashion
Week with innovative presentations at
both the spring and fall shows. In the
spring, Chanel staged its fashion show as
a women's rights demonstration, while
in the fall, Chanel presented its fashions
ironically, using a set designed as a
hypermarket. On aisles transformed into
catwalks, models paraded past Chanel-branded
hardware and FMCG products.