The economic downturn has not been kind to many firms in the premium sector - but not all luxury brands have struggled. Here at Intelliga, we were interested to read an article in Newsweek which looked at companies which have bucked the trend, and actually experienced growth. The article, Classic to the Core, explains that they have achieved this by strategies we stress to all our clients: having a strong brand, sticking faithfully to the brand image and majoring on quality and exclusivity.

The article looks at luxury brands – mostly fashion brands – that have seen varying degrees of success in navigating the global financial crisis and discusses the reasons why some have prospered while others have seen sales decline or, like fashion house Christian Lacroix, have gone under.  The article cites a study by Bain and Company that found the luxury market fell 10% in the US and 8% globally in 2009 – the first time the overall market for luxuries ever declined.

However, Hermès sales grew 8.5% worldwide in 2009, and turned in an 11% increase in Q4, while LVMH’s flagship brand, Louis Vuitton, also had a good 2009, enjoying double-digit growth.  What did these brands do?  They focused on “what they do best – classic bags and scarves for Hermès, old-fashioned luggage for Louis Vuitton”. There were no discounts, trendy product introductions or attempts to go downmarket.  Hermès even opened a new store in Manhattan in February – the brand’s first men’s store.

Apparently, for some brands, luxury isn’t dead, or even in hibernation, it has just gone back to an emphasis on quality, classic and more conservative items.  Consumers who may have bought more trendy and conspicuous items are moving back to “tried-and-true stalwarts”.

Famous luxury brands with more extrovert products that experienced sales declines shouldn’t worry, though.  NYU Professor Scott Galloway, who studies luxury marketing, believes the market for 'conspicuous consumption' items such as Porsches and Manolo Blahniks, which are classics, will rebound as soon as people have money in their pockets again.  There are people who could buy these items – they have been not been doing so because they don’t want to be seen as crass.  And the Bain study indicates that even if the market for some products never recovers to previous levels in the US, markets such as China, India and Brazil will more than make up for it – and there will probably be lots of room for less conservative items.

Salon.com features an interview with Columbia University business professor Sheena Iyengar, whose new book, “The Art of Choosing”, examines the way our personal expectations influence American thinking about personal choice.

She explains that Americans are asked to think about choices, from topics such as what we want to eat to what we want to be when we grow up, from a very early age, because we value self-expression and “in this country, self expression is primarily exercised through personal choice”. Other countries she discusses stress following directions in early childhood, not the independence and personal choice of America.

So, why is this important? Well, she also notes that having too many choices can lead to issues, whether it is ‘bad choices’ or outcomes that were not intended. While she only deals with the possible political and social implications on Salon (not surprising), the Editorial Review on amazon.com (Publishers Weekly) cites a case from her own research where shoppers shown 24 jams were only 1/10 as likely to purchase as those who were shown only six. In this case, the size of the consideration set did matter and certainly, the size or set-up of a shelf set is not something that should be causing consumers to turn away.

It’s not clear from the article or the review why certain choices, at least in the consumer arena, cause people to not buy or buy “incorrectly”. Whether it is lack of information, lack of brand or flavor preference or price differential, there’s not the information here to make that determination. But, it’s something that brands who are looking to expand their consumer consideration set should, well, consider.