Welcome to the the Ivey HBA Retail Marketing Management blog. Retail marketing is an exciting, dynamic, important, and very visible aspect of the overall field of marketing. Throughout the year, students will be posting comments regarding contemporary retailing issues. Although this is intended to be used by Bus 4411 students, industry marketing professionals are also invited to join in if they like.

Monday, February 2, 2009

A Shame Attached to Luxury

Written By: Courtney Lerman

There have been many articles written and news reports broadcasted that focus on the threat the current recession poses to retail sales of luxury goods. Naturally, when consumers feel their wealth has decreased or is threatened, they refrain from purchasing expensive non-staple items. As a result, many high-end retailers were offering significant discounts to try to move inventory through their stores over the 2008 holiday season. An interesting perspective on the future of luxury stores was presented in Rita Zekas’ article, “Thrift Store Chic” that was published in The Toronto Star on January 22nd.

Expensive retail stores focus their retail value proposition mainly on experience. Clearly prices are not a selling point and neither is convenience; people will pay high prices and travel long distances to shop at these upscale retailers. For some department stores, selection may be a focus, but the main reason these stores can charge astronomical prices is due to the customer experience.

Consumers will pay the $1,000 for a Gucci bag because it portrays a certain image. If this is so, then one may wonder why Prada shoppers have been requesting unmarked bags to carry their purchases. Zekas claims there has been a reverse of snobbism, “shoppers brag about what they snag at a low price”.

During a time when unemployment is hitting the middle class by the masses causing many to lose their homes, the positive experience associated with carrying a Chanel shopping bag has been whisked away – consumers are instead embarrassed. Shoppers have become weary of what others will think of their overindulgence and unnecessary spending when so many are suffering. Zekas describes this attitude as “a shame attached to luxury”. The main value proposition luxury brands had is threatened, and without this positive image, they have little to offer consumers.

Some retailers may hope this is temporary and as consumer confidence rises the “saving money” fad will end. However, there is evidence that this may develop into a long-term attitude. According to Tyler Cowen for the New York Times, a recession can alter cultural attitudes and behaviors for decades into the future. An example Cowen describes is the shift to inexpensive forms of entertainment during the Great Depression in the 1930s. Listening to the radio and playing board games were trends that rapidly grew during the depression and remained until the 1950s.

As consumers stay away from expensive brand named items out of fear of appearing overindulgent and unsympathetic, is there hope for luxury stores in the future? How long will this fad last? Will Burberry and Louis Vuitton be able to adapt? Without the positive experience associated with the brands and decreasing consumer wealth, it will be difficult for luxury retailers to maintain their sales figures.

The Toronto Star:
http://www.thestar.com/living/article/574815 - "Thrift Store Chic" by Rita Zekas published January 22nd, 2009

The New York Times:
http://www.nytimes.com/2009/02/01/business/01view.html?ref=business - "Recession Can Change a Way of Life" by Tyler Cowen published January 31, 2009

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