The one sector that has not yet felt the full impact of the recession is the luxury consumer products. But here is the caveat. Many aspirational product retailers were convinced that sales would continue unabated despite the slowdown. And at first, it seemed they were not too far from the mark. But as the global credit crisis unfolded, the global luxury products market began to feel the pinch. Closer home, the scenario doesnt look so gloomy. In India, as in many other emerging markets, the demand for luxury goods seems to be holding on. At least for the moment.
Formerly a signature of tycoons and blue-blooded heirs, luxury products have moved to the orbit of the brand conscious, well-read individuals who are able and willing to spend. These high networth individuals know the right watches, fragrances, leather goods and sunglasses to be seen with. And they know their Bottega Venetas and Birkins.
With the European Union asking for tax cuts to meet the World Trade Organisation requirements and a possible change in the policy structure to allow luxury retailers to set up fully-owned business, high-end retail spaces are being developed in Mumbai, Bangalore, Pune and New Delhi, notwithstanding the slowdown in consumer spending.
Of course, experts contend that while luxury sales growth in emerging markets is on the rise, it may not be enough to offset the slowdown in the maturing markets of the US, Europe, and Japan. But that is a different story altogether.
My view is luxury brands would pull through this phase if they follow certain thumb rules. First and foremost, focus on the value of your brandthat is what customers look for when they buy a premium product. Let your brand speak for itselfif is it aspirational, the consumer will hot hesitate to shell out the dollars. Again, the first casualty when the money is tight is the marketing and advertising dollar. Dont keep quiet, explain to the customer what your product is truly worth and watch the dollar walk that extra mile.
Its always advisable to have your plan B ready. So if plan A falls through, you have a back-up plan to tide over the downturn. Cut costs and not investments for your brandsbe it advertising (negotiate costs on media spends), below-the-line activities or public-relations strategies. Look at bringing down your brands breakeven point as low as possible to fight the recession and pull through.
One cannot fight and face the recession alone; therefore look at partnering with your stakeholders, suppliers, vendors, bankers, channel partners and customers. Develop a relationship, build a trust and confidence in them, and challenge the downturn together.
All this may sound a wee bit preachy in places and largely commonsensical. But then, it is in times of crisis that we tend to take decisions that seem to fly in the face of common sense.
The author is managing director, Victorinox India