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Recession Marketing

The End of Brands as We Know Them?

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The store was empty, although a handful of tourists were seen milling around the entrance, looking around in awe, and taking photographs. They smiled politely but shuttled off when one of the well-groomed members of the Armani staff approached them. The 12-storey Armani House, so perfectly situated in the centre of the Ginza district in the heart of Tokyo, reflected the current state of almost every luxury brand you can think of – sleek, stylish and…silent.

Welcome to the epicenter of brand heaven in the aftermath of the global financial meltdown. Consumption of luxury brands – Gucci, Prada and Louis Vuitton – counting for an astounding 12 percent of all sales worldwide. Tokyo is the place where Louis Vuitton's fortunes catapulted into the stratosphere. It's also the city where Gucci decided to open the first Gucci café, and Prada invested in creating their biggest store.

A couple of buildings further down the street, a long queue snaked its way into a store which until recently, would have been completely unacceptable in the Luxury Mecca – a plain, simple H&M store. Next door to that, Zara, and across the road UNIGLO – well known for shamelessly ripping off its wealthy neighbours moments after their latest collections hit the runways in Paris or Milan. A fact that didn't seem to be bothering UNIGLO one bit. Why should it? Their revenue is soaring upwards by 32 percent compared to their wealthy neighbours who are still trying to make sense of their own disappointing seven percent DECREASE. Years ago, when living in Paris, I never failed to be amused as I strolled down Champs Élysées on my way to work every day. At just 8 in the morning, local Parisians would be carrying packed shopping bags emblazoned with logos of every luxury brand from D&G to Chanel, shops that wouldn't open their doors for business much before 10 AM.

Things have changed.

I recently made a small purchase at Hermès, and I was asked if I would prefer to carry it in a plain brown bag without the famous logo. I was somewhat taken aback, and on further inquiry, the assistant replied that I would perhaps feel more comfortable with anonymity. Something as simple as a bag, that only six months ago was the essence of a status symbol now might be considered a liability. Or could it be that the brands themselves were a little reticent about selling their desired products at a discount?

Almost without exception the most exclusive brands are slashing prices to keep their turnover ticking. What would previously have been unthinkable, you can now purchase handbags, scarves, clothing and shoes at discounts ranging up to as high as 50 percent. They are not alone. Hotels rooms in the best district in town can now be had less 30 percent, and so can cars, hi-fi, cosmetics and washing machines.

Is this the end of brands as we know them? Or could brand owners be simply reacting to the economical crisis in a knee-jerk, wrong way? What are your thoughts?

Sponsored By: Brand Aid

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9 Comments

Nick on February 18th, 2009 said

We definitely have two forces at work here, first is that people are recognizing their financial position and having to make choices. Luxury items are going to suffer. How these brands got as big as they are anyways is the next point, but a very, very (did I mention very?) small portion of the population even has the money to support these brands.

The second is that a bubble has burst, and that bubble is that for far too long people have been trained to utilize credit and any other means necessary to extend their reputation through goods of exquisite brand. But these brands never stood for anything more than pretentiousness. Most marketers have forgot that a brand is not a logo or an identity campaign, but a reflection of value for the consumer. I buy Brand X because it delivers these attributes to me… But all many of these luxury brands provided was a logo. There is no connection, no benefits, no real purpose for consumers to care if they existed except to make other people believe they’re someone. None of that matters when the bubble bursts.

Denis Baldwin on February 18th, 2009 said

It’s not just fashion that is experiencing this price-slashing effect. I’ve noticed it in computer sales, car sales, the tradeshow industry… most everything I touch is withering under the weight of the failing economy.

Ceri on February 18th, 2009 said

I think the decline in sales of luxury goods is probably just a temporary reaction to the recession. But I have noticed a definite change in style recently. Women (and probably men) are seeming more confident in finding their own style rather than following fashions. This includes mixing designer, high street and vintage clothes. It also signals the move away from wearing something just because of it’s label. This may well be something that lasts well after the recession has gone.

Brandon R Allen on February 18th, 2009 said

I agree with Nick. You see knee jerk reactions from these fashion companies because they themselves are not confident in the value that they are giving to the market. Across the board you see changes made in all industries because people value things differently when times are tough. When your company was giving an inflated sense of worth to the market, then you are in real trouble like the high end fashion market.

Abraham on February 18th, 2009 said

Maybe it’s the end of brands as we know them… who knows? Maybe they are changing in to something all the consumers can identify with in this time of financial decline.

Jattinn Kochhar on February 19th, 2009 said

At least one simple fact is in the open – these luxury brands have been fleecing the consumers with their mighty overpriced products in the name of status. Now that they are offering discounts up to 70%-80%, the true profit margins are revealed.

Peter on February 19th, 2009 said

The individuals, sometimes known as “brand whores”, who built up these these luxury houses into the household names they are today, hmmm.., they are probably not the most loyal of customers. The big houses depended on the trendyness of their image to make sales. Brandwhores, trendyness, these are not the pathway to longevity.

Luxury is still selling. You just don’t hear about it. It’s the way it used to be before the “democratization of luxury”, haha, remember that term? The prols have stopped buying stuff they don’t need. The luxury houses no longer need the stores that serve them. End of story.

Richard Allan Marti Jr. on February 19th, 2009 said

A Luxury brand in the past had built in perceived value which could command a premium. In this economic climate, the luxury clients perception of that value has changed with their own personal value systems and the premium has evaporated.

Olga Slavkina on March 15th, 2009 said

I recommend that luxury brands NOT start trading down as it will surely lead to erosion to their brand equity. The times are tough, but luxury brands should look for ways of cutting costs rather than lowering prices.

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