How will the cost of living crisis impact on luxury brands?
The luxury sector is something of an anomaly in this discussion given its audience. High net worth individuals (HNWIs) tend to be more immune to the economic factors driving the current crisis and, as such, luxury brands are more insulated from its impact, in commercial terms at least. The sector is certainly not recession-proof, but it does tend to fare better during a downturn. While the 2008-9 recession shaved off 9% of the value of the luxury goods market, it was one of the fastest to recover globally.
That said, it is not immune to the context surrounding it and that most certainly has an impact from a communications standpoint. The autumn PwC Consumer Sentiment Survey saw sentiment at a lower level than at any point during austerity measures, at -44 points. And the backlash to Kwasi Kwarteng’s proposed cut to the higher rate of tax sent a very clear message. Wealth – and the implication of an excess of it – is a thorny subject.
Many brands across the sector are well placed to respond swiftly and effectively to this environment, given the widespread evolution of the industry from conspicuous to conscientious. Increasing global attention to ESG, along with the attitudes of newer generations of wealth and rise of ‘conscious capitalism’, have been spurring significant change over recent years.
At the Spears 500 event this September, the message from the Experience of Luxury panel was clear: the emphasis is now on making thoughtful, meaningful purchases and responsible investments over being seen to spend large amounts of money. Speakers from across retail, hospitality and real estate spoke of client and stakeholders’ greater interrogation of value, particularly in the story behind a company or specific product.
In a clear sign of the times, this June the Financial Times’ How To Spend It supplement - the international voice of luxury - rebranded to HTSI. Its editor, Jo Ellison, explained the move to be a subtle acknowledgement of changing times and priorities, and the desire for the title to reflect a world with deeper sensitivities. The acronym is also intended to allow readers freedom to interpret the "S", whether that be how to style it, how to save it and so on, and is the boldest statement from the title following its special issues like How To Spend It Wisely and How To Give It.
This is being seen across the media. Editors of the world’s top tier press want to bring their readers stories that inspire, provoke thought and advocate responsible corporate behaviour. And interrogation of ethical credentials is standard practice too, making sure they reflect those of the title itself.
In the influencer and ambassador spaces, quality over quantity is the direction of travel for both brands and personalities. Partnerships are fewer and very carefully selected, and are long term and founded on authentic connections.
The cost of living crisis is likely to amplify sensitivities and accelerate these changes further as luxury consumers, media and brands look to have a meaningful place in a landscape of austerity.