The Truth about Luxury

For years now, marketers have thrown around the concept that "the middle is gone." I almost came to believe it, but was never really convinced. Certainly, the "illusion of luxury" kept winning the day, but things are different today. You could never call the Ralph Lauren paint line "luxury," but it wore the mantle of high fashion, and so the "mantle of luxury" strengthened the successful middle. (Yes, the middle was there all along.) When seeing this spring's fashion ads, I kept thinking that for the first time ever, the Ralph Lauren ads were tone deaf. The Wall Street Journal notes that the branded store sales of this bellwether luxury retailer have fallen 12.4% this year. The company's total numbers still look respectable due to international sales and a strong 5% increase in wholesale sales due to the (drum roll for that missing middle) American Living line for J.C. Penney which does not even carry the Ralph Lauren name.

The above image is one of my slides from a recent presentation at Coverings, the annual tile trade show. I mentioned that Hermes was offering to put their customers purchases in plain brown wrappers. (Luxury = porn??) In today's email, Knowledge@Wharton has an article titled: The New High-end Consumer: 'Please Put My Bottega Veneta Wallet in a Plain Bag.' The article mentions mark-downs of as high as 70%. I believe that would qualify as "the middle."

The American Affluence Research Center surveys wealthy Americans (Average annual income $290,000 and net worth of 3.1M) twice a year. They surmise that much of the hype of "luxury" was fed by the media- as most of the affluent have solidly middle class values. Luxury made for more interesting stories, and no doubt brought in the luxury advertisers. Their survey found that remodeling plans are less than 1/2 of what they were a year ago. The 17 categories surveyed established historic lows, and by a very substantial margin in most cases. For example, 10% of those surveyed plan to increase their spending on furniture and home furnishings, while 43% plan to reduce their spending, while the rest plan to spend the same as last year. The survey offers an outlook for the next 12 months.