A downturn can sometimes represent an opportunity
“The world’s wealthy are shutting their wallets.”
I am by nature a glass-half-full kind of person, ever the optimist. In fact, if you’ve read many of these columns in Upward Home, you’ll know that I have a fundamental bullish view on the long-term potential of high-end brands. Consumer spending drives the American economy – and affluent consumers drive overall spending. Therefore, high-end brands can remain an important component to our economy for a long time to come.
That said, I recognize that high-end brands are not immune to the ups and downs of consumer spending. And when I saw this quote about the wealthy shutting their wallets in Robert Frank’s Inside Wealth column for CNBC, it really struck me.
Frank quotes executives from Hermes and Richemont as they adjust their corporate forecasts downward.
“There’s a lot of uncertainty,” said Hermes Chief Executive Axel Dumas. Sales of everything from Swiss watches to art to luxury real estate have slackened this year due to a slowdown in emerging markets, China’s crackdown on corruption, volatile financial markets and uncertainty around the U.S. election.
McKinsey’s most recent US Consumer Sentiment Survey measures a much wider spectrum of consumers, beyond the affluent, but it reaches similar conclusions. The report’s authors say that consumers have essentially remained cautious through all of the years since the 2008 downturn.
Financial-market volatility and the political uncertainty surrounding the upcoming presidential election are stoking fears of another downturn. Still, most Americans are staying loyal to their favorite brands instead of downgrading to cheaper options, and some are even splurging on certain types of purchases.
There are many pundits declaring that another downturn is imminent. That’s probably an easy prediction to make.
So what should CEOs and CMOs of high-end brands do to prepare?
McKinsey suggests that companies “stay in tune with how consumer sentiment is changing.” I agree. Pay attention to the behavior of your customers and prospects across all channels. The better you can understand these consumers, the better you can personalize conversations with them, as well as manage expectations.
As Pam Danziger of Unity Marketing recently wrote:
“The current climate for luxury calls on brands to invest more in understanding their customers, to learn more about what their brand of luxury means to them, and then discover how best to communicate their luxury value proposition to consumers who, frankly, are skeptical about paying so much more for luxury goods which may not be all that better than less-expensive brands.”
These are challenging times – and there may be more challenges to face. But by staying close to your customer and prospect, high-end brand managers have the opportunity to outpace the market and earn some gains.