If you haven't checked it out already—and it seems many of you have since it's o ne of the most popular stories on our site this week—give a quick gloss to my story about mass affluent consumers retreating from the luxury market as we head into what analysts and the papers seems to be projecting as a certain American recession. Read the full story here.
Raúl Martinez, CEO and executive creative director over at AR New York (they've done worked for brands including Salvatore Ferragamo, Dolce & Gabbana, Yves Saint Laurent, Versace and the most recent ads for Valentino, post the namesake's well-publicized adieu, pictured at right) seemed to sum it up nicely.
“I think the downturn in the luxury-goods market is now trickling down to Europe and it’s been a shock to many over there," he told me. "For a while there’s been a sort of comfort-level that luxury brands have enjoyed. Consumer are cautious and luxury brands are in alert mode.”
It's an interesting time for sure, and many of the analysts and consultants I spoke to for this story told me that they see several key points emerging from the luxury market's stumble over the past few weeks:
1. That affected luxury brands were taken by surprise given that they underestimated how much of their growth over the past five years had been fueled by these mass affluent consumers;
2. That the first area where tightened budgets might force some changes will be in the marketing and advertising departments. (This is, of course, a general market theory as well, and can be extrapolated to areas far beyond the luxury market in specific.;
3. And that some of those tightened ad dollars could increasingly go towards online campaigns, which offer greater ROI than the traditional media (no big secret to anyone) and also have the additional benefit of global reach that could prompt sales in foreign markets, which are still a thriving area for luxury goods.
However, the problem is that luxury marketers will most likely not be making quick, dramatic changes to their traditional media buys.
As Pam Danziger, the head of Unity Marketing, a luxury consultancy based in Stevens, Pa., told me: "The idea that magazine and TV advertising will go away is ridiculous, but what will become more important is having a better understanding of the consumer they're looking at. It's becoming much more vertical...with some of these niche magazines providing more connection to [the luxury sector's] real target market."
This trend seemed to be confirmed by Jason Binn, CEO of Niche Media, New York. Unless you're part of the uber-wealthy for whom these magazines are as ubiquitous as McDonald's golden arches are for the rest of us, you've probably seen his titles—among them Gotham, Hamptons, Ocean Drive and Los Angeles Confidential—in the high dollar rooms you booked through the company for a recent conference in Vegas. I know that I never stay at The Hotel on my own dime.
Per Danizger's assertion, Binn's group offers luxury marketers access to the consumers who will buy their products regardless of recessionary woes, the kind of folks, who, to paraphrase a WWD headline a few days ago, are more concerned with getting their high heels wet waiting in a drizzle outside of Chanel's couture show, than they are about this "thing" called a recession.
The titles are distributed to a consumer base in which roughly 50% have annual household incomes of over $250,000, as well as liquid assets and homes each valued at over $1 million. The books are also distributed through Net Jets, the private jet company owned by Warren Buffet’s Berkshire Hathaway, where Binn says he reaches customers with an average net worth of $25 million.
"[Luxury brands] are relying on us more than ever to vertically integrate their products and their services to these wealth markets that we’re targeting with these very unique readers and consumers that we have,” Binn told me. “The [vast majority of] mainstream consumer magazines can’t really deliver those kind of economic demographics to these brands.”
Though he did acknowledge that luxury marketers were shifting some dollars to more non-traditional media, for his part, Martinez said that it's a time when these brands need to maintain a consistency in their messaging.
"At a time like this its more important than ever to communicate with a singular voice and a singular vision...I think the worst thing a brand can do is to deviate from who they truly are, because over the long-term consumer confidence will be lost," Martinez told me. "One thing I think we have seen over the last number of years is a movement away from the more emotional creative and towards a more product-centric messaging. More dollars are being applied to Resort and Pre-Fall which are becoming true collections in their own right, where wearability becomes much bigger.”
Looks like for now, we'll have to play a game of wait and see concerning how the ad market will change for luxury players. Saks Fifth Avenue, for example, has already said that they're looking into doing ads in foreign magazines to grab some more tourism dollars, something the luxe retailer has never done before, and soon they'll start offering international shipping on their e-commerce Web site.
Meanwhile, I'll be comparison shopping the Vogue ad pages to see if any of this media shift stuff pans out. Oh, and Vanity Fair, you're on my list too.