From a global pandemic to a new society resurgence, and now the consequences of war, the world has changed tremendously in recent years. While mainstream markets and mass consumption have been the hardest hit, the question that arises is: how has the luxury industry fared through the economic crisis?
Bernard Arnault, one of the world’s wealthiest men and founder of the LVMH group, stated in a 2010 interview that a well-constructed brand could withstand any crisis. Today, thirteen years later, it appears that at least in his conglomerate of luxury brands, he is proving to be correct.
While it may seem that the crisis has not affected the ultra-rich, the reality is that no market has a guaranteed future in such an unstable environment. Before discussing the impact of the crisis on the luxury industry, it is essential to take a technical stop at the term “new luxury” as it affects consumers with different levels of purchasing power and priorities.
The economic crisis has affected everyone except for the very wealthy, who were insulated from the crisis, while the rest of society was living beyond its means and acquiring debt to purchase exclusive goods. This unsustainable pattern eventually led to a more cautious approach to financial management as people became more aware of the need to save for unexpected events in the future.
Despite this need to live life to the fullest, with the realization that the future is uncertain, two new groups have emerged, namely the conservative and the risky. The conservative group consists of price-sensitive individuals who are saving for survival in an uncertain future. The risk-takers, on the other hand, decide to live life to the fullest and spend now, as inflation may make it impossible to afford what is easily accessible today.
These differences in behavior and mentality are forcing luxury brands to adapt to consumer demands. The opinions of wealthy risk-takers conflict with those who advocate for responsibility and reduction of ostentation. As a result, customers are choosing discretion, and brands need to pay attention and adapt to this change.
Have you heard of “silent luxury?” These are brands that are responding to the crisis by focusing on high-quality, luxury goods that do not feature any logos or distinctive details that make it clear which brand they belong to. These items are not meant to be ostentatious but rather subtle, and they pass unnoticed to most people except for fashion experts.
The goal of silent luxury is to focus on the quality of the materials, using natural and sustainable options, and making them the main reason for purchasing luxury items. Those who can afford these brands choose to show off their designs to those who understand designers without being ostentatious to those who cannot afford these brands. This way, consumers show more empathy towards those who are less fortunate during an economic crisis.
Some of the top players in silent luxury include Hermès, Max Mara, Bottega Veneta, and Loewe, but there are also several other brands, from well-known ones to more niche brands, that are part of this exclusive group, such as Loro Piana, The Row, Polene, among others.
The decrease in the purchasing power of many consumers, coupled with a greater sense of responsibility in the purchasing process, has caused a significant reduction in the market that luxury brands target. As a result, brands are repositioning themselves to focus on silent luxury, offering high-quality, sustainable products that cater to the discerning consumer.