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From March 2008
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Sponsored by
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The idea that luxury has lost its luster, or
that even the wealthiest shoppers are bailing
out, may make for great headlines, but neither
is an absolute truth, according to Milton
Pedraza, CEO of the Luxury Institute.
“True luxury shoppers are resilient,” Pedraza
says. “They may tailor their spending for the
next six to nine months, but they’re not going
to stop shopping. And when they do shop, they
won’t hesitate to pay a premium price for
products that are unique and exclusive.”
Pedraza views the luxury market as a dynamic
entity comprised of different products, services
and segments of wealth: each, he says, responds
differently to economic cycles.
Pedraza outlined three demographic segments that
buy “true luxury” goods — brands like Bottega
Veneta, Gucci and Louis Vuitton.
The first is the over-55 empty nest couple worth
more than $10 million with annual income of at
least $500,000.
The second is married couples in their 30s and
40s with annual incomes of above $300,000 that
have accumulated up to $10 million in net worth.
The third group is young single professionals
earning $150,000 or more annually but who have
relatively low net worth.
“In times of economic uncertainty, the second
and third groups tend to throttle back spending
– and, in the case of the single young
professional, they may pull back dramatically,”
Pedraza says. “The super affluent will continue
to buy, but you can expect them to be more
discreet about their purchases than in the past.
Statistics show that 84 percent of today’s
millionaires are self-made. Most are respectful
of those who are struggling economically because
they’ve been down that road before.”
Pedraza offers a handful of suggestions to help
luxury brands survive an economic downturn.
• Conduct a rigorous assessment of your brand’s
category portfolio and eliminate marginal
“hobby” categories.
• Go up-market. One of the great ways to kill a
luxury brand, albeit slowly, is to go
down-market.
• Innovate and dare to be different. Stop
emulating your competition and start creating
never-before-seen products and categories.
View Related Stories:
Luxury’s Shrinking Purse
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