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Impact of Recession on Luxury Brands

Keywords: luxury brands downturn, customer principles luxury brands

Impact Of Downturn On Luxury Brands In India


Luxury has existed since times immemorial. Previously it was just with products and services, however above the period of time as the marketplaces have changed Luxury Brands attended into presence. Luxury brands are unique in the sense that it's not the product which is being sold but entirely the brand. Brand in itself codes exorbitant prices and the costs to learn an important role in creating value for the brand.

Indian consumers have been familiar with Luxury brands overseas through imports, however now with the Indian markets becoming richer, leading Luxury brands haven opened up shop in the Indian market. India and other appearing markets are prospective markets for the Luxury brands.

Economic Situation:

Post 2007, global current economic climate has been reeling under recession. Recessionary pressure started with USA economy slowing; nonetheless it has spread internationally impacting on all countries for some reason or the other. Income level, job have been affected badly. Usage levels have been down drastically.

Luxury Goods And Economic Recession:

Traditionally, luxury brands havent been afflicted by recession so much, since they have been providing to the higher end category, which is not affected by the monetary downturn. However, in recent times, the luxury has been providing to the inspirational customers, whose utilization patterns are afflicted due to economic recession. However, there's been no analysis show how Luxury brands are afflicted by economic downturn. Hence, there's a need gap to study how luxury brands are influenced by economic tough economy.

Literature Review:

Luxury brands are a myriad in themselves. To begin with it is important to understand different areas of luxury goods, Indian market segments, consumers of luxury products, their mindsets. No direct review has been undertaken so far to know the result of tough economy on Luxury brands, however there are few articles available online which discuss the downturn and luxury brands. Further, there are a few books that talk about the go up of luxury brands in Asia. The books review will concentrate on a booklet on the cult of luxury brands in Asia and a dissertation on the luxury consumers of India.

The Cult Of Luxury Brand

By Radha Chadha And Paul Husband

This reserve is a detailed study on the "lux-plosion or the explosion of luxury brands in Asia. The e book unveils the paradox of how luxury brands have managed to generate such an enormous market in Asia. In addition they try to redefine the new age luxury brand consumer in Asia. The blissful luxury brands in Asia have managed to create such an enormous aspiration that they are no longer limited to the top crust of the modern culture. Further, in the Indian context the authors uncover how farmers from interior Punjab own more luxury automobiles and how their wives splurge more on luxury brands breaking another misconception that luxury brands are limited to the metros. (Husband) Luxury brands in Asia focus on a completely different paradigm. Radha Chadha and Paul Husband clarify the paradox of together pumping up your product's position while pumping it out to the people. They crack the code of the cult, offering a tried-and-tested approach to creating an explosive following for your brand. They describe a powerful model that points out the spread of luxury in developed market segments such as Japan and Hong Kong, while predicting the near future course for rising marketplaces such as China and India. In addition they examine the occurrence of "genuine fakes, impossible to tell from the originals and detracting from their sales. Their research establishes the actual fact that while modern luxury consumers purchase and splurge for do it yourself actualization, in the Maslow's hierarchy model, the Asian luxury consumers fall season a level short and luxury purchases are more of a self esteem raise for them.

The Recession What It Really OPPORTINITY FOR Brands By Nicola Clark

Clark claims that marketers are puzzled regarding how the consumer seems about the downturn leading to mixed up communication strategy. Publisher cites the Milward Brown report saying that there is a change in the worthiness system of Brits. From being major spend thrifts they have grown to be quite frugal. People actually make a list before buying some product considering about how could possibly make them look before their friends. Such is the impact of downturn on people's ingestion that they feel guilty at the fact of shelling out for buying. (Clark, 2009)

˜Because you're still worthy of it' a survey in UK indicates that folks are deciding on smaller, inexpensive treats. This is of luxury has considered a different meaning. It is becoming an affordable luxury. Author cites that individuals look at some of the solutions as affordable luxuries.

Although, the author cites about change in consumer mind set the changing face of luxury has to be understood with reference to Indian context.

Shifting Consumer Principles And Brand Perceptions In Downturn By Vanella Jackson And Farah Bostic

Author cites that there surely is a big change in the value systems of consumers and the pace of change is immediate. ˜Now' Context needs to be taken into account. The study was conducted in U. S, U. K and China. The research identified the distinctions in the three economies in regards to to recession. But the three countries were positive about the recovery, Chinese were least affected with the thought of recession.

Also the other common thing was that of the sought to re-examine their ideals which would lead to a fundamental change in their relation with the brands, products and services they buy. Using the recession impacting on, the consumer's are more vigilant. They demand credibility and integrity, verifying the establishments credibility and posting with others through internet. (Bostic, 2009)

Conspicuous usage has given way to conscientious consumption indicating that individuals assign a moral value with their buys too. (Bostic, 2009) Luxury Brands remain finding consumers but folks have began distinguishing from Luxury and excess spending. You can find more focus on real thing now.

Sense of Community: Consumers have began to feel like a community pondering about how precisely their activities or buys would have an impact on the world at large. (Bostic, 2009)People talk about their views about brands and other attaches identical importance with their view. Because of this, folks have been cutting down on their spends on Luxury Goods because now it's the quality of life which concerns more.

The five key shifting values based on the authors are

Trust and transparency, Conscientious consumption, Feeling of Community, People electric power and New Spirituality. (Bostic, 2009)

Effect Of Downturn On Imagination Of Affluent Consumers By Unity Marketing

An firm in United States undertook a study to understand the effect of downturn on Luxury brands. The study aimed at responding to questions like how has the meaning of luxury modified for the affluent customers post downturn. The article cites that a most respondents experienced a setback due to the loss of their additional incomes in form of reward and it lead to fall season in the intake of Luxury goods. This situation is similar to the rise in Luxury goods in India among the list of BPO employees with the recently found income source. It could experienced an impact on the sales in the short run, but what may be the long term impact on these consumers in regards to to utilization of luxury products.

Shopper Behavior In Downturn Can Have LONG RUN Implications By Gill Aitchison

Author highlights that in times of recession almost all the sellers are resorting to discounts as a way to survive on the market in this trim period. Consumers are shifting to the low-cost private brands as they have the pinch of down flip. (Aitchison, 2009) Creator says that the consumption of luxury may rise immediately after restoration as it would again be a way flaunting one's financial success. For now, people have settled down for a humble way of living with an increase of and more folks opting for any occasion in their country. It indicates that people are at calmness with the new found frugal life. But the article increases new questions like would this recession have a long-term effect on the imagination of the consumer or would the shopping routine return to the sooner ways.

Impact Of Personal Orientation On Luxury- Brand Purchase Value By Shu-Pei Tsai

Undertaken across Asia-Pacific, Europe and North America, the analysis classifies luxury usage into two- socially oriented and personally oriented. The socially focused consumption assumes people to buy goods only to impress others. The two factors in interpersonal orientation are - Social Salience and Social Identification. (Tsai, 2005) The non-public orientation dimensions include

Personally attractive benefits: Product provides hedonic pleasure for do it yourself and functions as self-gifting, wherein the consumer rewards himself with the blissful luxury product

Personally symbolic benefits: it helps the manifestation of consumer's interior self

Personally utilitarian benefits: the product matches with individual's attitudes and flavour for quality

These three personal orientation measurements are quite other to the cultural concept of buying luxury goods to make an impression others. (Tsai, 2005)

This research was undertaken in 2005 when the growth period was going to start off. Now with the recession looming large after the increase period, how these personal orientations could have affected the patterns of usage of luxury products

Inside The Affluent Space: A View From The Top To Anticipate The Needs IN THE Emerging Affluent By Sue Philps, Sharanya Sita Ram memory, Chin Mun Hong And Geoffrey Yan

This research was undertaken by American Express across Asia-pacific countries like India, China, Singapore, Hong Kong and Australia. It had been designed to understand the needs of the emerging affluent and how the mass affluent would react in future. It provided five insights

Experiencing wealth: The luxury goods are bought to celebrate success, maybe it's purchase of first gem, yatch etc. . Maybe it's also spent on passions. Indians in specific desired luxury to be present atlanta divorce attorneys mundane detail. Maybe it's as easy as ordering a specific variety of coffee from a particular place.

Social Superiority: In India it was the leading motivator of purchase of luxury goods, it was meant to display prowess in terms of riches before others.

Towards connoisseurship: Highly within the mature markets like Japan and Singapore, it was absent in the Indian context

Quest for profound rooted Authenticity: In culture like India's authenticity is given leading importance, authentic and traditional occupies prominent space in luxury marketplaces.

Inner wealth: It had been again a trend of developed markets, the affluent desired the best which money could not buy, plus they desired inner riches. Luxury found a shift from acquiring material property to indulging in a single home. (Sue Phillips, 2008)

Source: (Sue Phillips, 2008)

The Recession And Its EFFECT ON Luxury: JWT

The paper was published as part of research undertaken by JWT. The paper analyzes how face of luxury has modified and the factors influencing this portion.

To commence with the major questions which the paper desired to answer were

  • Difference of leads for Luxury brands in Growing and developed market segments?
  • Impact of downturn on Luxury use?

Worldwide luxury sector market saw a twenty percent decline in year-on-year deal in 2008, which could be around 10% for the year 2009 according to Bain Consulting. The drop is caused due to many reasons.

Prior to downturn, the Luxury marketers followed the strategy of ˜Luxury for all', there by launching the masstige luxury brands which made a luxury accessible to a greater chunk of society. However, now with the financial downturn the statistics have comedown quickly. (JWT Trendletter, 2009)

The spending has comedown substantially as the number of riches have come down and those who have the money aren't spending it because of their new found frugality. In times of recession it is considered vulgar to flaunt one's financial success. (JWT Trendletter, 2009)

Rise in Populism: Instantly populism is on surge, the new way of living life is living simple. Poor consider the rich to be in charge of their ills; hence there is a general mis-trust. So, the abundant have toned down in their ingestion habits. Globally the CEO's are going for a pay-cut. Amount of millionaires in United States dropped from 9. 2million to 6. 7million. (JWT Trendletter, 2009)

Decrease in Commercial Spending: With all leading US companies feeling the pinch, there is certainly absolute lessen Luxury Gifts handed down with their employees earlier. No more can companies like AIG, which have been bailed out afford to offer such things. (JWT Trendletter, 2009)

˜Luxury Shame' is a new term which has surfaced in times of recession. It's considered vulgar to flaunt one's financial success in times of tough economy, ultra-rich are embracing a culture of frugality. (JWT Trendletter, 2009)

Closer look at the Luxury Lapse in Japan: Having accounted for about half of the global market for Luxury, Japanese market is shrinking for a price of around 10% in 2009 2009. Before which it has experienced fall in consecutive years in 2007 and 2008. The excellent reason for Japanese growth was that in lack of large homes and large automobiles, Luxury products were the only path to show off their wealth. Also, Japanese culture is driven by group tranquility, whereby with regard to feeling of addition people bought luxury brands. With recession, the income levels have taken popular and the concept of ˜Luxury Shame' arose in Japanese culture leading to people abandoning Luxury Brands. Post- Tough economy, young buyers who used to buy Luxury Brands believe that luxury is meant for ˜wealthy old dandies'. There is a shift in their attitudes towards luxury. There is a growth in low-price fashion with people queuing up before H&A's of the world. (JWT Trendletter, 2009)

The Indian Consumer And Luxe: WHAT LENGTHS Is "New Luxury By Johann John Matthai

This dissertation by the MICAn is a study on the consumers of luxury brands in India while uncovering the intricacies and peculiarities in their intake patterns. This research was conducted in 2008 across three metropolitan areas - Mumbai, Ahmedabad and Delhi. The analysis is not so detailed however; the analysis throws up four main sorts of luxury consumers - The Disinterested, The Romantics, the Calculated & the Brand Conscious. The dissertation dwells on the details of their attitudes, perceptions, shopping behaviors, their purchase container, the motivators, worth, beliefs etc.

Identified Knowledge Gaps

The publication by Hubby & Chadha talks about the growing cult and also predicts the future of luxury brand sin Asia. However, posted in 2006, the publication does not discuss the luxeplosion in the light of the current economical slowdown. So, the first gap in the analysis is "will the luxeplosion in Asia continue to develop in the new monetary context

Further, the authors have studied market segments like china, Japan and Hong Kong which are far more developed than India. The context of study will not focus exclusively on India. It really is my humble thoughts and opinions that what works for china or Japan might not apply to India. India alone is very diverse. Hence the next knowledge space is "will downturn impact luxeplosion in India?

The dissertation, although relatively recent (2008) too has not considered recession as a parameter of effect on the purchase habit and intentions of luxury consumers. "Should luxury consumers in India be re-defined in the context of the existing recession or do they screen a different patterns during recession? Has recession impacted their purchase habit and intentions? This is actually the third knowledge gap recognized from the dissertation examined.

Impact of recession has not been so severe on the blissful luxury market up to now and therefore there aren't many studies performed to review the impact of downturn on luxury market. All the available information is recent without major studies during the previous recessions. Also all the major studies conducted up to now with regards to impact of tough economy have been limited only to mature markets like European countries and America, there is no research performed with focus on India. India is still among the fastest growing luxury markets but there would be some change in the psyche towards luxury in Indian consumers. Masstige luxury brands saw rapid growth because of the surge in income levels of individuals due to the IT Trend. Now with the work market badly struck, how would the consumers respond to this situation. Hence there is a need to perform such a study in the Indian context

Research Problem

Based on the recognized knowledge spaces, my research problem may be stated as the following:

"To understand the changing movements and attitudes towards Luxury brands among average Indian consumers through the times of financial downturn

Research Objective

1. To review the consumption trends of Indian consumers in the luxury segment over the past decade

2. To understand the impact of recession on the purchase of luxury brands in the context of lux-plosion in India

3. To understand the underlying attitudes, perceptions and shopping action of luxury consumers in India to judge if recession comes with an impact on their shopping habits

Approach Note

In order to comprehend the impact of tough economy on luxury consumers, it is vital to analyze the behaviour of luxury consumers in India in the past and compare them with their current beliefs and frame of mind. Hence, the study will be possible only by performing comprehensive interviews with consumers of luxury brands. Further, a significant part of these consumers should have graduated to the purchase of luxury brands before the current slowdown in order to understand whether or not the slowdown has impacted their purchase action, altered their behaviour and value systems towards luxury brands.

India is not yet an adult market in terms of Luxury brands. Hence, this is of luxury may vary in comparison with international specifications. In India the high grade goods are also considered as luxury products. This would need to be kept under consideration during research.

A sample size of 20 consumers across Ahmedabad, Delhi or Mumbai owned by SEC-A would be chosen to execute the in-depth interviews.

To understand the industry point of view, skillfully developed would also be interviewed. This might provide us with the insider point of view of the industry towards recession.

Expected Contribution:

India is an evergrowing market for luxury brands but the current recession has halted the progress path. There is a need to comprehend the way the luxury industry designs up post this tough economy. Hence, there's a need to review the impact created by the downturn on the luxury markets. Current review undertaken would help to address this problem and oftimes be main researches under taken to understand the impact caused by recession on luxury brands.



Man, R. C. The Cult of Luxury Brand.


Aitchison, G. (2009, September). Shopper's Action in recession can have long-term implications. Admap Mag (508), pp. 1-3.

Bostic, V. J. (2009, August). Moving consumer prices and brand perceptions in recession. Admap Mag (507), pp. 1-4.

Clark, N. (2009, August 26). The Tough economy: What this means for brands. Marketing Publication.

Financial Times. (2008). Business of Luxury. India: Financial Times.

Julie Bazinet, S. S. (2008, September). Brand Approaches for an economical downturn. Admap Journal (497).

JWT Trendletter. (2009, May). Work happening: The Tough economy & Its Effect on Luxury. NY, USA: WARC.

Sue Phillips, S. S. (2008). Inside the Affluent Space: A View from the top to anticipate the needs of the rising affluent. Asia Pacific discussion. Singapore: ESOMAR.

Tsai, S. -p. (2005). Impact of personal orientation on Luxury brand Purchase value. International Journal of GENERAL MARKET TRENDS, 47 (4).

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