‘Value your value’: advice for luxury brands worried about the living-cost crisis
Retailers are gearing up for another global economic slump, battling skyrocketing inflation and a slowdown in consumer spending. High street retailers have responded by offering discounts and promotions, but what do you do if you are a luxury ‘non-essential’ brand? Matt Steward, chief executive officer of Above+Beyond, says value just needs to be reframed.
How should luxury brands respond to the living-cost crisis? / Pexels
I’m sure that as avid, evangelical readers of The Drum you will have seen the piece last week on the plight of Abercrombie & Fitch, and its rise and fall, and rise and faltering.
This seemingly revitalized brand has become a familiar victim of the supply chain, logistics and inflation clusterfuckery, strangled by rising costs and turning to fire sales and discounting excess stock. Top-line and bottom-line growth forecasts were cut, and the stock price plummeted.
It’s a story that will become increasingly uncomfortable for many brands and businesses.
As consumers’ wallets continue to get rinsed by rising costs, from bills to butter to bras, spending will be scrutinized, choices will be made and some brands are going to lose.
Reactive pressure will undoubtedly create short-term thinking. Discounting and promotion may stimulate sales, but at what cost to margin and brand reputation?
It’s an interesting context that as Abercombie & Fitch discounts out of short-term stock trouble, elsewhere in fashion Chanel and Ralph Lauren have chosen to hold the line – or in some cases increase prices – and their sales forecasts remain bullish. Apple, Tesla and Louis Vuitton don’t do sales, full stop. Value your value.
Admittedly, this is an easier ask for high-end brands, given the audience and their incomes. The squeezed middle, however, will become a growingly uncomfortable place to be.
The words ‘non-essential’ will be striking mild panic into marketers across the land. As spending is challenged, we also see a rise in upcycling and ‘pre-loved’ as the disposable becomes disposed of.
eBay’s sponsorship of Love Island is a testament to this, and a line in the sand, for fashion and beyond. The need to double down on value and values for brands is acute.
It’s not all shit, though. Know your worth, hold the line and be prepared to pivot.
When you’re in the squeezed middle, you need to stay true to your purpose, but flex the strategy. In the last recession, M&S was acutely aware of its place in the squeezed middle on the shopping list. They looked deep into their brand soul and doubled down on making quality products accessible and affordable.
‘Quality worth every penny.’ And they innovated and riffed off of this. It’s where the now prevalent ‘Dine in for £10’ concept was born, reframing an indulgent, expensive supermarket shop into a trade-down, home-dining treat. And of course the incremental footfall and in-store sales benefited.
Apple launched a thousand songs in our pockets during the 2001 downturn, and Amazon re-wrote reading with the kindle in the 2008 recession. So what can we learn and reuse from these cautionary tales and adversity busters?
Here’s a brief bluffer’s guide to surviving, and thriving, as the cost-of-living crisis takes a grip:
Don’t discount, reframe: Tell a story of love, craft and worth rather than discounting your way out of trouble. Cherished, not cheap
Stay true to your brand: Rediscover and double down on what is true and timeless to your brand
Innovate: Translate the brand soul into new ranges, new initiatives, new routes to market and new ways to frame your products and purpose
Be audience-obsessed: It starts and stops with what your customers, and potential customers, care about and what your brand brings to the party. Be useful or be entertaining, but be relevant and inspiring
Don’t compromise on the experience: Experience is king, and how a brand makes you feel at every touchpoint has never been more important as choices are made and sacrifices proffered
It’s going to get choppy for sure, but the opportunity for creativity to rise has never been more acute. And the opportunity to create value for brands in new and innovative ways will never be more necessary.