Emerging markets and the internet are the future for luxury
brands according to a panel speaking at the World Retail Congress
in Barcelona yesterday.
The discussion focused on the particular challenges the current economic climate posed for the luxury market, and warned that the sector is by no means immune to the global credit crunch. 'Trading up' may be going down According to Estee Lauder group president Patrick Bousquet-Chavanne the tendency for 'aspirational' consumers to move from mass market products to luxury brands could be slowing. "Nobody has a crystal ball, but we have seen a softening of demand across the retail market in the US," he said. Instead, the current economic climate may drive consumers to downgrade, leading them to search for budget versions of their favourite luxury items. A number of manufacturers already seem ready for the trend with budget versions of luxury products hitting the market such as Dr Semel's Timelapse Wand released this week, which, at $25, provides a budget alternative to expensive anti-aging treatments that can retail anywhere between $100 and $150. Emerging markets are booming According to Bousqet-Chavanne the only markets experiencing a boom at present are the emerging markets of India, China and Russia, however he did warn that success in these countries requires significant investment and takes time. "I believe that it is very likely that for all of us in the branding world it [emerging markets] will be a big share of earnings in the coming years," he said. The middle classes and the younger generation were cited as the biggest drivers of luxury and brand awareness in such markets. In its second quarter results publicised early February, Estee Lauder reported sales of $2.31bn on the back of strong performances in the emerging markets. In particular the company highlighted the Asia Pacific region and China where most of its brands sold out during the period and sales reached $347.4m. Internet provides growth opportunity In addition, the panel agreed that the internet provided another big opportunity for the luxury sector, however, creating a luxury shopping experience on the web can be challenging. "The emotional aspect is the most critical one to address," said panel member Graziano De Boni from Valentino. The luxury sector has often been slow to provide websites through which consumers can purchase goods, with luxury cosmetics group Clarins only adding transactional power to its site in 2007. The France-based company cited the renovation of the website as a major marketing and promotional cost that affected the year's profit figures, illustrating the financial significance of a move into the online sphere.