Fashion as Big Business: Luxury brands and Empires. The Crisises.

Last Friday I started talking about the luxury brands and empires. How they were founded and developed. By the 2000 the market was at its peak and the brands had no problems at all, they all reported profit increases. However in 2001, after the 9/11 , the conditions suddenly changed and the sales within the luxury goods market began to decrease as a result of the unsteady stock exchange, layoffs on Wall Street and bonus cuts.

The conglomerates suffered a severe drop in profits and the brands started costing millions to ensure survival. Probably the main reason for the massive downturn of the luxury goods market after the 9/11 is that 30% of it was dependent on the Japanese tourism. The visitors stopped flying to the US in the wake of the attacks because of fears over the security situation.  In the new situation the brands needed to find some directions.

For the Gucci group it was hard to compete in the harsher economic conditions and with the its desirable portfolio lost its autonomy in 2004 to the French holding company PPR (Pinault-Printemps-Redoute). Changes were made quickly. Tom Ford was out, young designers with fresh ideas were in, and the acquisition of Puma opened up a new market share in a sector with huge growth potential. 
The credit crisis that began in 2008 also had a huge negative impact on the fashion industry. It was the worst economic meltdown since the World War II and international financial institutions like Lehman Brothers and AIG collapsed, and the luxury brands Christian Lacroix and Escada filled for bankruptcy. The volatile economic climate has also claimed homes and jobs, feeding insecurity on a daily basis.

In order to remain competitive the big conglomerates and independent fashion brands needed to reevaluate their business strategies. The chairman of LVMH, Bernard Arnault, suggested that the luxury goods industry rebrand itself. He said that the word "luxury" implied triviality and showing off and the time for that was gone. By contrast, LVMH always emphasized quality, innovation, and creativity. 

The new economic climate has changed the consumers and made them more discerning. They started buying products considered to be more of an "investment" for the long term that are distinctive and classic.

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Ioana Liliana said…
Great post! Indeed in such a competitive market, and especially in such austere economic times, the best strategy for a luxury brand is promote its quality and creativity.

Fashionistable said…
Everything has a cycle. Just watch the luxury come back. Bet it is soon too. Xxxx
Francesca said…
omg it was by chance I came across this post and it was so much help as its a simular topic as my essay lol
great stuff def following you ur a life saver xxxx