Luxury good makers have always counted on their visibility and branding as a key driving force for their business. Once a brand achieves that elusive status as a recognized luxury item, that status itself can drive sales to wealthy consumers, not to mention those who would like to appear to be wealthy. According to a report by Newsweek, that dynamic is shifting as economic woes continue to plague individuals and businesses.
Across America’s upper strata, rich folk… are experiencing an unfamiliar emotion: luxury shame. The late Coco Chanel, doyenne of 20th century fashion, long ago said that luxury is “the opposite of vulgarity,” not of poverty. But in these recessionary times, it seems vulgar to flaunt one’s luxurious lifestyle. And so the wealthy are going blingless and eschewing the spending sprees of the recent Gilded Age, giving new meaning to the phrase “embarrassment of riches.” The trend is horrible news for the $175-billion global luxury market, which is already absorbing the blows of plummeting personal wealth. Just in time for Christmas, this new “embarrassment of riches” is cutting into sales of high-end retailers and brands like Neiman Marcus and Saks Fifth Avenue, Bentley and BMW, Christie’s and Sotheby’s. [From Newsweek - Luxury Shame - Why even the very rich are cutting back on conspicuous consumption by Johnnie L. Roberts.]
The story details a variety of indicators of this new perspective on luxury: cancelled real estate deals, advertising cuts in luxury-oriented magazines like the Robb Report, and luxury brands under pressure.
Is Luxury Shame Real?
But how much of this decline in sales of luxury items is really due to a desire to consume inconspicuously? Certainly, drops in advertising and product sales might well be related to the realities of the global economic mess. While many wealthy people may still be able to afford these luxury items, there might well be a psychological aversion to spending at the same pace when one’s net worth has declined by a third, even if that net worth remains substantial. Furthermore, many of the buyers of luxury items may fall into the “aspirational” category. A person who is merely rich (vs. super-rich) might decide not to buy a Ferarri at a time when the market is crashing and business prospects are uncertain. And more accessible luxury items (say, Prada handbags) are not the sole province of the truly wealthy – a portion of their market certainly consists of individuals with real worries about their income stream.
I think a neuromarketing study of this topic would be fascinating. Do wealthy individuals really feel shame now when they view a luxury product or see the logo of a luxury brand? I’d guess the answer is “no,” but without the brain scans who can say for certain?