"How do you sell luxury in a recession?” That is what Bloomberg asked back in 2009, reflecting on the Great Recession, the economic downturn that swept the globe beginning in the late 2000s lasted for nearly a decade, with its official “ending” coming by most accounts in the early 2010s. "If you're Gucci," Bloomberg asserted, "you try to convince customers that a handbag isn't just an accessory but an investment.” With that in mind, the purse getting top billing in Gucci boutiques that season was its “New Jackie,” a bag based on a style carried by the late Jacqueline Kennedy Onassis and “marketed as a bag 'to use and love forever.'"
With that same mentality in play, Gucci’s “GG” bags – the ones with the interlocking G’s patterns that have long been the foremost face of and selling point for the Italian design house – were hidden away. They were still available for sale in the Italian design house's brick-and-mortar stores, should a consumer inquire, but Gucci’s staff members certainly were greeting people at the door with “GG” bags in their hands in hopes to giving rise to a sale. That was not what consumers were looking for and so, it was not what Gucci was enthusiastically offering up.
No, in 2009, after years of economic uncertainty, “Consumers are looking for discreet, timeless purchases," Gucci CEO Robert Polet said at the time. They “are not keen on anything that could fall out of fashion. People feel guilty about that.” And so, Gucci rose to the occasion.
There was a potential catch, though. More “timeless,” also meant more expensive. That “New Jackie” bag with its smooth leather bod and golden-hued and bamboo accents cost upwards of $2,000. That is about twice the price-tag of the canvas-coated logo-ed bags. “Asking customers to trade up during a downturn might sound crazy,” Bloomberg asserted, “but was working for Gucci.” The brand’s sales for the first half of 2009 were down quite a bit less than the industry average – 3.7 percent versus 15 percent.
Such an aversion to non-classic accessories and trend-fleeting garments was demonstrated no better than by the success of Hermès and it's staple leather goods throughout the recession. The 170-plus year old luxury brand and its $7,000-plus Birkin bags “was one of a handful of luxury brands that not only weathered the global financial crisis but thrived,” Newsweek asserted in 2010.
“Most fashion houses slumped [in 2009], according to Bain & Company, with the overall luxury market falling for the first time ever during the recession.” As a whole, sales in the luxury fashion market dropped 10 percent in the U.S. and 8 percent worldwide in 2009. Hermès, however, saw its sales increase by 8.5 percent for the year as a whole, and by 11 percent in the fourth quarter. Its secret? “Rather than slash prices, follow fashion, or go downmarket, Hermès decided to focus on what it does best: produce expensive but timeless classics with unimpeachable quality that will last a lifetime.”
As it turns out, the decade-long recession and the corresponding drop in luxury goods sales was not a sign that consumer spending on luxury goods was altogether falling out of favor. Instead, “Buyers became more discerning, opting to move away from conspicuous consumption, fat logos, and lively colors," HSBC analyst Erwan Rambourg stated at the time.
The movement was not away from luxury, per se, but away from ostentatious displays and “towards tried-and-true stalwarts.” LVMH chairman Bernard Arnault – who, in an earnings call in January 2009 announced that the Paris-based conglomerate would largely pull back from its aggressive bottom-line expansion, which relied heavily on more accessible offerings, often adorned with its famed Toile Monogram – put it well: "With the [financial] crisis, bling bling is passé."
The brands that understood this and acted on it, whether such a trajectory was born from a trend perspective, as was the case for Gucci and Louis Vuitton, or whether it followed from a more longstanding traditional one (i.e., Hermès), were rewarded, while those around them – such as Versace, which was busy shuttering stores – suffered under the strain.
As for Hermès, its artistic director Pierre-Alexis Dumas said at the time that “Hermès isn't about trendy. It isn't even a fashion house.” And that precise focus, it seems, is exactly how you weather a financial storm.
*This article was initially published in September 2017.