How Will Luxury Brands Fare If There’s Another Recession?

With a global recession seeming more and more likely (thanks Donald), Vogue Business took a look at what happened to the luxury sector during 2008-2009 recession to get an idea of what another downturn might mean for the industry.

The 2008-2009 recession, the story explains, “shaved 9 percent off the value of the luxury goods market.” And while a number of brands were eventually able to recover – particularly heritage luxury brands – most department stores still haven’t.

“[High-end department store] sales nosedived 25 per cent in 2009,” the story says, “leading to early markdowns of 70 per cent and an overabundance of stock,” which gave rise to “flash sale” outlets like Gilt and Haute Look.

10 years later, and some luxury brands like Coach and Michael Kors are still having difficulty selling items at full price. Compounding that is an increased popularity of “more democratic styles, like streetwear.”

Still, the story says that most individual brands are “better prepared for the next recession” as they are “less dependent on wholesale than they were a decade ago” thanks to the rise of e-comm and social media. Those department stores that never recovered from the last recessions, however, are totally fucked.

“Recessions damage consumer confidence, can damage retailers and suffocate brands who often struggle to make payroll and cover working capital,” one analyst said. But, “substantial opportunities” exist for those brands and retailers that “survive” — due to “fewer competitors and additional assets.”

So basically Hunger Games, but make it fashion.

You can read more about it at Vogue Business.

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