London Diamonds founder James Sanders on luxury brands during a recession
James Sanders (London Diamonds) is an active investor in various sectors, including AI, gold, diamonds and other luxury markets. He is also an entrepreneur with an active interest in start-ups that challenge the norm.
As founder and managing director of London Diamonds, he leads a team dedicated to finding new ways to ensure customers get access to expert advice, the best diamonds and bespoke jewellery all at a truly fair price. In this blog, James Sanders gives his thoughts on what makes a luxury brand and how they can survive and thrive even during the toughest economic times.
Luxury brands are those characterised by their high quality and exclusivity. In fact, perceived scarcity is a major component of what makes them ‘luxury’, and as it drives up interest it also drives the price tag.
Within the retail sector, there are many luxury brands that rely on selling to a select clientele. In other words, they’re not looking to attract a wide audience and they’re not looking to sell to the masses. They concentrate on furnishing their rich clients with what they want.
Are luxury brands recession proof?
These kinds of brands are relatively recession proof, particularly compared with lower end retail brands. A small business could easily be finished off by a downturn in sales, for example, while a luxury small business is likely to be able to hang on to its clients as long as it keeps on top of their motivation to buy.
As long as the demand is there, brands can continue to pull in decent profits. And as these brands rely on their heritage, superior craftmanship and exclusivity, they continue to be in demand for those with the spending power.
Everywhere around the world, we’re experiencing a time of prolonged and unprecedented economic challenges. The events of the last few years have taken their toll on many sectors and, in the UK, there is a tough economic forecast to contend with.
Challenges ahead for the luxury sector
Political instability, economic shocks, the ongoing war in Europe and the post pandemic recovery is all hitting businesses and consumers in their finances. The UK is undergoing a prolonged cost of living crisis that is hugely impacting people’s buying choices.
According to the Bank of England, this is set to continue well into 2023. People are cutting down spending on luxuries as they focus efforts on the basics. But for the ultra-rich, this isn’t the case.
Indeed, recent research shows that ultra-rich consumers are still spending on the most luxurious brands in the world. Part of this is for the quality of the products, but part of this sustained demand for luxury brands is down to the positive impact that these brands make on their life. This positive impact is invaluable to people and arguably more so when there is a dire economic environment surrounding them.
What can luxury brands do to retain customers?
While the outlook is absolutely more positive for the luxury sector than many others, that’s not to say they don’t need to pivot their offering and keep on top of what their customers want.
Being a luxury brand isn’t a guaranteed fail safe against recession, particularly as most have a relatively small pool of consumers to attract. In order to reinforce the strength of their brand, they need to work on their customer loyalty offering to shore them up for the future
The human touch is vital, as is responding to changing demands from those customers. For example, offering VIP services could work to build on the trust between the brand and its customer base.
Alternatively, the brand may need to widen its scope to appeal to consumers at different spending levels. Expanding their range of products and reaching out through marketing campaigns to more people could go a long way to shoring up the brand during difficult times.
Learning from start-up success
Taking lessons from start-ups could also stand a luxury brand in good stead. Start-ups have to be agile and ready to pivot. They also have to be able to reach out through digital marketing campaigns that actually tap into the necessary zeitgeist, and they have to get creative.
Legacy brands may not see the need to follow a start-up’s successful marketing strategy, but it’s a great idea for any that need to make changes to hang on to customers over the next few years.
Read more about James Sanders here.