Has the rerun of the Roaring 20s come to an end? According to Vogue Business's Laure Guilbault, it may have. Erwan Rambourg, the Global Head of Consumer and Retail Research at HSBC, told her, "[he thinks] we're done with exuberant [post-lock-down] growth. We're seeing a landing finally in sight."
LVMH's CFO, Jean-Jacques Guiony, shared during the LVMH earning call, "Growth is converging — after three roaring and outstanding years — towards numbers that are more in line with the historical average." Thomas Chauvet, Citi's Head of Luxury and Consumer Discretionary Research, agrees with Guiony, sharing that the luxury market "is finally catching up with the realities of the economic cycle after several years of above-average growth."
What does this mean for the brands? Well, the good news is that Q4 includes the holidays when most people take their Christmas bonuses to the luxury stores to spoil their loved ones or themselves. Rambourg believes that while the holidays may not increase sales solely, they will undoubtedly help US sales match those abroad.
But unless you are a CFO of Kering or LVMH - this drop in revenue won't cause you to lose sleep. But, what I find interesting is the connection between brand equity and brand revenue. Brand equity is the public's perception of the brand or the brand's name. Luckily, brands like Gucci and Hermes do not require much advertising in order to keep relevance. However, for less luxury brands, like Target, for example, if it has a low-profit quarter, a CFO would advise it to run sales - sell more for less that will, in the end, run up profit for the company. However, LVMH and Kering's brands do not have that luxury (pun intended).
I was taught that running sales or promotions can sometimes deteriorate a brand's status. A marketing professor of mine, Emory Serviss, at Auburn University, explained that a sales promotion has two goals: short-term and long-term. Short term, it helps get rid of old stock. Long term, it invites new consumers to your brand. However, when you use a promotion often, it lowers the value perception, so in the future, it may not be perceived as a "luxury" anymore if you bought it on sale.
That's why luxury brands don't run sales promotions. So, how else can a PR professional working for LVMH help run up sales in Q4? They should trust brand loyalty. Cynthia Sener at Forbes says, "It's mission-critical that brands stay focused on evolving their customer experience and give consumers compelling reasons to engage, trust, share, and return."
I do not believe luxury brands should (or ever will) run a sales promotion. As much as I would love it, as a PR practitioner, it would hurt its brand more than it would help. If I were on LVMH's or Kering's PR team, I would advise them to trust their consumers and the brand loyalty they've built while continuing to enhance the consumer's experience in their stores, online, and everywhere else in between.
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