ECONOMIC DOWNTURN

Critically discuss the view that in times of economic downturn corporate social responsibility is an expensive luxury

Critically discuss the view that in times of economic downturn corporate social responsibility is an expensive luxury

The Luxury Institute has created its usual trends for the year ahead. This time, however, there is an economic crisis which will affect the industry in multiple ways. First, the number of wealthy 'mass consumers' (those on decent incomes who aspire to rich lifestyles) is likely to drop as people tighten their belts or become unemployed; second, even the mega-rich have lost some money on the markets - steel magnate Lakshmi Mittal has seen £16bn wiped off his fortune.

But The Luxury Institute takes the view that everything is cyclical and this is a time when those brands with the potential to last in the long term need to invest more than ever(Abelson, et al.,2008). Its trends - edited by us - for 2009 are:

1. Traditional luxury brands dramatically accelerate their internet activities

The traditional luxury industry has been slow to adopt Web 2.0. Meanwhile, innovators such as Gilt, Ideeli, A Small World, Portero, Vivre, Couture Lab and several off-the-radar players such as Bespoke Global, are gaining traction online via membership models, global communities, and by aggregating categories of bespoke luxury designers and producers in one-stop-shop destinations.

Their economics will become much more compelling as the economic downturn makes opening stores and traditional advertising economically challenging. Look for all types of traditional luxury goods and services providers to begin to imitate the techniques of these luxury innovators or to acquire them.

2. Luxury awakens to the influence of Generations X and Y in the digital area

According to The Luxury Institute's research, 22% of consumers have executed a transaction via a mobile device, while 21% have made a payment via mobile(Ducoté, 2006). Those doing so tend to be under 45 years-of-age, but significantly wealthier, with household net-worth at $5+ million.

Luxury should be leading m-Commerce innovation since it creates an enhanced experience for all customer segments. Generation X and Y shoppers are influencing the lightning speed with which consumers of all ages, including baby boomers in their 50s and 60s, are embracing mobile technology for on-the-go entertainment, search, and transactions.

Look for a few luxury innovators to make a more serious effort to experiment with m-Commerce in 2009, especially internationally, as luxury quickly discovers that it must seriously address the mobile needs of the wealthy constituents of Generation X and Generation Y, as well as the mobile needs of boomers.

3. Price Does Matter. Luxury will appeal to the rational brain again

In the recent boom, some in the luxury industry deluded themselves into believing that the more expensive an item, the greater its appeal to the wealthy, regardless of quality, functionality and service experience. University research suggested that the more expensive a consumer was told an item was, regardless of the fact that it was the same quality as a much lower priced item, the more the happy

chemicals in the brain approached a state of ...