The Luxury Rebound

Now that the U.S. economy is recovering (albeit slowly) from the economic crash, there’s been lots of buzz about the rebound in luxury retail. Certainly, the sector has been outperforming other retail categories, with analysts pointing to luxury as a safe harbor amid disruptive factors like rising oil prices and the chaos in Libya. One CNNMoney story, in fact, referred to investors hopping on a “luxury bandwagon” and noted that Louis Vuitton’s London boutique has limited shoppers to a maximum of three purchases for fear of running out of inventory. The report also cited China’s thriving economy as a key driver of global demand for luxury goods.

So while luxury is supposed to be back, I think a more interesting question to ponder is whether it ever really left.

Right after the 2008 economic collapse, predictions from various prognosticators ranged from “this will kill luxury as we know it” to “luxury is always recession-proof.” As the recession unfolded, some observers even cited the continued construction of U.S. outlet stores by the likes of Saks Fifth Avenue OFF 5TH and Nordstrom Rack as evidence of a “reinvented luxury sector” focused on the burgeoning ranks of value-driven consumers.

Well, count me as a skeptic, then as now. After all, retail has always been a cyclical business. I think luxury was neither “forever changed” by the recession nor “reinvented” as a consequence of it. Right in the thick of the recession, major brands moved forward with plans for some of the most lavish flagships ever in Europe and Asia, including Louis Vuitton’s meticulously crafted Bond Street location that was hailed as “one of the most magnificent stores in the world” when it opened in May 2010.

So what happened? Rather than luxury being in the midst of a rebound, the sector has merely returned to its timeworn model – namely, catering to a niche of well-heeled shoppers in gilded retail districts across the globe.

During the cheap-money era, aspirational shoppers were able to snap up luxury goods as never before. And so, for a time, a kind of mass luxury did emerge, especially in the U.S. This trend might have helped fuel the construction of iconic flagship stores, which can be great for brands looking to expand their appeal, but it was never anything more than a temporary byproduct of the bubble.

Fundamentally, luxury retail’s basic identity – steeped in status and predicated upon providing quality goods that cost much more than their utilitarian value would suggest –emerged from the so-called Great Recession without so much as an eyelash out of place.

Peter Burgoyne is creative director of the retail division at strategic branding and retail-design consultancy CBX.