You would think that, with all the talk of hard times from here until the seas freeze over, the one sector that would really suffer would be luxury gifting, the passing of apparently frivolous products from one person to another.
Some of the panic signals out in the market and the degree of brave whistling in the dark from retailers would seem to bear this out. But that is to equate hard times with a return to a very basic level of existence. Times are hard but not that cataclysmic. At least, not yet.
And some trends are up. At one end, top London stores are showing serious profit returns. Selfridges’ operating profits are up by 12.3% to a record breaking £150 million, whilst at London based food and gift emporium, Fortnum & Mason, sales have jumped 14 per cent to £74.4million in the year to July 2014 – pushing profits up to £3.8 million from £1.8 million the previous year. At a more modest end, Britain spends up to £6.34 billion each year on takeaway coffee (that’s an average of one every week) as it becomes more and more part of the everyday luxury. Organic food has also grown with 4 out of 5 households now buying organic and the industry rising to £1.79 Billion in the UK.
“In hard times, people seek compensatory gifts or self-gifts to make up for other, more expensive treats being unattainable”
There are, of course, still a few people whose natural habitat is Kensington and Notting Hill and who have no money concerns. The ones we so enjoy hating. They need not concern us here. They are not real people.
There is, of course, a sliding scale of luxury. It is often said that today’s luxury is tomorrow’s necessity, though it remains to be seen whether that cliché will go into reverse in the next few years. For the purpose of this article, I am defining luxury as frivolous, unnecessary purchase. Unnecessary from a practical point of view, that is, but highly necessary from an emotional point of view.
There is still money to be made in this area. But, like any market, there are no easy pickings. Say luxury and you think of art for art’s sake. Not a bit of it. You still need rigorous segmentation and targeting. Get it right and opportunities lie in several areas.
It is, first of all, very important to understand gifting if you want your company to head towards a luxury market. There are, believe it or not, different types of gifting and understanding these is very important. See our full thought leadership piece for the four different types of gifting: