By  on March 16, 2009

How does a luxury brand cope when luxury is seen as a stigma?

As the reality of the economy sinks even deeper into consumer consciousness, the concept of luxury has gone from a badge of honor to a private indulgence. While there are some who continue to purchase designer bags and shoes with four-digit price tags, many consumers have said it somehow feels wrong to shop — even if their wallets haven’t thinned out.

The turning of the tide — no matter how long it lasts — is creating concern among industry executives. Last month, a group of senior executives from luxury brands that included Graff, Loro Piana, Ferrari and NetJets gathered privately to discuss how to continue to promote their respective brands and break the current perception that luxury is a dirty word in times like these.

Part of the problem, according to Karl Lagerfeld, is that the meaning of luxury had become distorted.

“The word [luxury]…was used for things it was never related to,” the designer said. “It became nearly obscene. Now it has to change…and go back to what it used to be about — discretion and elegance, and not bling-bling. The hint of vulgarity has to go. The luxury business will never die. Luxury is about quality, refinement, innovation, and not about price.”

Lagerfeld also abhors stinginess, which he calls a terrible vice that often emerges in times of crisis among well-heeled people. “The money has to go out the window to come back through the door,” he said.

Frédéric De Narp, president and chief executive officer of Cartier in North America, said there has been a crossover and confusion between trendy fashion and true luxury in the past several years among consumers and brands.

“Fashion is of the moment and not timeless,” he said, noting that communicating Cartier’s quality and heritage is of utmost importance. “True luxury should be timeless. Cartier has never compromised on that. When you’re talking about translating your important sentiments into objects, quality will always sell.”

Paco Underhill, managing director of consultant Envirosell and author of “Why We Buy: The Science of Shopping,” said consumers can be divided into three groups: the downwardly mobile, those who are or know someone at fiscal risk and those who remain wealthy but feel fashion or luxury consumption is bad manners right now.

“There’s a fundamental issue here in which so many Americans have no grasp on their personal finances,” said Underhill. “That whole affordable luxury category was based on people spending money where they shouldn’t have. One of the fundamental issues we have in our culture is who can afford what.”

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