The Paradox of Luxury Brand Strategies – Go East?

According To Forbes, a profit warning by Burberry end of 2012 began to cast a shadow over the luxury industry, which has shown resilience to the economy’s impact on most consumer sectors.  Chief Executive of Burberry Angela Ahrendts adds in a publication of the Huffington Post, “As we stated in July, the external environment is becoming more challenging.. Given this background, we are tightly managing discretionary costs and taking appropriate actions to protect short term profitability.”

LuxurySector concludes that 2012 was an active year for the luxury sector.  They add, “China officially overtook the United States as the world’s biggest consumer nation of luxury goods for the very first time. Wealthy investors in Asia and the Middle East snapped up European luxury brands, as European conglomerates intensified acquisition of suppliers and reinvigorated dormant heritage brands. But what does all this mean for luxury in 2013?”

Different Luxury Brand Predicitions for 2013

Go East

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According to Chinese Business and Luxury Blog JingDaily  a new report by Bain & Company estimates that China has surpassed the US to become the world’s largest luxury market. “Led by a 7 percent rise in luxury spending this year — strong compared to the global average but down from the double-digit growth we’ve seen in Greater China for the past several years — Bain holds that China accounts for 27 percent of spending on luxury goods and services globally, compared to 20 percent for the United States.” Previous reports have projected that China will account for 33 percent of luxury spending by 2015.

Current Economic Climate

Michele Norsa, CEO of Salvatore Ferragamo, the Italian shoemaker, said: “Markets are very volatile. We must keep a cool head and define our forecasts day by day. …The first part of the year will be slower. In the second part there will probably be a recovery. These are the signs we are receiving from all our markets.”

From Established to Emerging Countries

Burberry has hedged against the Eurozone crisis by allocating capital for expansion into non-traditional ventures and digital technologies. “The re-born British flagship rose its revenues to £574 million ($879.7 million), an impressive 22 per cent raise in its third quarter in 2011, with sales coming mostly from China. ” However Burberry also chooses to focus beyond the strategy of just selling “aspirational dreams of luxury” to the Chinese nouveaux riches: now there is also investing in technology and social media, revamping its website and getting e-commerce established on solid SAP technology.

Wait – Not SO Negative

The CEO of luxury retailer Saks Fifth Avenue Stephen Sadove has a completely different outlook on luxury predictions in 2013 (and quite a positive one at that!):

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