Luxury Brands During Recessions

Presenter: Riley Elizabeth Hynes

Group Members: Fiona Bolger Tischler

Faculty Sponsor: Anurag Sharma

School: UMass Amherst

Research Area: Finance

Session: Poster Session 5, 3:15 PM - 4:00 PM, Auditorium, A74

ABSTRACT

This project examines the resilience of luxury brands during recessions. Although the phenomenon is seemingly counterintuitive given the usual nature of luxury purchases as discretionary, luxury brands are able to make strategic changes that insulate themselves when compared to losses in other market segments. The customer base of these companies are mainly high-income individuals who are less sensitive to market shocks and income losses, allowing them to retain their consumers. Furthermore, the companies display scarcity-based models that maintain prestige even when the market conditions are unfavorable. They have high control over pricing and supply, allowing them to maintain their margins when other sectors cannot. Brands in the lower end segment rely heavily on discount models, high volume sales, and a large customer base which causes major losses that are not experienced by the luxury sector. Luxury brands do not engage in aggressive discounting and do not focus on volume sales, which helps to reinforce value and prestige. Also, the global reach and brand recognition of luxury companies allows them to diversify worldwide, insulating them from areas that may experience recessions more than other areas of the world. While sales may slow during recessions, profitability and brand strength are not lost, minimizing downside losses when compared to the rest of the market. This project highlights how prestige and brand value alongside strategic business decisions allow for resilience when other market segments suffer, offering insights into brand management in times of immense stress.

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