Luxury brands are back in the news again, buy for non-luxury reasons.  The media could not resist the price increase story that has be developing around the luxury goods market as many of the top players “level-set” pricing across geographies.

Who would have thought that $10,000 handbag in China would go for a mere $8,500 in North America?

Since no self-respecting luxury brand would lower prices, it looks like the uber wealthy demographic will have to settle for the some price rounding in the upward direction.  As reported in the media, Luxury brands, including Hermes <> and Louis Vuitton <>, have been marking up prices over the past few years, as rising stock markets, improving home values and an overall stronger economy make the rich even richer.

The Luxury Brand Sector is +2 points or 3 percent at 60 this month, partly on the pricing storylines, but collectively on the continuing efforts by top sector brands to move through a very difficult economic periods.  From changing luxury brand tastes, declining demand in China and continuing economic troubles across Europe, from Cartier to Louis Vuitton, the brands are using their marketing engines to help re-ignite interest in the sector.

Another reason for the recent price adjustments is the Swiss Franc.  A sudden and unexpected move by the Swiss National Bank to remove the currency exchange cap it had placed against the struggling euro, causing a spike of the Swiss franc against the euro and dollar.  Since a considerable number of luxury time pieces (that would be watches to those in North America) are made in Switzerland, Cartier <> and others have increased prices from 2% – 5% in the Eurozone and North America.

Cartier

Much of Cartier’s news was typical for the brand, including events, product announcements and a series of promotional efforts that together help sustain media momentum of +10 percent in March.  The price increase media coverage did not have a noticeable affect on the brands overall media rating position, which is off -4 points or 6 percent at 75.

Hermes and Louis Vuitton

The Hermes and Louis Vuitton brands are seeing some media uplift despite the broad  suffering in the  luxury sector itself.  Hermes is up +8 points or 10 percent at 80 while Louis Vuitton is up +5 points or 6 percent at a strong 84 media rating.

As reported across the media, after years of heady growth, the parent company LVMH’s marque brands have run into headwinds as they navigate changing consumer tastes and increased competition. Europe’s protracted slump and cooling economies in Asia, particularly China, have weighed on demand, as have protests in shopping mecca Hong Kong. Tensions in Russia, which has been a strong growth market for the luxury industry, also have hampered sales.

The flip-side of luxury brands – income inequality

I can’t help but include a related, albeit antithetical trend, when discussing media moves in the luxury brand sector.  Income inequality off -3 points or 4 percent at 75, is still drawing considerable media attention.   The storyline took flight in 2011 as the great recession of 2009-2012 (although it seems to still be with many segments of society) was driving its economic stake further into the heart of the middle class working family.  The media then took some time off the topic for nearly 2 years?  Curious lack of attention slowly ebbed forward as the story morphed into who was being left behind in the economic recovery.  Surprise.  Mostly the same people impacted in the first place.

Markets roared.  The wealthy got, well, wealthier.  And luxury brands took a collective breath that there was still a lot of discretionary income flowing through the global economy.  It’s just that the flow was uneven.  Time to correct the problem, deal with that Swiss Franc thing, and get the luxury goods business back on even ground.  What does this have to do with income inequality?  Not much really.  Two Americas.  Two Europes.  One moving further into prosperity and luxury, the other facing income stagnation and lost opportunity.  Luxury is not the villain in this storyline.  These brands are just filling a need.   The brand managers are unfortunately facing some fall-out from the lack of policies fueling the continuing headlines on income stagnation and the continuing signs of another gilded age.

Media Rating and Momentum – Income Inequality

Media momentum has ebbed on income inequality.  The evolving economic storyline has been more about broad recovery versus a roaring stock market that is only benefiting those who have enough savings to invest in stocks.  Short and long term media rating growth are down, but the CUME is still up +8 percent.  Income inequality, as President Obama suggested in a number of recent speeches, is a defining issue of this generation.