Luxury in the early 2000s was quite different from what luxury is now.  Luxury used to be entirely aspirational, about showing off social status through clothing and goods.  And if social climbers were unequipped with the cash they needed, they turned to the next best thing: Credit cards.

We now know the consequences of credit cards, loans and impulse buying, and recession hit consumers are now focusing on saving and paying off debts.  So do these behaviors and trends spell the death of luxury?

The answer is no.  While the current state of luxury is quite different from what it was almost a decade ago, luxury exists and is actually doing well.  Luxury brands like Tiffany & Co, Nordstrom and Coach have recently experienced a resurgence in profits, perhaps as a result of their understanding that luxury consumption has changed.

No longer trying to flood the American market with more and more stores, brands are very strategically opening up stores in the US and are looking globally forward by opening up stores in Asia, the Middle East and South America.

When it comes to the American market, savvy luxury brands know that luxury doesn’t attract just one kind of consumer. The luxury market consists of a diverse set of consumers who are mainly interested in quality in regards to the amount they pay, turning away from buying clothing and accessories just for the sake of wearing a brand name.  So while the very, very rich haven’t changed and buy only the most elite, most affluent consumers are careful about their spending habits and are interested in a wider range of price points.

Ron Kurtz of the American Affluence Research Center explained, “The affluent consumer is a careful spender and an aggressive saver—they typically don’t buy items that are associated with luxury…It’s only that top one percent that seems to be knowledgeable about those brands.”

Nordstrom, for instance, is reaping the benefits of being able to reach out to diverse luxury consumers.  Unlike Saks and Neiman Marcus, who focus on a more traditional and niche luxury market and have recently suffered financial setbacks, Nordstrom sells luxury items at various price levels and plans to open four new regular stores and 13 clearance Nordstrom Rack stores.

Kelly Tackett of Kantar Retail says that while emerging markets overseas are profitable for luxury brands, the American market still has room for restructure and growth:

“I think the [luxury] retailers that have the most exposure to the U.S. were more hard hit…That’s why you’ll see a lot of brands focusing on growth outside of the U.S.—in the Middle East, Asia and even Brazil. Those economies are starting to be a little bit more attractive. Even though Dubai was hit with the real estate market collapse, there is still a huge consumer demand for luxury goods and American brands.”

That luxury brands that cater to more thoughtful and careful American consumers, as well as cater to emerging markets overseas, are the brands that are discovering profits and success.  As the Unity Marketing report on luxury confirms, consumers see luxury items as investments, not just flashy pieces of brand name fashion.

Photo: Aston Martin.