How the Recession Changed the Luxury-Advertising Landscape
Picture this: The economy is tanking, and your key clients -- the world's foremost luxury brands -- are sweating bullets over pullbacks in consumer spending. That was the reality for not just one, but numerous boutique agencies built on the backs of fashion houses and high-end retailers. The result has been the embrace of digital and social media, an area that brands, long used to funneling the bulk of their ad budgets into glossy magazines and billboards, had only tepidly begun to experiment with before the recession.
Agencies, as a result, have seen their digital businesses explode.
"When the recession hit, fashion and luxury brands were probably hit the hardest," said Dianne Desroches, CEO of AR New York. "Some pulled advertising internally. Some went dark. Some were smarter -- they said, 'Let's think creatively about this.'"
The pullback hurt some of these specialty agencies because fashion and luxury brands have long gravitated toward small, independent shops.
A single designer or visionary at the helm often seeks out a similar structure in his or her agency, according to Ruth Bernstein, executive director-strategy and partner at Yard. "Smaller, independent agencies tend to be owner-driven as well," she said. "The designer who started his own line or the makeup artist who started her own line wants to find a peer to co-create with."
Designer John Varvatos, a Yard client, echoed that view. "We don't have SWAT teams of marketing people, and we don't waste a lot of people's time going down a wrong path that I might not want to go down or that might not be right for the brand," he said. "I'm working directly with the owner. ... [Yard] has become so intertwined with the culture and our brand. I don't feel like I'm working with an agency. I feel like I'm working with someone that's a part of our company."
Boutique fashion shops across the board say spending has largely bounced back after a rough 2009 and 2010. Still, they believe the fashion- and luxury-advertising landscape will never be the same again. And that's probably a good thing.
"The recession was the best thing that ever happened to the fashion industry," said Richard Christiansen, founder-creative director of Chandelier Creative. "A lot of what was going on before the recession felt very formulaic. ... The recession was a great opportunity to get a bit more aggressive and dip your toe into digital or something nontraditional."
For those brands that got creative, there were new partnerships, forays into social media and a willingness to experiment with things such as New York's Taxi TV. Sites such as Gilt Groupe and Ideeli introduced new ways of moving high-end goods. And e-commerce sales continued to grow steadily, forcing designers to embrace an area they'd once shunned.
Matt Mason, director-innovation at Syrup, said he's seen fashion brands accustomed to one-way dialogue via monthly magazines begin to realize the power of listening to and communicating with the consumer through Facebook, Twitter, Foursquare or any number of other digital and social-media channels.
Social media is making inaccessible brands accessible, and consumers appear to be hungry for it. Consider that Burberry has 5.8 million likes on Facebook, while the Twitter feed for Donna Karan's brand DNKY, @dkny, has more than 320,000 followers.
Still, this set of marketers has a long way to go to catch up to other industries when it comes to embracing social and digital media. Jane Deery, president of PGR Media, a boutique media shop, estimates that even now, fashion and luxury brands spend just 1% of their media budgets in the digital space. But that media mix is shifting online, she and her peers say. And to prepare, agencies are now staffing up. PGR added two digital specialists in the last two years, with plans to hire two more to its staff of 26.
CreateThe Group, a digital agency, has benefited from the shift to digital and says revenues and staff have grown by double digits in the past year.
"The pendulum has gone the other way," said James Gardner, founder-CEO of CreateThe Group. "Anything new, any new technology, [luxury brands are] jumping on and looking at and thinking about how to use it."
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