Janet Whitman, Financial Post
Published: Saturday, October 10, 2009
Restoration Hardware Inc., the upscale home-furnishing chain, has a novel approach to coping with the recession: higher prices.
The U.S. company, which operates a handful of stores in Canada, has introduced a pricier line based on the theory that even in the worst economic downturn since the Great Depression, consumers are more willing to pay more for goods that emphasize value, craftsmanship and exclusivity.
Luxury branding experts say the idea is far from outlandish.
In the world of high-end shopping, Donald Trump and Paris Hilton-style glitz and “bling” are out. But the world’s wealthy are willing to pay a bundle for goods and services they believe represent high quality and lasting value.
Putting a spotlight on the trend, sales of the British luxury car Rolls-Royce are revving up amid the downturn, while sales of Mercedes and BMW models are sputtering.
At Parisian luxury fashion brand Hermes, best-known for its leather bags that start at US$7,000, sales are up 10%, while demand for Coach’s ubiquitous US$325 handbags has slumped. High-end New York City apartments may have seen their values plunge, but at Fifteen Central Park West, billed as the ultimate Manhattan luxury building, at least eight condos are reported to have sold for nearly 40% above what their owners paid for them in 2007.
Purveyors of luxury here and abroad are grappling with how to serve this new, more conscientious consumer.
“There’s a lot of soul-searching and a lot of experimenting,” says Milton Pedraza, chief executive of the Luxury Institute, a research firm that follows the industry. “It’s a very turbulent period in the minds of executives. In the next few years, I think we’re going to see some really dramatic innovations from people in the luxury industry.”
Executives at Restoration Hardware came up with the idea to offer the high-end line of home furnishings almost by accident, after falling in love with a cast-aluminum searchlight lamp they saw in Australian Vogue.
The company decided to take a gamble and sell the lamp, which at US$1,600 was by no means a recession special. It was a surprise hit.
After testing a series of similarly high-end, limited-run products in the spring, the line now makes up 20% of Restoration Hardware’s fall assortment.
Read the full article here:
http://www.financialpost.com/story.html?id=2088739
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